Some 26 million American adults (1 in 10) don’t have any credit record, according to U.S. government research. An additional 19 million Americans have credit records that are either too old or too insignificant to create a credit score.
Add in those who have poor credit scores, and you’re looking at tens of millions of people who can’t qualify for favorable interest rates on auto loans, credit cards or other financial products — if they can even get these things at all.
Are you one of them? If so, you have options. Two innovative credit-builder products, Instal and Revolv, could help you establish credit or improve your existing score.
Created by CreditStrong, a division of Austin Capital Bank, Instal and Revolv can result in up to $1,100 worth of credit that’s reported to the three major credit bureaus (Equifax, Experian and TransUnion).
Financial advisers often suggest getting a secured credit card to help build or boost a credit score. But those cards require you to deposit hundreds of dollars, which not everyone can manage. Secured credit cards may also come with high interest rates and loads of fees.
By contrast, CreditStrong doesn’t require you to lock away hundreds of dollars. Depending on the product you choose, you’ll pay a one-time administrative charge of $15 or a $99 annual subscription fee.
Used right, an Instal or Revolv account could help you improve your credit profile — or establish one in the first place. Here’s how they work.
Instal is a credit-builder loan — but you don’t get the cash right away. Instead, the loan amount is deposited in a locked savings account at Austin Capital Bank. Your monthly payments are applied to the loan’s balance.
CreditStrong reports these payments as an installment loan to the three major credit bureaus. Once you’ve made the final payment, CreditStrong reports the installment loan as “paid in full” and allows you to withdraw the loan amount.
You can choose a loan term of two, three or four years. Each month, CreditStrong will provide your FICO Score 8 from TransUnion to help you track your progress.
Revolv is a $500 credit-builder loan, but it’s reported as a 0% interest revolving line of credit, similar to a credit card. The difference? You never get a card. What you do get is the reputation of being able to handle a revolving line of credit responsibly, once you’ve made regular, on-time payments.
This “digital credit card” can’t be used to buy anything. It’s used for advancing funds into a locked savings account. You get to select the amount you want to move into the account each month, or you can set your monthly payment to $0. If you choose to raise that amount, CreditStrong will increase your reported line of credit by $100 for each three consecutive on-time payments (up to $1,000 total).
Making or increasing the payments could help you become better at both budgeting and saving. You’ll need to make room in your spending plan for the extra payments, and experiencing the satisfaction of watching the balance grow may encourage you to continue a healthy savings plan.
As with Instal, your FICO Score 8 will be available through the account each month.
How CreditStrong products affect your credit score
Revolv is reported to the bureaus from day one; Instal can take 30 to 60 days to show up on your credit profile. (CreditStrong reports your payment information to the three bureaus when you make your first payment, but it can take them some time to process the information.)
They can affect 90% of the factors used to calculate your credit score:
Payment history: (35%) Making on-time payments to your Revolv or Instal account is the biggest single factor that determines your score. When setting up your Instal account, you choose the amount (as little as $28 a month) that you feel confident paying. If you opt for Revolv, you choose your monthly Revolv payment, which can be as little as $0.
Amount owed: (30%) Also known as “credit utilization,” this refers to how much of your available credit you’re using. The less you use, the greater the positive impact on your score.
Length of credit history: (15%) The longer the term, the more positive the impact — assuming you pay on time. A CreditStrong Instal account has a term of your choosing, from two to four years. A Revolv account has a 12-month term that is renewable.
Credit mix: (10%) A revolving line of credit or an installment loan in good standing indicates that you can responsibly handle a financial obligation. If you already have one type on your report, such as a student loan, adding another form of credit improves the mix.
New credit: (10%) This last factor isn’t something CreditStrong will help with, but you can help yourself. Opening multiple accounts too close together is unadvisable, especially if the consumer doesn’t have much of a credit history. By adding just one account at a time, CreditStrong users can avoid this risk.
How quickly will your credit score improve?
It’s impossible to say, since every person’s credit profile is unique. (Your credit profile is all the information on your credit record, including active accounts and closed accounts.) To be clear: Neither Revolv nor Instal will make an instant difference. When it comes to building or improving credit, there’s no such thing as a quick fix.
Think of your credit score as a long game. It takes decades, on average, to create a strong score. According to a data analysis from Experian, the biggest jump in average FICO scores occurs in your 50s to 60s. Instal and Revolv can help you with the ongoing process of building a solid credit history.
According to an analysis of 50,000 accounts, CreditStrong customers saw these changes on average to their FICO Score 8:
- A 25-point increase within 90 days, if they made all payments on time
- A nearly 40-point increase after nine months, if they made all payments on time
- About a 70-point increase after one year, if they made all payments on time
Signing up is fast and easy
It takes only about five minutes to open your account, using a simple online form. No credit check is required, and no minimum income is needed to apply.
- Be at least 18 years old and a U.S. citizen or permanent resident
- Have a Social Security number or individual taxpayer identification number (ITIN)
- Own a checking account, debit card or prepaid card in good standing
- Have an email address, and a mobile phone number or Google Voice account
Instal has a one-time administrative fee of $15. Revolv charges a $99 annual subscription fee. Both products are available in every U.S. state except for Vermont and Wisconsin.
All funds are held in Austin Capital Bank, an FDIC-insured community bank in Austin, Texas.
What if life happens?
Suppose you’re blindsided by a financial emergency after choosing Instal or Revolv, and you’re concerned that you can’t make your payment on time. You have two options:
Changing the payment amount. For Revolv, you can log in and set that month’s payment to $0. Since nothing will be due, you won’t be late with a payment. (It’s possible to do this more than once.)
Canceling early. This isn’t ideal, since the longer your account is active the more improvement it will make to your credit score. But if necessary, you can cancel Instal or Revolv without any fees or penalties. If you’ve made at least one payment at this point, the account will be reported to the bureaus as “paid in full” after cancellation. If you’ve made an administrative fee payment but no loan payment yet, the account will simply not show up on your credit report.
The bottom line
Money mistakes you made when just starting out can haunt your credit profile for years. Wild cards like illness or unemployment may also harm your credit score. Even responsible behaviors, such as paying your bills on time and avoiding consumer debt could ultimately hurt you if they make you “credit invisible.”
All three situations can have the same effect: You could wind up paying tens of thousands of dollars in extra interest for loans and other financial products, including auto insurance.
CreditStrong can help you improve a poor score or can help you go from being credit invisible to having a healthy credit report. Doing this can greatly improve your overall financial wellness and put you on the road to a more secure finance future.
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