Imagine you’ve been retired for a few years. You’ve paid off your mortgage, you don’t have other loans, and you’re financially secure. Now you want to borrow some money to help one of your children purchase a home and now consider a different situation: You’re a recent immigrant, and you need a loan to open a business.
In both cases, a lender could sometimes reject you—not because you have any blemishes on your credit report but because there isn’t enough up-to-date information in that report. In the traditional credit-scoring system, if you haven’t borrowed money recently, it’s almost like you don’t exist.