What goes into a credit score?
There are five main categories of information that impact a credit score:
- Payment History: Whether the borrower has historically repaid their debts on time. This section also considers bankruptcy, foreclosures, and any accounts that have been reported to collections agencies.
- Amounts Owed: The amount of outstanding debt the individual has. The debt is assessed not just as a total dollar amount, but in relation to how much credit is available to the person. In other words, this section considers whether the consumer has taken every dollar available as debt or has managed to keep availability on their credit lines.
- Length of Credit History: How long an individual has had active credit accounts, as well as the age of the oldest and newest accounts.
- Credit Mix: The types of accounts used. This evaluation considers various credit types including credit cards, mortgages, auto loans and personal loans.
- New Credit: How many accounts have been opened recently. Too many new accounts opened too rapidly increases the risk of default on repayment of debt and therefore may be considered as a hit to the credit score.
Why are credit scores so important?
Credit scores are used to evaluate an individual’s financial risk. They’re used to determine creditworthiness when taking a loan, renting a property, buying insurance, applying for a credit card or even signing up for a cell phone plan. While the specific score requirements will vary depending on the creditor, the higher a person’s credit score, the more likely they are to get approved for credit.
So, creating an opportunity for employees to enhance their credit scores can greatly increase the chance that they are able to meet their financial goals and improve their quality of life.
How can I help my employees improve their credit scores?
Repayment history has a significant impact on credit scores, so this is a logical place to start. Kashable is an employee benefit that has been designed to make timely repayment seamless. Our low-cost personal loans are automatically repaid through payroll, so employees can rest assured that they are always paying on time. Additionally, the funds employees are accessing through Kashable can be used to pay down other outstanding high-cost debts, helping employees to catch up on overdue payments and meet future repayment timelines.
Kashable also reports loan repayment to all 3 major credit bureaus – over 50% of repeat borrowers saw their scores improve!
Ready to get started? Learn More when you Book A Demo.
Missed our first video? Learn all about 401(k) plans here.