How to Start Building Credit with Figure Pay
Credit. It's a word that everyone knows they might need at some point in their lives. It's a score that may determine whether you can secure loans that save you thousands of dollars if you have good credit instead of bad credit. And if you ever plan on buying a house—as most Americans do—you're likely going to need it at some point.
The question is: how do you start building credit in a secure, reliable way?
To answer that question, it helps not only to understand credit but to understand how credit can work in the 21st century using blockchain technology. That requires a review of what you might already know—and a few tips for what you may not know about building credit in this day and age.
You may already know how credit profiles work. Let's review some of the key variables, according to MyFico:
- Amount owed: The amount you owe relative to the amount you can borrow has a tremendous effect on your credit score. After all, your credit is more stable if you have a tremendous amount of credit available to help you weather financial storms.
- Payment history: How effective are you are making payments when you have to pay them? You can't very well claim "good credit" if you borrow a lot but are constantly delinquent. Paying off on time can make up 35% of your credit score.
- New credit: How much new credit is going on your credit history? If you were to suddenly open up all sorts of new accounts without rhyme or reason, it could affect your score.
- Length of credit history: Having a long-term, reliable relationship with a creditor is a fantastic way to demonstrate your commitment to financial discipline. For this reason, many people choose to keep old accounts open.
- Credit mix: Diversification is usually good, even in how you handle credit. But if you have only a series of car loans on your credit history, it may change the way some lenders perceive you.
Knowing this, what's a great way to start building credit in a reliable way? How can you build a good history with creditors while using a system that's efficient, secure, and affordable?
How Figure Pay Works
Meet the blockchain. You've probably heard of it: the blockchain refers to technology for data storing. But rather than storing the data in, say, a warehouse, blockchain technology stores information by adding "blocks." Since the data is stored on these blockchains rather than a centralized warehouse, it creates the potential for a decentralized financial infrastructure.
Imagine if U.S. dollars also came stapled with notes that said, "this is owed to XYZ bank," for example. It would create a degree of accountability and independence that is unprecedented in the history of finance. Rather than using an accounting system that's centralized and largely done manually, blockchain technology creates more accuracy and accountability with an automated system of book-balancing.
In online payment systems, this has the potential to create three distinct benefits:
- Efficiency. Payment systems on the blockchain are decentralized and come with automatic records. This helps money move more quickly without sacrificing accuracy.
- Affordability. With speed and efficiency, there's less of a need to charge for the overhead of making a payment system work. The better (and more automated) the system, the more affordable it can be.
- Security. One reason blockchain technology is so revolutionary is that it decentralizes money while making it remarkably secure.
Needless to say, this is a digital technology revolution that can have an endlessly beneficial impact on finances. That's especially true with Figure Pay.
Explaining Figure Pay
What does this all have to do with Figure Pay?
Figure is a payment system using blockchain technology to create an immutable record. That means that it's a payment system that can skip the manual, red-tape nature of accounting.
Because blockchain technology creates an ironclad digital record of every transaction, it means that anyone using it can have a high degree of confidence that everything is squared away. If you remember balancing a checkbook in the past—using pen and paper, not to mention your own manual math—you see why blockchain technology can be so powerful. It's like checkbook balancing that involves all parties. It's a faster way to create accountability.
How does that accountability factor in? When a blockchain adds a block, it has to share its information with an "unbiased" network of computers known as nodes. This adds a layer of accountability because these nodes connect to some of the most trusted financial institutions around. The result? If you use blockchain technology for payments, you can have a high degree of confidence that the payment you're making is secure and accounted for.
How Figure Pay Helps You Build Credit
It all sounds well and good. You know the importance of building credit. You know the possibilities of blockchain technology. So how does Figure Pay help unite the two, using a blockchain payment system to help individuals build credit?
The key is in the availability of credit. When credit is even more affordable for lenders due to blockchain technology, it introduces all sorts of possibilities for the borrower. Not only can loan transactions be efficient and secure, but if they're more affordable in the process, both sides benefit.
The borrower benefits from a lower cost and higher degree of credit availability. The lender benefits because more of the transactions are about what the borrower can pay off, and less about the costs of making the loan go through.
Figure Pay, for example, works using Figure Pay Credit Loans. This is a simple system that uses a "buy-now-and-pay-later" method, similar to a payment method most people are familiar with: credit cards. A Figure Pay member could finance a purchase of $10 up to $2,500 using credit with any Figure Pay participating merchant.
Rather than how a credit card works, this is a simple, one-time point of sale loan. The Figure Pay holder could choose not to take out this kind of loan again and simply move on with their life. This can establish a credit history. With the loan paid off on time and the product purchased, the Figure Pay user can then build credit history, helping to demonstrate that they're a reliable borrower.
The Credit for All Program
The "Credit for All" approach also means that more people can have access to loans as a way to build credit.2 For example, a buyer can earn access to credit by depositing $1,200 a month to their Figure Pay account1 for two consecutive months3.
The credit system as it's traditionally known can be frustrating for people with a lack of credit history. Figure Pay creates a way for people to earn credit as they go, thereby creating a "Credit for All" approach that can help people get on their feet.
Interested in learning more about how blockchain can help people build credit? Sign up today for a safe and secure Figure Pay account1 to access easy mobile payment and Figure Pay Credit Loan!
Figure Payments Corporation dba Figure Pay | NMLS #2033432. 100 West Liberty Street, Suite 600, Reno, NV 89501. (800) 260-1795.
The Figure Pay demand deposit account is held at UMB Bank, n.a., Member FDIC, with program management services provided by Figure Payments Corporation. The Figure Pay Loan is offered by Figure Lending LLC dba Figure. 15720 Brixham Hill Ave, Suite 300 Charlotte, NC 28277 (888) 819-6388. NMLS 1717824. www.nmlsconsumeraccess.org Equal Opportunity Lender. Standard data charges may apply. Terms apply. Figure Pay FAQs.
1 Figure Pay-branded demand deposit account is held at UMB Bank, n.a., member FDIC
2 Figure Lending LLC will report the status of your Figure Pay loans to the consumer reporting agencies ("CRAs"). Each CRA generates a credit score based on its own criteria, which may or may not include information we report about your Figure Pay loan.
3 Instant access to point-of-sale loans is available for those who qualify. Point-of-sale loan eligibility can also be earned by making a minimum of $1,200 per month in cumulative deposits into the Figure Pay account for two (2) consecutive months.
*Figure Pay is available in Alaska, Arizona, Colorado, Connecticut, Delaware, Illinois, Iowa, Kansas, Kentucky, Maine, Maryland, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, Oregon, South Dakota, and Utah with more states to come. Figure Pay will expand its availability based on regulatory approval on a state-by-state basis. For any questions regarding Figure Pay, including availability, please call Figure Pay customer support at 1-800-260-1795 or visit figurepay.com