FinTech firms now advising people on how to boost their credit worthiness

  • 23 Feb
  • 2 min

People in the US are turning to FinTech companies to help them understand and improve their credit score.

In some countries, your credit score virtually determines your life. This number – which in the United States ranges between 300 and 850 – allocated to consumers on the basis of their credit history, is intended to serve as an indicator of their creditworthiness. The higher the number, the more financially trustworthy a person is considered to be. However, in the US, credit scores are actually used for a whole host of different purposes: not only when applying for a bank loan, signing up to a home rental agreement or insuring your car, but even as part of background checks when making a job application. Moreover, the concept is far from straightforward, especially since, just as with financial ratings agencies, there are a number of different organisations that calculate these scores, three of which are based in the US. Credit scores are also given to consumers in the UK and Canada. People are therefore now turning to FinTech companies to help them understand what factors affect one's credit score and what sort of behaviour will improve it. A number of apps have been created that not only shed light on the subject but also provide a form of financial education plus other services. One of the best-known companies doing this is Credit Karma. The San Francisco-based unicorn, which is valued at $3.5 billion, will give you an idea of your credit score, based on data from two out of the three largest consumer credit reporting agencies. Credit Karma also helps you understand the factors negatively impacting your score, will give you advice on how to improve it and also add product recommendations to help you save money. Working with the same business model, Credit Sesame will give you your score from the third agency. The Credit Sesame app also warns users of any suspicious activity on their bank accounts. Other companies working in the same field, such as Debt Payoff Planner and Mint, explain in clear terms the strategy users should adopt in order to pay off debts and thus improve their credit scores. All these firms stress that the personal data in their hands is handled in a secure manner, with due regard for privacy. This has become a crucial point, given the scandal surrounding the hacking of private data at the Equifaxe credit reporting agency. Is the large number of apps already in circulation an indication that the market is saturated or that the need has now been met? Not necessarily, and new entrants certainly believe they can do better. Precisely with this aim in mind, UK company Clear Score is now launching beta testing of its offering.

By Sophia Qadiri