If you're looking to buy a car or a new home, you'll need good credit. And if you're trying to boost your credit score, there are certain things to avoid that could hold you back.
Christian Widhalm, CEO of Bloom Credit, joins TheStreet to explain some of the mistakes people make when trying to improve their credit score.
Transcription:
Conway Gittens: What are some common mistakes people make when trying to repair their credit score?
Related: An alternative to credit scores could open doors for borrowers
Christian Widhalm: I think one of the biggest ones is that they think it's going to happen overnight. And there is a big difference between repairing and establishing. So today in the United States there are hundreds of millions of consumers, about 106, I think, who do not have access to conventional credit rates or products. Huge number. That's like 40% of the credit-eligible population in the United States. Approximately half of them have subprime loans. Then they have done something to harm your credit or your credit has been affected. The other 50% have little or no record with the major credit agencies or cannot be qualified. What that means is that there is a limited history on them with the major credit bureaus, so if a lender gets information about them, they often cannot extend credit to them. Because there is not enough information for them to make a credit decision. And we believe that there are clear solutions on the market to help solve it. For those who are thin files, no files, you could benefit from reporting 24 months of your checking account history almost overnight because you can establish business lines on previous payments that can ultimately help impact your credit score much more quickly. On the credit repair side, for people who have actually done something that has damaged their credit, that's a little bit more difficult. That's a little more time. It's a little more complicated to establish your payment history. Because if we go back to what I mentioned before, one of the most important things, actually, I think the most important thing in terms of credit score is a positive payment history. So if you've done something to overturn a positive payment history, you need to start demonstrating how you're becoming more positive in terms of your payment history, and that may take a little more time.
Conway Gittens: What are some of the most common myths about credit cards?
Christian Widhalm: Credit card or do you think credit data is myths?
Conway Gittens: Credit Data Myths.
Christian Widhalm: We talked about it a second ago, there's a black box that controls what credit score is ultimately generated. It is very difficult to determine exactly what will affect a consumer. I think there has been an increase in novel financial products, including credit building products, and some of them are gimmicky. And I don't think necessarily the major credit agencies or even the lenders are enamored with them because they're trying to gamify the system and figure out how to artificially inflate credit scores. Those are not all. I'm just saying there are some that are clever. The real thing is to be able to enter and demonstrate real credit worthiness. And again, alternative data coming from checking accounts and then also real information coming from actual card products, loan products that you can ultimately open and establish a history as a consumer.
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