WASHINGTON–People who live in “micropolitan statistical areas, or non-rural census tract areas outside of metropolitan statistical areas (MSAs), are the most likely to be “credit invisible,” according to a new report from the Bureau of Consumer Financial Protection.
According to the BCFP, the report found approximately 15% of people 25 and over in rural areas can be classified as “credit invisible,” and approximately 12% in micropolitan areas.
The report, titled “The Geography of Credit Invisibility” from the BCFP’s Office of Research, said consumers in the two areas are more likely not to have a credit record maintained by one of the three nationwide consumer reporting agencies (NCRAs). People in those areas are also most likely to have a credit record that contains either too little information (“insufficient unscorable”) or information that is deemed too old to be reliable (“stale unscorable”), the report added.
Special Focus on Geography
The study is a follow up to prior BCFP analysis that examined “credit invisibles” and “becoming credit visible,” this time with a special focus on geography.
“While determining the underlying factors that cause sustained credit invisibility is difficult and beyond the scope of this study, highlighting geographic variation in credit invisibility can aid policymakers and advance the conversation around potential causes and solutions,” the study states. “The importance of geography in accessing credit has been a long-standing concern for policymakers, going at least as far back as early efforts to combat redlining.”
The BCFP said it further found the relationship between income and credit invisibility is much weaker in rural areas, where credit invisibility is higher even if the tract’s relative income level is higher.
“Specifically, upper-income tracts in rural areas have concentrations of credit invisibility that are comparable to those of LMI (low- to moderate-income) tracts in the principal cities of MSAs and higher than those of all tracts in micropolitan areas or suburban areas of MSAs,” the analysis stated.
Two ‘Notable Patterns’
Moreover, the BCFP said its research discovered “two notable patterns.”
“First, the upward-sloping relationship between neighborhood income and the likelihood of establishing a credit card is much stronger in MSAs than it is in Micropolitan or rural areas,” the report found. “In contrast, outside of MSAs, the relationship is fatter, much like the overall relationship between the incidence of credit invisibility and neighborhood income in these areas.
“Second, the overall rate of using a credit card as an entry product is much lower (about 10 percentage points) outside of MSAs than compared to within MSAs.”