What is a credit builder loan? If you have no credit at all or bad credit, it can be difficult to get a loan or a credit card. Typically with bad credit or no credit you would need to apply for a secured credit card, which requires a deposit that will be used as your available credit. Self, offers a way to build credit with a credit builder loan that doesn’t require any deposits.
How Does A Credit Builder Loan Work?
A credit builder loan is an installment loan that allows someone to build a positive payment history while they save money. Payment history is 35% of your FICO Score, so when you use a credit builder loan and make on time monthly payments it will help to increase your credit score.
When you apply for a credit builder loan the money is held by one of their partner banks. You choose weather you want to pay the loan off in 12-24 months. Each monthly payment you make is reported to all three major credit bureaus Experian, Equifax and TransUnion. After all the payments are made, you will get access to the money minus the administrative fee of $9 and the interest.
What Credit Builder Accounts Does Self Offer?
Self offers two credit builder accounts that you can choose from 12 months or 24 months repayment plans. Choose a monthly commitment to repay the loan. The lowest commitment is $25 and the maximum is $150 a month.
If you chose the $25 a month plan and you paid $25 a month for 24 months, at the end of your loan repayment you would have 24 months of payment history on your credit report and have $520. If you chose the $150 a month plan and you paid $150 every month for 12 months you would end up with 12 months of payment history on your credit report and $1,662. To learn more about Self’s plans you can visit their website self.com.
Important Tip: You must make all your monthly payments on time in order to build your credit score. Any late or missed payments will hurt your credit score that you are trying to build. Make sure that you pick the repayment plan that you can stick to you 12 or 24 months. If $150 a month is too much for you try one of the other plans for $25, $35 or $48. It can take up to six months before your credit history is updated on FICO. You can monitor your FICO score at myFICO and your Vantage Score at Credit Karma.
How To Apply For A Self Loan
To qualify for a Self Credit Builder Loan you must:
- Be at least 18 years old or older.
- A permanent U.S resident.
- Have a Social Security number.
- Have either a bank account, debit card or prepaid card
- Live in one of the 50 U.S states
Should You Get A Credit Builder Loan Or A Secured Credit Card?
Now that you know what a credit builder loan is should you get one or a secured credit card? There are two important differences to consider when thinking about getting a credit builder loan or a secured credit card:
- With a secured credit card you need money upfront for a deposit which then becomes your credit limit that you can use immediately. With a loan you don’t need any money upfront but you cannot access your money until the loan is paid off.
- A credit builder loan is between 12 or 24 months long to build credit history. A secured credit card can be used as long as you need to use it for to build your credit. Once you have increased your credit you can apply for a unsecured credit card with better benefits.
Does Self Have A Secured Credit Card?
Yes, Self does offer a secured credit card the Self Visa Credit Card. To get the Self Visa credit card you must:
- Have an open Credit Builder Account
- Make 3 monthly payments on time to the Credit Builder Account
- Have $100 or more in savings progress
- Have your account in good standing
Once you meet the eligibility requirements for the Self Visa Credit Card you can:
- Choose your credit limit with a portion of your savings progress to secure your card and set your limit
- Order your card by confirming the correct location
- You will receive your card in the mail and can activate it to start using it wherever Visa cards are accepted
- You can monitor and track your spending activity
Benefits of the Self Visa Credit Card
- You don’t need any additional money to open the credit card. All you need is the money you saved from your Credit Builder Account.
- If you account is in good standing you can have the opportunity to increase your credit limit over time.
- When you use the Self Visa credit card responsibly by making on-time payments, and keeping your debt low it will greatly increase your credit score.
- There is no hard pull on your credit when you apply so it will not negatively impact your credit score.
- You can use the credit card anywhere Visa credit cards are accepted.
To build your credit score making on time monthly payments is the best way to increase your credit score. Applying for a credit builder loan with Self is an affordable option to help you make low on time monthly payments for 12 or 24 months so you can build your credit. Once you have started making monthly payments with your credit builder loan you can use the money you saved and open up a Self Visa Credit Card to help you increase your credit score.
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