Bits mobile app says it can boost your credit score for a monthly fee

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An app called Bits is aimed at people with limited credit history and is designed to increase an Experian score through a monthly fee.

It is often seen as a trap that in order to be eligible for credit, you must first take out credit.

There are often stories about the “invisible mortgages”, people who have always managed their finances perfectly well, but because they never had a credit card or never borrowed anything, the lenders cannot trust them to pay off a mortgage because there is no data.

There are ways to improve your credit score without going into debt, including signing up to vote, paying your cell phone bill, and paying your rent, but this is often the same as being accepted for a credit card, and can -be with a higher credit card. interest rate if this is your first.

While it doesn’t matter if you spend little for it and always pay it on time and in full, there is one app that thinks this is a bit strange.

It’s called Bits and is meant to build your Experian credit score using monthly fees more akin to a subscription service than a credit card.

In fact, although it advertises itself as a “digital credit credit card,” you can’t use it to buy things.

Founder Faisal Khalid told This is Money: “We founded Bits because we thought it was strange that consumer finance experts would recommend taking out credit cards, to help build your credit score. credit, when in fact these cards were, and still are, inaccessible. to those who need it most.

How does Bits work?

It’s not the equivalent of your Netflix or Spotify subscription that increases your credit score, however, it’s still about lending, just differently.

A monthly subscription of between £ 2 and £ 20 per month, depending on the ‘credit limit‘ you choose, is loaned to you over a period of several years, and you pay it back.

You can cancel whenever you want, as your outstanding balance is always £ 0 at the end of each month, provided you have made the payment.

How does Bits work.  Users can cancel at any time because you pay a subscription fee.  This means you don't owe anything after every monthly payment

How does Bits work. Users can cancel at any time because you pay a subscription fee. This means you don’t owe anything after every monthly payment

In his website example, he uses a ‘credit limit’ of £ 720 on the Bits digital credit card, which is paid off over three years at a rate of £ 20 per month. This three-year period is the case regardless of which plan you choose.

Bits is pocketing the £ 2-20 a month – in return, users would in theory have to increase their credit scores, and the company says that could lead to cheaper borrowing in the future.

Because it’s a pre-set monthly subscription, the argument is, Faisal said, that it “wouldn’t put you in debt, and it would be accessible to everyone,” but would still help create credit.

The app also includes weekly credit counseling, one-on-one conversations with its founder on building credit, and accessing podcasts.

The app can be downloaded on Android and Apple and takes approximately 8-10 weeks to appear on your Experian credit report. It only requires your name, date of birth, address, and email address to register.

Faisal told This is Money that those who signed up to Bits – there are 34,000 people signed up on the company’s mailing list but not all on monthly plans – have seen their credit scores improve. from 50 to 200+ points.

Subscription plans cost between £ 2 and £ 20 per month, and Bits says the more you can afford to pay, the better the effect on your credit score.

Subscription plans cost between £ 2 and £ 20 per month, and Bits says the more you can afford to pay, the better the effect on your credit score.

What should you be aware of?

But while Experian is the largest of the Big Three credit reference agencies, Bits does not yet report to Equifax or TransUnion, which means lenders who use the data collected by these agencies won’t see that you have maintained payments on this app.

It should also be noted that missed payments affect your credit score, like a standard credit card. But don’t forget that you can exit the service free of charge if you prefer.

And, he admits that his monthly payment is higher than a minimum credit card payment, although a minimum credit card payment charges you interest, which you don’t.

Andrew Hagger, the founder of personal finance site Moneycomms, said failure to report to Equifax was “a pretty big omission if you’re supposed to help people build their credit scores.”

He added, “I don’t see any advantage in using this card over something like an Aqua credit builder type card.”

The bank’s smartphone-only Tandem’s Journey credit card, for example, for people with lower scores or leaner credit records, comes with a minimum payment of interest and fees and 1% of the balance. , or £ 5 per month, whichever is greater. .

But it’s obviously a card you can spend things on, and it comes with a potential maximum credit limit of £ 1,500.

And finally, Bits is not regulated by the Financial Conduct Authority. He was covered as a representative of Modulr FS between August 2019 and April of this year, but other than that period he was not covered despite being in existence since 2018.

We asked the app about it and it said, “A previous product that we released required EMD authorization which we obtained through Modulr Finance. When we switched to the new version of Bits, we didn’t no need for the services Modulr provided us.

“The tips are fully compliant with all FCA rules and regulations. “

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