When a credit report shows "insufficient credit," it means there is not enough credit history or activity to accurately assess an individual's creditworthiness and generate a score. This can happen for several reasons:
1. Limited Credit History
The individual has no prior credit history, making it impossible to generate a reliable credit score.
Common for young adults or those who have never used credit cards, loans, or other credit products.
2. Thin Credit File
A "thin credit file" means the individual has very few credit accounts or limited credit activity on their report.
Without enough credit data, the system cannot determine a credit score.
3. New Credit Accounts
TransUnion requires at least 6 months of credit history to generate a score.
If an individual has recently opened accounts but their oldest account is less than 6 months old, their credit report may show "insufficient credit."
4. Inactive Tradelines
Credit accounts that have been inactive or closed for a long time may not contribute to score calculation.
Updated financial behavior ensures that only recent activities impact credit scores, which may result in an 'insufficient score' status if accounts lack recent activity.