When he’s not scoring three points, NBA star Stephen Curry wants to help you improve your credit score. He is an investor in Kikoff, a new credit creation platform for Gen Zers and millennials.
How Kikoff works
Kikoff users are given a $ 500 credit line that they can only use at the Kikoff store. The cheapest way to get started is to subscribe to the Kikoff credit service, which costs $ 2 per month. The online store also offers e-books on personal finance.
If you sign up for the $ 2 monthly plan, you are only using a tiny fraction (less than 1%) of your $ 500 line of credit, which is a very favorable credit utilization rate. Kikoff basically designed a structured microcredit system to demonstrate the credit building activity. He reports these lines of credit to two of the three major credit bureaus (Equifax and Experian).
By using a Kikoff account responsibly, the company notes that customers can positively influence several key aspects of their FICO credit score, especially their payment history (35% of the FICO formula), how much they owe (30%) and the length of their account history (15 percent). It has hundreds of thousands of users and has raised $ 42.5 million in venture capital.
There is a large market of people looking to build or rebuild their credit scores. The FICO claims that 79 million American adults have credit scores below 680 (which the company says is “an acceptable credit threshold for lenders”), and 53 million cannot even be rated because they do not have enough information on their credit report. Together, this means that about half of all American adults have subprime credit or no credit at all. It is safe to say that there is a demand for credit products suitable for beginners and builders.
In some ways, Kikoff is similar to credit loans, which are essentially a form of structured forced savings to create credit, as monthly payments are reported to the credit bureaus. At the end of the term (maybe a year or two), the account holder keeps most of the money they put aside, usually less some interest and fees. Saving money on your own would be more profitable and provide more cash, but it would not directly improve your credit score. This is why home builder loans appeal to some people.
Another popular method of creating credit is to take out a secured credit card. The customer deposits a down payment (often a few hundred dollars) which usually serves as a line of credit. The lender can keep the deposit if the cardholder defaults, but the idea is that the customer will use the card and pay off their balance each month, with the goal of improving their credit profile enough to qualify for a card. traditional unsecured credit after six to twelve months (in which case the issuer will reimburse the deposit).
Assuming you pay your bills on time and in full to avoid interest, and buy a card that doesn’t charge an annual fee, a secured card is probably the best of these credit options because it serves the most purposes. . You can use these cards anywhere the card network (eg Visa or Mastercard) is accepted. And they often report to the three credit bureaus. The Capital One Quicksilver Secured Cash Rewards credit card is a good example; it even gives 1.5% cash back on every purchase.
There are also unsecured credit cards specifically aimed at builders and credit restorers, such as the Visa PetalÂ® 1 “no annual fee” credit card, the Tomo credit card and the X1 card – which practice underwriting. cash flow. They don’t place as much importance on your credit score; many of their target customers don’t even have a credit score. These companies are much more interested in the income and expenses of candidates.
Their ideal clients have strong incomes and savings habits, but have fallen through the cracks of the traditional credit scoring model for one reason or another. Due to their detailed underwriting practices, these three startups may also offer much higher credit limits than secured cards.
Alternative credit monitoring services
Another way to improve your credit score is to sign up for an alternative credit monitoring service such as Experian Boost, Perch, or eCredable Lift. The first two are free, and eCredable Lift costs $ 24.95 per year. Each works a little differently, but the basic summary is that you can sign up to get some existing payment histories, which are not traditionally counted in credit scoring formulas, built into your reports. Examples include rent, streaming services, utilities, and more. These alternative credit monitoring services offer huge benefits, potentially free, with no real downside since you can unlink accounts if the additions don’t help your score.
Conclusion: is Kikoff a good deal?
It’s not bad, but it wouldn’t be my first or my only choice. There are other ways to build or rebuild your credit score that cost less and provide broader appeal.
If you want more purchasing power while building credit, then go for Petal, Tomo or X1. If you plan on spending little but still want to buy things with a credit card and build a relationship with a credit card issuer, go with a secured card. If you want an immediate, free way to improve your credit score, try Experian Boost or Perch. If you want to improve your credit score while putting money aside, then a credit loan is your best bet.
Maybe Kikoff could provide some extra perks, but I wouldn’t put all of my eggs in this basket. It can cost as little as $ 2 per month, but there is no evidence that it helps your credit score more than these other strategies, and each of them could cost less or offer additional capabilities. Sometimes they can even do both.
A question about credit cards? Email me at [email protected] and I would be happy to help.