Insufficient Credit History: What Does this Mean?

Aaron Bouren
6 min readJan 28, 2021


Insufficient credit history means that you don’t have enough experience as a borrower for a lender to approve you for a credit card or loan. Without a sufficient amount of information in your credit report, a financial institution cannot predict how you will handle borrowed money as accurately. So it’s common to see the term “insufficient credit history” on a letter of denial from a lender. But it may come up other times, too, like when you’re apartment hunting. Renters with insufficient credit history are more likely to be asked for money upfront.
Whether you’re applying for rental property, a personal loan, a student loan, a line of credit or something similar, there’s another party that will depend on you to fulfill your promise to pay. Some of the parties that can access your credit report include:

  • Insurance companies
  • Banks and financial institutions
  • Landlords and employers
  • Mortgage lenders, auto loan lenders and other lenders

The credit score was created in 1956 by the cofounders of the company that is known today as FICO®. Lenders now rely on this score, or some variation of it, to evaluate the creditworthiness of recipients to calculate interest rates.
When you are just started out with your credit it is common and to be expected you will be told you have no credit. However this does not mean you have bad credit. It simply shows that you have not proven yourself yet whether or not you can be trusted by lenders. If a lender runs your credit report and comes back to you and says you have insufficient credit history this doesn’t mean you’ve done anything bad. It just means you’re inexperienced.

Unfortunately, most lenders want proof of credit history before they’ll approve a loan, which means you need credit history in order to build credit history.

How Credit History Contributes to your Credit Score
The three major credit bureaus -TransUnion, Experian and Equifax-are tasked with collecting and maintaining the creditworthiness of the general population. When you apply for credit of any kind lenders and creditors will check your creditworthiness by pulling your credit report. Credit scores can range from 300, which is extremely poor credit, to 850, which is exceptionally good credit.

There are five factors that are used to calculate your FICO credit score: your payment history; how much debt you have relative to available credit; how long you have had credit accounts; your mix of different types of credit (loans and credit card accounts); and your appetite for new credit. Each factor has a specific weighting in the calculation.

  • Payment history: 35% of your credit score
  • Debt-to-credit utilization ratio: 30% of your credit score
  • Credit history: 15% of your credit score
  • Credit mix: 10% of your credit score
  • New credit: 10% of your credit score

The most important aspect of your credit score is making sure to make regular, on-time payments for amounts greater than or equal to the minimum amount due. It’s also important to maintain a low debt-to-income ratio, which means the amount of debt you owe should be relatively low compared to your income.

How Much Credit History Do you Need?
Typically, you will need six months of credit history in order for a credit score to be calculated and reported by the major credit bureaus. Note that this score may not be enough to get approved for all loans at a reasonable interest rate, though, depending on the specific kind of loan you want.
The interest rate and payback period for a loan usually depend on your credit score, which in turn depends on your credit history. For example, it’s unlikely that someone with less than one year of credit history would qualify for a 30-year mortgage.

It is important that a single credit score doesn’t stick with you forever. You will need to be consistent and prove your creditworthiness by continuing to pay your debts on time and making at least the minimum payment due.

Building Credit History

There’s no such thing as a quick solution to building credit. You may see results in a matter of months, but these practices for healthy credit usage are lifelong habits that will keep your credit strong in the long run.
The best way to fix insufficient credit history is to start building your credit ASAP. Here are some ways you can start to do that now.

1. Review Your Credit Report for Errors

If you have a lower than anticipated credit score or none at all, it is important for you to keep checking your report regularly to ensure that everything is accurate and up to date. This way when you see something that doesn’t make sense or is inaccurate you will be able to address it sooner. This is where a credit repair company can potentially help you.

If you have been told you have insufficient credit history, but you believe you have established credit, first consider whether it’s been more than six months since you last paid a debt in case your credit history has lapsed. Otherwise, confirm that all personally identifiable information (such as your legal name, Social Security number and driver’s license number) is accurate on your loan application. If your legal name is even slightly misspelled or is missing a suffix (Jr., Sr., I, II, III, etc.), your credit report could be incorrect.

2. Get a Secure Credit Card
If you have no credit and therefore no credit history, you will find it difficult to get approved for a loan. One way you can work on this is by getting a secured credit card. A secured credit card requires a cash deposit as collateral. This is ideal for young and new credit users: Since you likely have little to no credit history for lenders to base their approval off of, putting up money will give them something to fall back on if you fail to make payments. Using a secured credit card responsibly for some time will help you establish a strong baseline of credit health and open the door to cards with higher limits and more benefits.

3. Pay Your Bills on Time
Since between 35 percent and 40 percent of your credit score is calculated based on your payment history, it is hands down the most important thing you should be diligent about. Start now by paying your bills on time and in full each month. Anyone that extends you credit, in the form of debt, expects to be paid back at regular intervals and for at least the minimum amount due. Late or incomplete payments may negatively affect your future credit score.

4. Maintain or Reduce Debt-to-Income Ratio

Maintaining a healthy debt-to-income ratio is recommended. Several steps can help you achieve a lower debt-to-income ratio, include reducing your total debt by paying off credit cards and paying down any other loans that you can. Avoid taking on new debt. Improve your income by asking for a raise, getting a second job or finding a new primary job that pays more. Review your budget to see where you could save money to put toward paying down debt. If you don’t have a budget, now is a good idea to start one.

As you now know, establishing credit and credit history is important, but the work doesn’t end there. It’s essential to monitor, maintain and, if needed, proactively work to boost your credit score. Late payments, collections, defaults, and bankruptcies can have a negative impact on your credit report for as long as 10 years. If your credit score is not where you want it to be, together we can work to improve your credit with our credit repair program. A credit repair specialist will work with you to help identify and remove negative items from your report such as inaccurate, incomplete, or unverifiable items. These types of items include incorrect personal data, collections, late payments, foreclosures, bankruptcies and more. ⁣You can contact us to schedule your free consultation!

Originally published at on January 28, 2021.



Aaron Bouren

Aaron Bouren, CEO of Bouren Ventures, is an entrepreneur, public speaker, sales trainer, and marketing expert. Learn more at