How would your life improve if your credit score grew by 40 points over the next year? Could you refinance your high interest debt? Could you move out on your own or finally get ahead of your bills? On average, members at Self Lender improve their credit score by 40 points over the course of a one year loan.
Self Lender isn’t a gimmick. Rather, their Credit Builder Accounts give people with bad credit the opportunity to improve. A Credit Builder Account is a loan that reports to all three credit bureaus. However, Self Lender does not require a credit check. How do they do it? Should you open a Credit Builder Account through Self Lender? This is what you need to know.
What is Self Lender?
Self Lender tracks your credit score, and give suggestions on how to improve it. The suggestions are accurate, and Self Lender makes it easy to pull your score on demand. Self Lender’s suggestions aren’t as good as those from FreeScore360 or Credit Karma. If you’re interested in credit information, get a free credit report elsewhere.
Self Lender partners with companies that offer debt products. They explain how you can use these products to build your credit. People with established credit won’t find these offerings particularly useful. Credit comparison sites will help you find better credit cards, auto loans and more.
On the other hand, Self Lender also serves people who have no credit or bad credit. Self Lender partnered with Capital Bank of Austin to Credit Builder Accounts. These accounts give people with bad credit a second chance to build credit. They give people with no credit an opportunity to get off on the right foot.
Credit Builder Account Basics
A Credit Builder Account combines a forced savings program with controlled environment for building credit.
When you open a Credit Builder Account, Austin Capital Bank opens a Certificate of Deposit in your name. They deposit $550, $1100, or $2200 into the CD that you opened. At the same time, you take out a loan for the amount in the CD. Even though the CD is in your name, you cannot touch the money inside until you pay off the loan.
For 12 months you pay level payments to the bank. Self Lender reports each of the payments to all three major credit reporting bureaus which allows you to build your credit score.
At the end of your 12 month term, the CD matures and you get the money. If you fail to make a payment, the loan will go into collections. Self Lender offers a real loan product which means you have to make the payments.
People with poor credit (especially bankruptcy) know how hard it is to rebuild credit. If you’ve got poor credit, a Credit Builder Account may be among your only credit options. As long as you haven’t perpetrated credit fraud, you’ll be able to open a Credit Builder Account. This makes it a great option for people with bad credit.
However, you should not open the account, unless you can afford the monthly payments. If you’re fixing your credit, your top financial priority needs to be paying your current accounts.
It’s also somewhat expensive to open a Credit Builder Account. Self Lender customers pay a 10.57% interest rate on their Credit Builder Accounts. You also have to pay a $12 fee to open your account.
What does this mean in practical terms? You pay $594 to receive $550 CD twelve months later. The CD earns a negligible interest rate while you’re paying down the loan.
The Credit Builder Account is not free, but it is a low cost way to build credit.
Who should consider a Credit Builder Account?
A Credit Builder Account through Self Lender isn’t a good option for everyone.
People with credit scores in the fair to excellent ranges don’t need Self Lender. Instead, they should focus on timely payments and paying down credit card debt to improve their credit score. This is cheaper and more sensible than opening a Credit Builder Account. Need more tips on fixing your credit? Check out our guide to fixing credit.
On the other hand, people with bad credit or thin credit files will see massive benefits from a Credit Builder Account. The Credit Builder Account helps you develop the discipline of saving money and paying down debt. If you’re serious about rebuilding your credit, Self Lender is an excellent option for you. Just be sure you can make the monthly payments.
Do people with bad credit have alternatives to Self Lender?
Many credit unions offer credit building loans for their members. Consider asking about a credit builder loan the next time you visit a local credit union branch.
Another option for people looking to build credit is a secured credit card. A secured credit card is a credit card that requires an upfront deposit of a few hundred dollars. Your credit limit is usually equal your deposit. Most reputable banks outline a path to returning your deposit to you.
A secured credit card is a great way to build or rebuild credit. In some circumstances, it’s much cheaper than a credit building loan. As long as you choose a credit card with no annual fee, and you pay your bill in full each month, a secured credit card is the right option.
If you can’t trust yourself to pay your bill in full each month, then you should consider a Credit Builder Account through Self Lender.