New Fintech platform helps you build credit where traditional approaches fail, says CEO
Chainarong Prasertthai / Getty Images / iStockphoto
StellarFi, a non-profit company, announced the public release of its new fintech platform, which helps individuals build credit by paying their bills on time through the platform.
See: 30 Things You Need To Know To Build Credit
Find: How to build credit without a credit card
StellarFi founder and CEO Lamine Zarrad, a former US Department of Treasury National Bank Examiner, revealed in an exclusive phone interview with GOBankingRates.com that 132 million Americans have credit scores below the traditional limit for most lenders.
“It is [nearly] half the country, he said. “It is 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 credit
Traditionally, there have been only a few ways to build credit, including opening a credit card and paying on time.
“The traditional credit card approach to credit building is very inefficient. If you do not have a co-signer, you will probably get a credit card with a very low credit line and high interest rates,” said Zarrad.
Alternatively, someone can look at getting a loan with collateral. “This is also inefficient, and unfortunately it is also expensive,” he said. A secured loan forces someone who may not have much 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 credit building, such as Experian Boost, which take into account factors such as timely bills to electricity companies and electricity services, which are not usually considered in a credit score. The problem with these alternative scoring methods, he pointed out, is that they are only useful if lenders look at them.
How StellarFi helps consumers build credit by paying on time
StellarFi seeks to help people build credit where traditional approaches fail, Zarrad said. The platform reports timely bill payments to the three major credit bureaus – Experian, TransUnion and Equifax – as timely loan payments. This is because StellarFi gives a cash advance to its customers, uses the money to pay the bills, and then deducts the payment from the customer’s bank account.
StellarFi then reports the payment on time to the credit bureaus. “We enter into a traditional credit relationship with you,” he said. “We can report your timely bill payments as legitimate loan transactions. We take the risk.”
The program has three service levels at three price points. The $ 4.99 / month plan can help you build credit with up to $ 500 per month in bill payments. The $ 9.99 / month plan can cover up to $ 25,000 in bills per month. The $ 19.99 / month subscription allows for additional benefits and perks, including the ability to repay the cash advance with ACH transfer, select payment dates for the bill, and also offer credit lock services. No credit check is required to use any of the three services, according to the StellarFi website.
Build credit on the road to home ownership
For many people, building credit responsibly can help them on their way to home ownership. Even with the Fed rate hikes, mortgage rates are still historically low. And a better credit score can mean incredible savings by giving the home buyer access to a lower interest rate.
StellarFi allows users to create customized credit targets, which can show potential home buyers what they need to do to ensure a good interest rate for a mortgage. The platform can also help potential home buyers to apply for a mortgage by streamlining the application process.
In addition to building credit, you should look at other factors that may indicate your overall financial health before applying for a mortgage.
“You want to be aware of 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 mortgage
Find out: How do I improve my credit score for buying a home?
Most importantly, Zarrad said, he wants consumers to be very aware that there is more that goes into a successful mortgage application than just a credit score. “That’s definitely what we want to do with our platform, to educate consumers.”
More from GOBankingRates
