Christian Widhalm, CEO of Bloom Credit, joins TheStreet to explain some of the mistake people make when trying to improve their credit scores.
Transcript:
Conway Gittens: What are some of the common mistakes people make and trying to repair their credit scores?
Christian Widhalm: I think one of the biggest is that they think it’s going to happen overnight. And there’s a big difference between repair and establish. So in the United States today, there’s hundreds million consumers, just about, I think 106, that do not have access to mainstream credit rates or products. Huge number. It’s like 40% of the credit eligible population in the United States. About half of those have subprime credit. So they’ve done something to impair their credit or their credit has been hurt. The other 50% are thin file or no file with the major credit bureaus or unscorable. What that means is that there’s limited history on them at the major credit bureaus, so that if a lender pulls information on them, they oftentimes can’t extend them credit. Because there’s not enough information for them to actually be able to make a credit decision. And we think that there is clear solutions that are in the market to be able to actually help fix that. For those that are thin file, no file, you could benefit from reporting 24 months of your checking account history almost overnight because you can establish tradelines on past payments that ultimately can help impact your credit score much more quickly. On the credit repair side, for folks that have actually done something to impair, that’s a little bit harder. That’s a little bit more time. It’s a little bit more going and actually establishing your repayment history. Because if you go back to what I mentioned earlier, one of the biggest things actually I think the biggest thing in terms of a credit score is positive repayment history. So if you’ve done something to actually negate positive repayment history, you have to actually start demonstrating how you are becoming more positive in terms of your repayment history, and that can take a little bit more time.
Conway Gittens: What are some of the most common credit card myths?
Christian Widhalm: Credit card or you think credit data, myths?
Conway Gittens: Credit data myths.
Christian Widhalm: We kind of talked about it a second ago with there’s this black box that kind of controls what the credit score is ultimately are generated. It’s very hard to determine exactly what’s going to impact a consumer. I think there has been a surge in novel financial products, including credit builder products, that some of them are gimmicky. And I don’t think that necessarily the major credit bureaus or even the lenders necessarily are enamored with them because they’re trying to gamify the system and figure out how to artificially inflate credit scores. That’s not all of them. I’m just saying there’s some that are out there that are gimmicky. The real thing is being able to go in to demonstrate real credit worthiness. And again, alternative data coming from checking accounts and then also real information coming from real card card products, loan products that you can ultimately open and establish history as a consumer.
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