Lenny Credit is a very straightforward way to build credit history while doing the things you normally do. Lenny lets users apply for a credit line and then send the money straight to their bank accounts for free.
You borrow funds for whatever you want, then pay off the bill at the end of each month like you would a credit card.
These payments are reported to two of the three major credit reporting agencies (Equifax and Transunion), which allows you to start building credit history while learning to stay on top of your financial health.
Here are some things to keep in mind as you build your credit history:
1. Turn on Autopay
Payment history is the largest part of FICO® Scores and accounts for a whopping 35% of the overall score. This segment of your score looks at the percentage of on-time payments you’ve made over the last seven to ten years. Lenders are most concerned with their borrowers being reliable, which is why this category is weighted so heavily.
Turning on autopay ensures that you'll never risk missing your payment and damaging your credit score.
Here are step-by-step instructions on paying your Lenny Credit bill.
2. Watch How Much You Borrow
Another major factor in credit scores is called “credit utilization.” Credit utilization is a ratio that compares the amount of debt you have in relationship to your amount of available credit.
For example, someone with a $1,000 credit limit on their credit card and a $100 balance would be using 10% of their available credit.
A common misconception is to keep your utilization below 30%. The truth is the lower the utilization, down to and including zero, the better.
If you are financially able, a good rule of thumb is to pay off your bill in full each month.
3. Use Your Credit Line to Keep it Active
FICO® Scores consider whether a person's credit report shows recent balances on revolving and/or open-ended accounts. People who show moderate and conscientious use of revolving and/or open-ended accounts, such as having low balances and paying them on time, generally demonstrate responsible financial behavior. People without recent credit activity on these accounts tend to be viewed as higher risk by lenders.
A good rule of thumb is to withdraw a small amount each month and pay it back by the end of your billing cycle.
4. Earn Balance Increases
You can improve your credit utilization ratio even more by earning Lenny Points and redeeming them for balance increases.
This is because if you increase total available credit increases but your spending stays the same, you will be using a lower percentage of your overall credit.
You can earn Lenny Points for taking actions known to build your credit score, such as paying your bill on time or in full, keeping your utilization ratio below 30% and educating yourself through our financial blogs.
5. Avoid Closing your Account
Your length of credit history accounts for 15% of your credit score. This segment looks at how long your oldest and newest accounts have been opened, along with an average age of all accounts.
Contrary to popular belief, closing your accounts doesn't make them go away or help your score.
An “excellent” score in this category means having your oldest line of credit for years or more, and a high average age. All you have to do to keep this segment healthy is keep your oldest lines of credit open.
Having an excellent credit score is important, and Lenny can help you start understanding yours. At Lenny, we create products for life, and will continue to create and recommend products that users love and want to continue using.
Lenny offers many unique features that make understanding a great score easy, including: Lenny's personalized credit tips, easy visualizations of your usage, automatic payments, and more.
If you haven't already, download the Lenny Credit app and start building a good financial understanding now!