Helping Customers Understand Their Credit Score and How You Check It

Women with credit card and laptop

Your credit score is one of the most important aspects of your financial life, and nowadays, it’s easier than ever to check your score. However, most customers hold several misconceptions about credit that may damage their score or make them unwilling to use credit at all.

How to Help Your Customers Understand Credit

There are several aspects of credit that your customers must learn to use their financial products correctly. Here’s how you can educate your customers through your website.

Explain the Difference Between a Good and Bad Credit Score

A credit score is a three-digit number that assesses your creditworthiness. The higher the score, the better your interest rate on loans. That’s because lenders use this number to assess how likely you are to pay off a debt product. Credit scores vary between the models used.

Tell your customers that they should aim for a Good to Exceptional score. Good starts at 670, Very Good at 740, and Exceptional at 800. An Exceptional score almost guarantees approval.

Reassure Customers That You Perform Soft Checks (if Applicable)

Many life-long credit users still think that all credit checks affect your credit. That isn’t the case; only multiple hard checks damage your credit. If possible, reassure your customers of this fact.

For example, SoFi’s credit score monitoring system only does soft checks on your credit. On their website, they reassure customers that soft fulls “won’t hurt your credit score, or your wallet.” This gives their customers peace of mind if they ever choose to use this feature.

Be Mindful When Speaking About Credit Models and Bureaus

Most of your customers know that their credit score is printed on a “report,” but the report looks different depending on what model or bureau is used to populate these reports. While most lenders use FICO scores, some use VantageScore, which weights rank factors differently.

The three main credit bureaus, Experian, TransUnion, and Equifax, use different rating systems. In one bureau, you may simply qualify for a loan. In another, you may get a better interest rate.

Show a Chart of How Credit Scores are Calculated

Credit scores are calculated differently depending on the credit model used. However, you’ll mostly have to deal with FICO scores. FICO scores your creditworthiness as follows:

  • Payment History (Prompt Payments): 35%
  • Amount Owned (Credit Used vs. Credit Limit): 30%
  • Length of Credit History (How Long You’ve Had Credit): 15%
  • New Credit (How Often You Apply or Open Accounts): 10%
  • Credit Mix (Variety of Credit Products You Have): 10%

VantageScore calculates creditworthiness on a scale of Extremely Influential to Less Influential but doesn’t state how much each action is weighed. For this reason, FICO is the better option.

Don’t Forget to Explain Why Credit Scores are Important

Generation Z shoppers, which will soon be your prime demographic, want the perks that come with owning a credit card. However, 78% admit they’re afraid of assuming a lot of debt.

Since Gen Z already has a negative opinion about credit, you need to teach them why their credit score is essential. Since most aren’t interested in owning a home (because they can’t afford it), appeal to their need for adventure with travel incentives, rewards, or cash back.

Set Them Up With Resources That Check Credit Scores

If you don’t have an app that allows your customers to check their credit scores, point them towards a software that can. Explain that monitoring their credit score is essential if they want to track what actions damage their creditworthiness and build better financial habits in the future.

Plus, several financial apps come with multiple perks. Your customers can track their expenses, set financial goals, and automate their transactions and bill payments all from one dashboard.

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