KNB will be in charge of setting credit scores. Obviously, the most important factor will be on-time payments. At the age of 18, the person will start off with a 500 credit score. The lowest is 0, and the highest is 1000, so 500 is in the middle. Consistently good financial decisions will increase the credit score where as consistently bad financial decisions will decrease the credit score. This means everyone 18+ will have a credit score, and there is no way to opt out.
The rate adjustment is a formula of (1000-C)/100 = percentage rate.
All landlords, utility companies, and other subscription based service must report the on-time payment made by the consumer. This is even in the case where the landlord is a single person with a few rental properties. With that in mind, he may want to form an LLC for his rental properties so the report does not show his actual name. The credit score will determine the rate adjustment that the creditor will impose. All cards within a product must have the same base credit card rate. This is then added to the rate adjustment for a total of what the consumer will pay. Let’s look at a few roles.
Joe has a credit score of 250. He wishes to apply for a credit card that has a base rate of 18%. Here is how his rate will be determined. (1000 – 250)/100 = 7.5% This will get added for a total of 25.5%. If John just started out as an adult, and hadn’t had the opportunity to prove himself yet, then his credit score is 500 which is better than Joe. In his case, the same formula will be (1000 – 500)/100 = 5%. Once added that to the 18% for a total of 23%. In most credit rating systems, you are punished for not having any credit history. The KNB will give everyone a chance. Now let’s look at Frank. He has a 1000 credit score which will be (1000 – 1000)/100 for a total of 0%. That same card will only cost Frank 18% interest which is the base rate since he has a perfect score.
All lenders and credit card providers must provide the base rate for all of their products. There can not be multiple base rates for the same product. This allows the consumer to shop for options, and make decisions on who to go for first. The creditor is allowed to charge late fees, but not over credit limits.