We all know that bad credit can harm you in more ways than one. Its hard to get a credit card and if you do, you pay higher interest rates, its almost impossible to get a mortgage or car loan, your insurance premiums are higher than those of people with better credit, and so on. Even your job search can be negatively impacted because prospective employers look at your credit score to determine how responsible and how good a manager you are. And in positions where you handle sensitive financial information, a bad credit score might mean you are struggling financially, which might make you more likely to commit fraud.
This is hardly news, as the cost of bad credit has long been documented. But what many people underestimate is that the cost of a thin credit file is also high. Simply put, having what the credit industry calls a thin credit file is not a good thing, although not as burdensome as bad credit. As the name suggests a thin file is a file that contains very little information about your credit history. To understand how this can hurt you, lets revisit the formula on which your credit score is based. The following parameters come into play:
*Payment history: 35 percent of your score
*Outstanding debt: 30 percent of your score
*Length of credit history: 15 percent of your score
