, formerly known as Self lender, is a financial technology company that specialises in building and rebuilding credit. Self’s mission statement shows that it is a fintech company aimed at helping people, especially those new to credit, with bad credit records and those without access to traditional financial products or frameworks, build their credit.

To achieve their mission, Self offers a “credit-builder account,” which allows people who ordinarily wouldn’t qualify for a loan from traditional banks to receive instalment loans and repay them to build a positive credit history. So, if you’re looking to build your credit or redeem your credit, this post is for you.

Why do you need good credit?

You may be wondering why credit is so important and why your credit records always have to be in top shape. Having good credit comes with many advantages that make your life easier and increase its quality. With good credit, you get:

  • Lower interest rates on your loans.
  • Better credit card deals
  • Larger loan and credit card limits
  • The ability to skip utility deposits
  • Lower insurance rates
  • Easier approval for rentals
  • Higher negotiating power on loan terms
  • Better housing options
  • Also, some jobs may require you to provide your credit history as part of the application process. Having a good credit score greatly increases your chances of landing the job!

How works

Self offers credit builder accounts backed by FDIC-approved financial institutions they partner with like Lead Bank, Sunrise Bank and Atlantic Capital Bank. The credit builder account is essentially a small credit builder loan taken out in your name (credit builder loans available on Self range from $520 to $1663).

However, the funds are not directly disbursed to you. Instead, Self holds them as a secured loan by placing the money in a Certificate of Deposit. With a certificate of deposit, the money is held for a specific period, after which you can withdraw it with added interests. Here’s how the credit builder loans work:

  • You join Self at no cost, then apply for a credit-builder account. Upon approval, you pay a one-time, non-refundable administrative fee of $9.
  • The bank partner lends you a small loan which the bank holds on to via a certificate of deposit until the loan is fully repaid.
  • The month after taking the loan, you start repaying with prompt, equal payments over the term of the loan.
  • Once the term ends and you have made full payment, your certificate of deposit matures and unlocks. The principal amount will then be released to you.

A remarkable thing about Self is that each prompt monthly payment you make is reported to all the three major credit bureaus: Experian, Transunion and Equifax. Also, once you have fully repaid the loan with prompt monthly payments over the period you chose, the funds will be released to you. Your payment history forms 35% of your FICO score, so being regular with payments is very important to your goal of building credit.

Self offers four different monthly payment options: $25, $35, $48 or $150 and the payment can be spread across either 12 months or 24 months.

How much does Self cost?

While Self itself is free, the credit builder account comes with certain charges. The first charge is the administrative costs which is a one-time payment of $9. You will also have to pay interest rates, APRs and finance charges determined by the payment option you choose.

Monthly payment option Loan term Finance charge Interest rate Annual percentage rate Activation cost Total cost What you’ll receive at the end of the term
$25 24 months $89 14.14% 15.92% $9 $600 $520
$35 24 months $125 14.70% 15.97% $9 $840 $724
$48 12 months $46 12.44% 15.65% $9 $576 $539
$150 12 months $146 14.87% 15.91% $9 $1800 $1663

Also, if you are making your monthly loan payments with a debit card, you will be charged a $0.30 x 2.99% fee per transaction. To avoid the fee, you can link a bank account instead.

Be sure to check out the Self website to be aware of any changes in the rates and pricing.

Who can get a Self Credit Builder Loan?

To begin your credit journey with Self, you must be 18 years or older and a valid permanent US resident or a US citizen with a physical address within the United States. You will also need the following:

  • A valid bank account, debit card, or prepaid card.
  • A valid email address and phone number.
  • Your social security number.

According to Self, they do not turn applicants down based on just current credit scores, but they partner with Chexsystems to determine your eligibility by analysing your banking history. They, however, do not perform any hard inquiries on your credit.

How to join Self

According to Self, most people are able to join within 5 minutes of applying. However, it could take longer for someone without a credit history because of the additional steps required to verify their identity.

During the signup process, you will be required to provide relevant personal information like your legal name, phone number, email etc. You will also select your loan terms, enter your payment information and answer some security questions for identity verification.

If your loan request is approved, you’ll pay the one-time non-refundable administrative fee of $9 to complete the signup process.

You can access the signup page here.

The Pros of Using the Self Credit Builder.

The main benefit of the Self credit builder is the chance to improve and build up your credit score. As stated earlier, your payment history forms 35% of your FICO score, so keeping up with your Self payments is a sure-fire way to build up your credit.

  • Self allows you to save money over time
  • Self reports to the major credit bureaus monthly, increasing your credit score without making any substantial financial purchases.

If you have decided to build or rebuild your credit, is a great way to start. However, while using Self, you still need to constantly check your credit score, monitor your credit report for errors, and promptly make your payments. Doing all these will help you build your credit.

Author: sheila johnson