Affirm is a financial technology company whose headquarters are at 650 California Street, San Francisco, California, United States. It started its operations in 2012. The company runs as a financial lender of installment loans for customers to use at the point of sale to finance purchases of various goods such as electronics, fashion, furniture, and so much more. Since the financing is a form of a loan, you must have the right credit scores to benefit. But what credit score do you need for Affirm financing?
This article aims to give details about the scores you need to benefit from Affirm loans. All financial companies usually check your borrowing history from the credit bureaus when you apply for a loan or line of credit. That is called a hard credit pull and usually shakes your overall scoring a bit, although your scoring goes back to normal within a short period.
You might be wondering where the bureaus get information concerning your scoring. Well, every financial company must report your loan repayment or credit card usage to the bureaus, who then keep the information. They then avail your details to any financial company that wants to know more about you. We have three main credit bureaus in the United States. They include Equifax, TransUnion, and Experian.
What are credit scores?
Credit scores, also called FICO scores, are numerical expressions to show an individual’s creditworthiness. In short, the numerical shows your ability to pay a given amount of loan. Different people have different scores, meaning they have different capabilities to pay loans. The scores range from 300 to 850, whereby 300 represents the worst scores and 850 stands for excellent scores.
Some people may not have any scores whatsoever because they have never taken loans in their life. Take, for example, a student who just graduated the other day with no idea about loans and lines of credit. Such a person does not have any borrowing history, and thus they have zero scores. They have to get a secured credit card for rebuilding credit or a credit builder loan to gain some scores.
The more your scores, the more you are likely to get approved for loans and lines of credit. Attaining Good-Excellent scores requires a lot of discipline as far as borrowing is concerned.
What factors affect your scoring?
Various factors affect your overall scoring. According to Experian, the following factors affect your scores.
- Payment history: How you have been paying your loans and lines of credit determines a lot in your overall scoring. If you have been defaulting, you are likely to have low credit scores. On the other hand, you will have good scoring if you have been paying your loans on time and in the right amounts. Payment history contributes up to 35% of your overall scoring.
- Credit usage: The amount of money you owe your creditors also plays a significant role. You should spend at least 35% of your overall limit. If you are the kind of person who utilizes all your limits, that harms your overall scoring. The amount you owe contributes up to 30% of your total scoring.
- Length of credit history refers to how long you have been using your credit cards and loans. If you started a long time ago, then that means you have a long borrowing history. Financial companies prefer giving loans to people with a long credit history and good payment records. The length of your payment history contributes up to 15% of your overall scoring.
- Types of accounts: some financial companies call them Credit Mix. If you have various types of credit accounts, then that means you are repaying to various creditors who report your payments to the credit bureaus. If you have many lenders reporting your loan payment or card usage, then that will contribute up to 10% of your overall scores.
- New Credit: Applying for new credit leads to a hard inquiry by the lenders. If you apply for too many credits at a given time, that will pull you down. You should make sure that you apply for loans and credit lines that you are sure will help you. For example, after researching and getting the best balance transfer credit cards for fair credit, applying for it to transfer your balance makes sense. Even if they make a hard inquiry on your overall scores, that will not hurt your scores in a big way.
What credit score do you need for affirm?
It is incredible to note that Affirm does not have a minimum score requirement. However, it performs a soft credit check when you make an application. In most cases, the company considers your payment history, how long you’ve been having an Affirm account and the merchant’s interest rate.
Even though the company does not pull a hard credit check, you will not automatically qualify for a loan, and more so if you are new to the company. If they do not approve your request, they always email you why. Typically, you can get approval if you have a score of 640 or higher.
Affirm loans show on your credit report, and thus it is always good to make your payments in the best way possible.
What interest rates does Affirm charge?
The affirm loans have varying interest rates, ranging from 0% to 30%. You can benefit greatly if you are lucky to get a loan at a 0% interest rate. Interestingly, the loans do not change as it happens with credit cards’ interest rates. Credit cards have variable rates that change from time to time.
Affirm has three main loan repayment plans. They include;
- Three-month plan
- Six-month plan
- 12-month plan
Why should one use Affirm?
We have several reasons you may find Affirm as your best option for loans. They include the following.
- If you get a zero-interest loan. Various Affirm merchants do not charge any interest when you get Affirm financing to buy an item. They include Peloton, Adidas, and Dyson. You need to commit yourself and pay your debt in installments until you finish. Only defaulting may lead to some penalties.
- If you have an expensive item. When you lack money to purchase an expensive commodity that you must have, then getting Affirm financing can be of great help. Getting a loan can be a good idea if you drop ship and need to purchase an item and sell at a profit.
- Cannot get a credit card. Qualifying for credit can be a big issue, especially if you have no borrowing history. However, loans from firms such as Affirm are easy to get, especially if you hold an account with the company. However, you can get approved for a credit card with no credit if you apply for a secured credit card.
How do secured credit cards work?
The operation of secured credit cards is almost the same as credit builder loans. After getting the most appropriate card, you must open a checking account with the financial company issuing the card, then deposit some money to act as security. Some institutions have minimum deposit amounts, while others allow you to deposit the amount you have.
The deposited amount acts as security for your loan. Again, the amount you deposit is your credit limit. The limit refers to the maximum amount you can borrow with your card. Usually, secured credit cards are suitable for people with bad credit or no credit history who intend to grow their scores.
After growing your scores to fair amounts, the card issuer may upgrade you to an unsecured credit card. You must commit yourself to paying loans without defaulting so as to qualify for unsecured credit cards. Remember that since you have a security deposit helping you borrow a loan, the interest rates are usually low.
What is the difference between unsecured and secured credit cards?
Secured and unsecured cards differ in specific ways. One of the differences between secured and unsecured credit cards is that they require a security deposit when getting them. However, unsecured credit cards require your scores. We have unsecured cards for bad, fair credit, good, and excellent scores.
Additionally, you determine your borrowing limit with secured credit cards, while unsecured credit cards dictate your credit limit based on your overall scores. Furthermore, secured cards charge lower interest rates than unsecured ones for bad credit.
Affirm is a financial technology company headquartered at 650 California Street, San Francisco, California, United States. The company deals with loans and finances, buying various goods in partnership with other companies to finance purchases for qualifying borrowers. Once you get a loan from Affirm to purchase your items, you then pay in installments using any of the various payment plans.