Your credit score is an important part of your financial life. It is a key aspect of being able to access credit when you need it, to pursue your dreams and realize your full potential.
Without great access to credit it is harder to attend your dream college, balance academic coursework with part-time work, buy a car to commute to a better job, pursue your entrepreneurial passion, or buy a home in a great school district.
Having a good credit score matters, and it is important to start building credit early in life.
If you’re currently using the Atlas credit card to build credit, or considering signing up, it’s important to understand how it can help build your credit. In this article we dive into the details:
- How Atlas works
- How Atlas builds credit
- What to expect in terms of score changes
How Atlas works
1. Get your spending limit
To get started with Atlas, all you have to do is link your primary funding account to get a spending limit. The limit is based on your linked account without needing a credit check.
2. Make purchases
As you make purchases they get charged to your line of credit. We frequently re-evaluate your account and automatically upgrade your spending limit as your history with Atlas grows.
3. Pay balances
With Smart Pay we frequently pay off your Atlas balance. This ensures you always make on time payments, have low utilization, and never risk building up too much debt. This helps maximize credit building while protecting you from the risks of runaway debt.
How Atlas builds credit
As part of understanding how Atlas helps build credit it’s also helpful to understand how credit scores get determined, and how your credit score gets calculated.
1. How is your credit score determined?
Credit scores are determined by credit bureaus. There are three major credit bureaus: Transunion, Experian and Equifax. Every month lenders and credit card companies report payment activity to credit bureaus. The bureaus then update your score based on the reported activity.
2. How is your credit score calculated?
There are few different types of credit scores and each has its own nuances. The most common is the FICO score which is used by 90% of top lenders. FICO scores are based on the following five factors. These are the five key factors that impact your credit score.
- Payment history (35%): your track record of on time payments. You always want to make on time payments.
- Credit utilization (30%): whether you are consistently maxing your limit or using credit responsibly. You want to avoid high amounts owed and consistently high credit utilization.
- Credit age (15%): how long you have had credit accounts with reliable and trustworthy usage. Long standing accounts are considered a positive.
- Credit Mix (10%): the mix of credit products in your report (eg: credit cards, installment loans, etc.). Having a healthy mix is good.
- New credit inquiries(10%): number of recent credit applications through “hard” credit history checks. Generally not good to have too many in a short amount of time.
3. What does Atlas report on?
Now that you’ve got the basics, let's dive into what Atlas reports to the credit bureaus to help you maximize each of these factors.
- Payment status: whether or not you paid the previous month's balance. If you have Smart Pay enabled and sufficient funds every month in your linked account, you will never miss a payment.
- Card utilization: through Daily Spending limits and Smart Pay Atlas ensures that you can pay off your balance frequently for low utilization and makes it easy to pay your full balance each month.
- Account age: this is the number of months you’ve been with Atlas. In general, the older your account, the better! Long standing accounts show that you’ve been reliable and trustworthy over a long time.
- Current balance: this is the amount you have spent since the last statement plus any amount that is past due.
4. When does Atlas report payments?
Atlas reports to credit bureaus at the beginning of every month. IIf you're a new user it can take 2-3 months for it to show up in your credit report. Atlas currently works with all thre major credit bureause-- Transunion, Experian, and Equifax.
What to expect in terms of score changes
Atlas has all the features you need to stay on top of the key factors that impact your credit score. Atlas is designed to help you maximize the key factors that determine 80% of your credit score: payment history, credit utilization, and account age. Additionally, Atlas card can improve your credit mix and never makes credit inquiries helping with the remaining 20% as well.
Consistent use can help you build a strong payment history, increase the length of your history, maintain a healthy credit mix, prevent high utilization (since we don’t report a limit or utilization) and avoid unnecessary hard inquiries.
The key thing to remember is that it’s important to start early, never miss a payment, and keep utilization low. Atlas makes that easy to do all of those. Building credit takes time and the best time to start is now!
If your credit score dips a bit from opening a new account don’t get discouraged. By making regular on time payments and building a strong history your score can keep improving. It’s essential to turn on Smart Pay to never miss a payment and maximize your payment history.
Atlas can make a big difference. But remember – it’s only one or many potential accounts. It’s still important to stay on top of other financial accounts and activities besides Atlas. Since Atlas is only one factor, credit score increases are never guaranteed.
Building credit takes time, and we’re committed to being with you and in your corner throughout the journey.