No credit can be worse than having bad credit. Building your credit can be difficult if you aren’t getting many opportunities to show creditors you are a responsible user. And you need credit to rent an apartment, buy a car, or apply for a credit card. A great option for someone with no credit looking to build their credit responsibly is Self Lender.

What is a credit builder loan?

A credit-builder loan is designed to help people who have little or no credit history build credit, also known as a CD-secured loan.  What that means is a small loan is placed in a Certificate of Deposit account.  Over a 12-month period, you will make monthly payments and at the end of the term the CD will unlock and the funds will be released to you with interest. The best part about it is you will have built credit history in the process. Making you more likely to get approval for a loan or credit card.

How does Self Lender work?

You will go to Self Lender’s website, join at no cost, and apply for their credit builder account. Upon approval, you will pay a non-refundable, one-time administration fee for the account (typically around $12.)

Self Lender’s bank partners will deposit the loan into the FDIC-insured CD account. Until the loan is paid in full, the funds will remain in the CD.

The next month, you will begin to repay your credit builder account by making equal payments over the 12-month term. Payments can be as little as $25 depending on how small your loan is. Your payment history is reported to all three major credit bureaus each month.

At the end of your term, when your CD has matured and you have paid the loan off in full it will unlock. You will receive the amount of the loan plus interest earned during the term.

Building good credit

Payments account for 35% of your entire credit score. Self Lender reports to all three of the major credit bureaus your on time monthly payments. This shows you are a responsible user and gives future lender’s good marks on your history to base their decision off of.

Once your loan reaches maturity, Self Lender stops reporting to the bureaus. It is important that you keep active accounts in good standing to maintain good credit. You cannot have more than one credit builder account with Self Lender at a time, but are welcome to apply for another account after maturity.

Getting started

Getting started is easy, you can do everything from your computer. You will need a bank account, debit card, or prepaid card, along with your email address, phone number, and social security number. You must be a valid permanent U.S. resident with a physical U.S. address, and at least 18 years of age.

The approval process is based on ChexSystems, a specialty consumer reporting agency under the Federal Fair Credit Reporting Act. Past retail banking history is used to determine eligibility. They will look at items like closed checking and savings accounts.

Applying for Self Lender shouldn’t affect your credit score because no hard inquiry is made with the major credit bureaus.  

Credit Builder Loans used to only be available at community banks and credit unions.  Thanks to the wonderful world of technology, companies like Self Lender and it’s partners can offer you access to these credit boosting accounts from your computer screen.  Within 30-90 days you will see a jump in your credit score. Best of all, at the end of your term you can see a jump of up to 100 points in your credit score!

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