Chainarong Prasertthai/Getty Images/iStockphoto
StellarFi, a public benefit company, has announced the public release of its new fintech platform, which helps individuals build their credit by paying their bills on time through the platform.
See: 30 things you need to know to build credit
Find: how to create credit without a credit card
StellarFi Founder and CEO, Lamine Zarrad, former National Bank Examiner for the US Treasury Department, revealed in an exclusive phone interview with GOBankingRates.com that 132 million Americans have credit scores below the threshold. traditional for most lenders.
“This is [nearly] half the country,” he said. “It’s not a trivial number. We see credit as the path to a better life, to capital, money and a better quality of life.
Ways to build up credit
Traditionally, there were only a few ways to build credit, including opening a credit card and making payments on time.
“The traditional credit card approach to establishing credit is very inefficient. If you don’t have a co-signer, you’ll probably get a credit card with a very low credit limit and a high interest rate,” Zarrad said.
Alternatively, someone can consider getting a secured loan. “It’s also inefficient, and unfortunately, it’s also expensive,” he said. A secured loan forces someone who may not have many resources to tie up some of their money in a loan and then pay interest as they repay the money over time.
Zarrad points out that there are also alternative methods of building credit, such as Experian Boost, which takes into account factors such as paying utility companies and streaming services on time, which are not normally available. not factored into a credit score. The problem with these alternative scoring methods, he pointed out, is that they are only useful if lenders consider them.
How StellarFi Helps Consumers Build Credit Through Paying Bills On Time
StellarFi seeks to help people build credit where traditional approaches fail, Zarrad said. The platform reports on-time bill payments to the three major credit bureaus – Experian, TransUnion and Equifax – as on-time loan payments. This is because StellarFi gives a cash advance to its customers, uses that money to pay bills, and then deducts the payment from the customer’s bank account.
StellarFi then reports the payment on time to the credit bureaus. “We are entering into a traditional credit relationship with you,” he said. “We can flag your on-time bill payments as legitimate loan transactions. We take the risk.”
The program has three levels of service at three price points. The $4.99/month plan can help you build credit with up to $500 a month in bill payments. The $9.99/month plan can cover up to $25,000 in bills per month. The $19.99/month plan offers additional perks and perks, including the ability to repay the cash advance with an ACH transfer, choose your bill payment dates, and also provides credit lock services. No credit check is required to use any of the three services, according to the StellarFi website.
Building credit on the road to homeownership
For many people, building credit responsibly can help them on the path to home ownership. Even with the Fed’s interest rate hikes, mortgage interest rates are still historically low. And a better credit rating can mean incredible savings by giving the buyer access to a lower interest rate.
StellarFi allows users to create personalized credit goals, which can show potential buyers what they need to do to get a good mortgage interest rate. The platform can also help potential buyers apply for a mortgage by streamlining the application process.
In addition to building your credit, before you apply for a mortgage, you’ll want to consider other factors that could indicate your overall financial health.
“You want to know your debt-to-income ratio, your credit mix or the types of credit you have, your monthly payments relative to your income, and your total debt relative to your income,” Zarrad said.
Bad Credit: You Can Still Get a Home Equity Loan
Discover: How can I improve my credit score to buy a house?
More importantly, Zarrad said, he wants consumers to be acutely aware that a successful mortgage application is about more than just a credit score. “That’s definitely what we want to do with our platform, educate consumers.”
More from GOBankingRates