Credit FAQs

Credit Basics

Q. What is credit?

Credit is an arrangement where a lender allows a borrower to use money now, on the promise that it will be repaid later — usually with interest. It lets someone access funds they don't currently have, in exchange for a commitment to pay it back over time.

Q. How does a credit card work?

Using a credit card means borrowing money from the card issuer — essentially a pre-approved loan. Each billing cycle, the cardholder receives a statement showing what they've spent and the minimum amount due. They can pay the balance in full (avoiding interest) or make a smaller payment, with interest charged on the remaining balance.

Q. What is a credit score?

A credit score is a number, typically between 300–850, that reflects creditworthiness. It's calculated from a person's credit history — payment history, amounts owed, length of credit history, new credit, and the mix of credit types used. A higher score signals lower risk to lenders.

Q. Why does good credit matter?

Good credit makes it easier to get approved for loans and credit cards on better terms — lower interest rates, higher limits, better insurance rates — and can even affect renting an apartment or being hired for certain jobs.

Q. What is APR?

APR (Annual Percentage Rate) is the yearly interest rate charged on an outstanding credit card balance. It reflects the true cost of borrowing, including interest and fees — a lower APR means less interest paid on any balance carried over.

Q. What is a credit limit?

A credit limit is the maximum amount that can be borrowed on a credit card. Exceeding it can result in a declined transaction or an over-limit fee, and the limit itself is set based on factors like income, credit score, and payment history.

Q. What is a FICO score?

A FICO score is a specific type of credit score created by the Fair Isaac Corporation, ranging from 300–850 and used by around 90% of top lenders. It's weighted across five factors: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%).

Q. How can a FICO score be improved?

Paying bills on time, reducing debt (especially credit card balances), avoiding new credit applications, keeping old accounts open, and maintaining a mix of credit types all help. Meaningful improvement typically takes 3–6 months of consistent positive behavior.

Q. How often is a FICO score updated?

Whenever new information is reported to the credit bureaus — usually monthly, as creditors report payment activity. Since not every creditor reports to all three major bureaus (Experian, Equifax, and TransUnion), scores can vary slightly between them.

Q. Is FICO used worldwide, and do other countries handle credit differently?

FICO is primarily a US system. Other countries have their own models and their own consumer-protection rules — for example, the UK, Canada, and Australia use different bureaus and scoring approaches, Germany relies on SCHUFA, France has no single universal score (banks use internal models instead), and Japan's bureaus (CIC, JICC) don't use a standardized FICO-style score. Consumer rights also vary: in the US, the Fair Credit Reporting Act (FCRA) gives consumers the right to see their report, dispute errors, and limit how their data is shared; other countries apply different data-privacy and consent rules.

Q. Are all credit scoring systems publicly available?

No. FICO's methodology is publicly documented, but many countries and institutions use proprietary models with undisclosed factors and weightings — which is part of why understanding your credit standing can be harder when dealing with different lenders or countries.

Q. What is a credit account?

A credit account is the record of credit extended to a customer — tracking their credit limit, how much they've used, what's still available, when payments are due, and whether they're current on payments.

Q. What is a "bucket," and why does it matter?

A bucket is a way of categorizing money within a credit account — for example, separate buckets for purchases, cash withdrawals, and interest. Buckets let different rules (like interest rates or payment priority) apply depending on the type of balance.

Q. What is a billing cycle, and what happens at the end of one?

Each credit account runs on a recurring cycle, usually monthly. At the end of the cycle, the amount owed is calculated, any interest is billed, balances are updated, a statement is generated, and any past-due amounts move forward to reflect how overdue they are.

Q. What is "cash spend," and why is it treated differently?

Cash spend refers to transactions like ATM withdrawals or money transfers — considered riskier or less flexible than regular purchases. Because of that, clients can set separate limits and tracking specifically for cash transactions, distinct from the overall credit limit.

Q. What is a credit bureau?

A credit bureau (or credit reporting agency) collects and stores data on people's borrowing and payment behavior — loans, credit cards, payment history, and debts. Bureaus use this data to generate credit reports and scores, which other lenders use to decide whether to extend credit and on what terms.

Program Setup & Launch

Q. What do I need to launch a credit card or revolving credit program?

To launch a credit program, you typically need:

• Access to capital to fund receivables
• A licensed issuing bank partner (BIN sponsor) or your own charter
• Regulatory and compliance oversight
• A card network membership or partnership
• A credit decisioning capability (underwriting and risk rules)
• A loan management and servicing platform

Thredd provides the core issuing infrastructure, transaction processing, and network connectivity, and helps orchestrate integrations across underwriting, servicing, and third-party providers.

Q. Do I need my own bank charter or BIN to issue credit cards?

Not necessarily. Most fintechs and brands launch credit programs through a sponsor bank model, where the partner bank holds the charter, owns the BIN, and acts as the legal issuer of record. Thredd supports both sponsor bank programs and clients operating with their own bank charter and BIN. For non-bank clients, we can support introductions and program structuring with sponsor banks, reducing time to market.

Q. Who provides the capital for consumer credit balances?

Capital can come from several sources depending on program structure:

• The sponsor bank
• A warehouse facility or debt provider
• The program manager or fintech balance sheet
• A structured combination of the above

Thredd does not provide lending capital. We enable the infrastructure to originate receivables, track balances, manage credit lines, and support reporting to capital partners.

Q. Can I customize APRs, fees, and credit rules?

Yes. Credit program flexibility is a core design principle. Clients can configure:

• APR structures, including fixed, variable, or promotional rates
• Fee logic such as late fees, annual fees, or foreign transaction fees
• Credit line assignment rules and underwriting decision trees
• Grace periods and billing cycles
• Risk-based pricing strategies

Final structures remain subject to bank partner approval, card network rules, and applicable regulatory requirements.

Q. How long does it take to go live?

Time to market varies by program complexity, regulatory requirements, and bank partner readiness. Thredd's pre-integrated components and predefined program templates are designed to reduce build time compared to building individual components independently. Contact your account manager for a program-specific estimate.

Application Process & Decisioning

Q. How does the credit application and decisioning process work?

Applications are submitted through the Thredd Credit API, which triggers automated soft credit checks and third-party decisioning without a hard credit inquiry. This includes KYC, OFAC, and address verification, and a review of the applicant's data against the client's credit policy — checking minimum requirements (age, income, credit score), credit history, any derogatory marks, and velocity or duplicate-application rules. If the applicant qualifies, an offer is issued and the client records the applicant's response via the API. On acceptance, a hard credit check is performed automatically. If approved, a credit line and payment card are created without any further integration steps required. Clients receive real-time updates on application status through Thredd webhooks, which can be used to communicate progress to the applicant through the client's own interface.

Q. Do I need to build my own application journey?

Yes. Thredd provides the API layer and processing infrastructure, but clients are responsible for building the customer-facing application experience — for example, a mobile app or web form that captures applicant information and displays status updates. The Thredd Credit API handles submission, decisioning, and account creation on the back end.

Q. What is the difference between a standard application and a pre-approved application?

A standard application goes through Thredd's full origination flow, including soft credit checks and third-party decisioning. A pre-approved application is for applicants who have already passed the necessary diligence checks before submission. In this case, the credit limit, cash limit, and interest rates are determined prior to the API call, and the standard decisioning flow is bypassed. Clients use a separate endpoint for pre-approved submissions.

Q. Can a customer have more than one active application for the same product?

No. For any given product, a customer may only have one application actively moving through the review process at a time.

Application Statuses

Q. How do I track the status of a credit application?

Application status is returned in the API response when an application is created, and is updated throughout the origination process. Clients can retrieve the current status of any application using the Get Credit Application by ID endpoint, and can view the full history of status changes using the Get Credit Application Timeline endpoint. Status changes also trigger webhook events, enabling clients to notify applicants in real time without polling the API. Once an offer has been generated, its details — including whether it's still pending, accepted, declined, or expired — are also included on the application object returned by the Get Credit Application by ID endpoint, so clients can check offer status directly rather than relying solely on the webhook.

Q. What application statuses should I expect, and what do they mean?

An application moves through several statuses during its lifecycle. It is initially set to Pended while identity verification and any manual review checks are completed. If the applicant qualifies, the status moves to Offer Pending Acceptance while the applicant considers the offer — applicants have 30 days to respond. If no response is recorded within 30 days, the application is automatically marked Withdrawn. If the applicant declines the offer, the status moves to Offer Declined. If accepted, the status moves to Offer Accepted while the hard credit check is performed. If the check passes, the status moves to Approved and the line of credit and card are created. If the check fails, the status moves to Declined. Applications can also be Declined earlier in the process if they fail the initial soft credit, KYC, identity verification, or fraud checks.

Account & Payments

Q. How do customers manage their account once a line of credit is live?

Thredd provides a set of read-only Explorer API endpoints that clients can use to power customer-facing account management functionality. These cover the account dashboard (balances, limits, payment information), billing statements, and transaction history. Clients surface this data through their own interface — Thredd does not provide a consumer-facing portal directly.

Q. How is a cash limit calculated?

A cash limit — the portion of the credit limit that can be used for cash-type transactions — is calculated as a percentage of the total credit limit: Cash Limit = Credit Limit × % of Available / 100. That percentage is configurable per program.

Q. What happens when a transaction is posted?

When a transaction posts, the system determines which balance bucket it applies to, calculates any interest owed, adjusts past-due amounts if applicable, and recalculates the customer's available credit (and available cash, where relevant).

Q. How is the minimum payment calculated?

The minimum payment is a configurable percentage of the outstanding balance, set per program.

Q. How are payment due dates determined?

Due dates are set as a configured number of days from the billing cycle date — for example, 28 days is a common default, though this can vary by program.

Q. How are payments processed against a line of credit?

The Thredd Credit API supports two payment flows. Manual payments — for example, cash or check payments collected outside the system — can be logged directly against the account. For automated repayment, clients can set up a scheduled autopay using a bank account linked to the customer, with a choice of standard or same-day ACH transfer. Bank accounts used for autopay must first be created and linked to the customer via the Bank Account endpoints.

Q. Can customers have more than one bank account linked to their credit account?

Yes. The Bank Account endpoints support creating, retrieving, updating, and deleting bank accounts associated with a customer. Multiple bank accounts can be linked to a customer record and used as payment methods for line of credit repayments.

Interest & Fees

Q. How is interest calculated?

Interest accrues daily, based on a fixed Annual Percentage Rate (APR) divided by 365 to get a daily rate. Different transaction types (purchases, cash advances) can carry different rates, and interest is tracked separately for each. The formula is:

Accrued Interest = Balance × (Daily Rate / 100)

For example, on a $250 purchase balance with a daily rate of 0.0517808%, the daily accrued interest would be:

250 × (0.0517808 / 100) = $0.1294

At the end of each billing cycle, the accrued interest is totaled and added to the relevant balance. When a payment is made, it reduces the corresponding balance from the payment's value date, and accrued interest is updated accordingly.

What's Next

Q. Is technical documentation available?

Full API reference documentation is available for the Thredd Credit API, covering all endpoints across the Application, Explorer, Bank Account, and Payments capability groups. Documentation includes endpoint descriptions, request and response schemas, field-level definitions, example payloads, and error reference information. For more information, see Introduction to Credit at Thredd.