Building credit with a digital credit card
A digital credit card. available through Grain, is a line of credit based on your income rather than your credit score. You get cash advances to your linked bank account, like a cash advance or pay-day loan, but instead of paying all the money back on your next payday, you pay back in monthly payments like a traditional credit card.
Does Grain check your credit?
Just because Grain doesn’t use your credit score doesn’t mean they don’t run some type of credit check, such as with small credit bureaus like Clarity. Grain will use your bank account information, such as income and cash flow to determine your initial credit line. For some, Grain may require a security deposit to reduce their risk, depending on your income and spending habits.
How does Grain help build credit?
Grain is a great credit builder card option because it reports to the credit bureaus. With a Grain Digital Credit Card, you are enrolled in auto-pay, which means every month, Grain will automatically deduct your account for the minimum payment due. Since payments are reported to the credit bureau, you’ll be able to build good credit history as you make on-time payments and pay down your credit line. Payment history makes up 35% of your FICO credit score and is one of the most important factors for creditors and lenders. If you pay your minimum payment with Grain, you’ll show on-time payments and receive a positive payment history from Grain to the credit bureaus.
In addition to payment history, Grain also affects your credit utilization ratio, which makes up 30% of your credit score. If your maximum credit limit on your Grain credit card is $500 and you have $250 outstanding, your credit utilization on your credit card is 50%. You can combine all your credit cards and loans together to get a combined credit utilization which impacts credit reporting.
Furthermore, Grain is considered a revolving line of credit, which is different than most other credit cards. This allows for a diversified mix of credit on your credit report, which makes up another 10% of your credit score.
Is a Grain Digital Credit Card good for you?
If you have bad credit and you need cash, or you want to build good credit history, Grain is right for you. Access to quick money without getting into a credit card debt cycle is difficult and there are few companies out there that are friendly and flexible. We believe a Grain digital credit card is one of the few products available to people with bad credit that are friendlier and better than conventional choices like payday loans or payday advance apps. In addition, they’re transparent and show you all the fees and costs upfront.
Final take
As with any product, there’s a lot of information out there, so let’s sum it up for you:
- You will get access to money quickly.
- You can get approved with a bad credit score if you have cash flow.
- You can build your credit history.
- You can diversity your credit mix.
- You can combine your credit utilization.
- You need a valid bank account and cash flow.
- You might be asked to secure your digital credit card.
- Grain has lower APRs than many credit cards.
- Like many traditional credit cards, late fees and interest can add up. Since you’re using this to build your credit, ideally late fees are not an issue. Do not keep a consistently high balance.
We encourage you to give Grain a try if you’re trying to build your credit. If you have any questions, we offer free credit consultations and are happy to answer any questions about how to build your credit. Give us a call at 314-485-9940 or schedule an appointment today.
