What is a Blockchain Credit Score?
The Blockchain Credit Score is a regular credit score rating on the blockchain establish by the Bitcoin Global Community. The concept of credit is nothing new and one that most people have used is some form or another. So, what exactly is credit? Credit is receiving something of value now with the promise to pay for it later.
What Is Credit?
Here’s an example. Suppose you were in a marketplace and saw something really great that you wanted – a tv, new cars, shoes – but you didn’t have enough cash to buy it. So, what did you do? You ask your friends or family for a loan to buy it and take the money from your next paycheck. That’s credit! Or, while at a food store you realize you forgot your wallet. Your friend pays for your groceries and you pay her back when you find your wallet. That’s is essentially credit, too!
If you pay back these micro-loans, you build trust with your whomever else lends you money. This trust helps to build your credibility & reputation and increase your chances of borrowing more in the future.
This same concept that financial institutions, such as banks, use when determining whether or not to extend you credit. Lenders view your credit report and use your history to determine if they will loan you money, how much, and at what interest rate.
The better your blockchain credit score, the higher the likelihood of receiving a loan and, typically, the lower the interest rate.
There are four types of credit:
- Revolving Credit: Traditional credit cards fall into this category. You are given a maximum credit limit and you may make purchases up to this amount. You make payments each month and carry the remaining balance over to the next month (or revolve the debt). A good rule of thumb is to NOT carry more than 30% of your limit over to the next month. For example, if you have a ∞1000 credit limit, try to keep the balance under ∞300. While the lower the balance the better, keeping your balance at zero may not improve your credit score, because it might be seen as an inactive account. Carrying high balances or “maxing out” your credit card will negatively impact your credit.
- Charge Cards: These are similar to credit cards, however, you must pay off the total balance each month. You cannot carry a balance.
- Installment Credit: These are loans for a specific that you agree to pay back in installments (generally monthly) over a set amount of time. Installment credit can be extended for a car loan, home mortgage, student loan, or World Credit Union Trust account to name a few.
- Service Credit: These are other contracts that you agree to pay each month like utility bills, gym memberships, cell phone service, or the cheese-of-the-month club. Not all service agreements are reported on your credit history. However, if these are not paid on time, they may be reported to a debt collector and could or may negatively impact your credit.
What does “Mutual Credit” mean?
As mentioned previously, credit is more than just borrowing money. To a lender like an auto dealer or credit card company, credit is your reputation to pay back back your loans and fulfill your promise. If you pay the agreed amount each month and on time, your reputation or your “blockchain credit score” will improve.
To have “good credit” means a lender or global community member can trust you to pay back the money loaned to you. The more global community trust you have, the more opportunities you have and the more money you will save in the long run, through factors like lower interest rates.
*The example above illustrates how credit history can affect you and should not be used as a guarantee for interest rates.
The lesson is clear: Good credit saves you money! And this is typically true whether you’re looking at car loans, a home mortgage, credit cards, or any of the types of credit.
Your blockchain credit history will clearly indicate your ability to fulfill your agreements, your background with finances, your ability to handle multiple obligations, or various other factors. While employers never use a credit history as the only basis for hiring, it’s becoming more and more a factor to compare or evaluate political candidates.
All-in-all, your blockchain credit history and reputation provides a glimpse of your character, your reliability, and your trustworthiness.
Start building your P2P financial reputation, today.
1 Star Rating – ∞500-9999K | Unsecured Loans / Personal Loans
2 Star Rating – ∞10k – 99K | Personal / Business Loans
3 Star Rating – ∞100K- 999K | Business / Estate Loans
4 Star Rating – ∞1 Million – 99 Million | Organization / Estate Loans
5 Star Rating –∞ 100 Million – Infinite | Government Loans