Self Credit Builder Account review
Build your credit history without getting a credit card.
Self Financial, Inc. – formerly Self Lender – helps individuals repair or build their credit through a small loan – all without a hard credit check or a security deposit. And your monthly payments are reported to three major credit bureaus: Equifax, Experian and Transunion.
These types of loans – called credit builder loans – help to establish your credit in 12 or 24 months and can be a great option for those who don’t have the funds for a secured credit card.
What is a Self Credit Builder Account?
Credit builder accounts — also called savings-secured installment loans — are secured by virtue of how they’re set up. The entire value of the loan is in a certificate of deposit (CD), which can be taken by the lender if you default.
Through Self Credit Builder Account, you can take a loan out for $525, $545, $1,000 or $1,700 from one of Self’s banking partners. The funds from the loan are then held in a CD that earns 0.10% APY for 12 months.
What’s probably best about this loan is that you don’t have to meet a minimum credit score requirement. Since the loan is completely secured, it greatly reduces any risk to the lender, thus relieving some of the requirements other providers or loan types carry.
- Choose to hold your funds in a 12-month or 24-month CD, depending on the account value you choose.
- You can earn an APY of 0.10% on the amount in the CD.
- Your consistent monthly repayments are reported to the three main credit bureaus: Experian, Equifax and TransUnion.
- Repayments made on time and in full can positively affect your credit score.
- There’s an annual fee of $9 to $15, depending on the account you choose to open.
- You won’t be hit with prepayment fees should you find yourself able to pay off your loan early.
Self Credit Builder Account vs. traditional loans
A Self Credit Builder Account isn’t a loan in the typical sense. Usually when you take out a loan, you get the funds, spend them and then repay the loan.
With Self Credit Builder Account, you take out a loan with a banking partner and your funds are held in an FDIC-insured CD for 12 or 24 months, depending on the account value you choose. You make 12 or 24 equal payments over the course of your repayment term, and the partner reports your payment history to the three major credit bureaus each month. Once you’ve paid off the loan, the funds in your CD will have matured — with earned interest.
When you use a credit builder account, you can establish a payment history. Keeping up on your payments and making them in full can help bolster your credit score.
Self Credit Builder Account pricing
It’s free to join Self. If you decide to take out the loan, you will pay a nonrefundable administrative fee between $9 and $15, depending on the amount you wish to borrow.
Depending on your loan size, you could pay monthly payments of $25, $48, $89 or $150 per month. When you establish your credit builder account, the following rates and fees will apply:
- Interest rate:
12.03% on the loan amount with a maximum APR of 15.98%.
- Annual fee:
Nonrefundable $9 to $15 (varies by product), depending on your account value
If you miss a payment by more than 15 days, you’ll be charged a late fee of 5% of the monthly payment due. You can make early repayments at any time with no penalties or fees. You will get any interest that has accrued in your CD, but you will still need to pay the amount due. Payments are typically reported to credit bureaus within 60 days of your first payment’s due date.
Self Credit Builder Account vs. secured credit cards
One key difference is the requirement of an upfront deposit. Secured credit cards require you to provide cash up front to secure the credit limit on the card. Self does not have this requirement.
|Self Credit Builder Account||Secured credit card|
|Upfront deposit requirement||None||Total amount of credit limit, usually $200 to $500|
|Access to funds||No access until after 12 or 24 months of payments, depending on your account’s value||Ongoing access to credit limit|
|Credit reporting||Reports to the three major credit bureaus as an installment loan||Reports to the three major bureaus as a revolving line of credit|
|Cost||APR of 12.03% to 15.98% (varies by product)||APRs start at 9.99% but can be as high as 24.99%|
Self Credit Builder Account benefits
- Build — or rebuild — your credit.
These accounts are intended to do exactly what they say: Help you build your credit. To successfully do so, you’ll need to make timely, in-full payments every month. A good payment history isn’t the only thing that makes up a credit score, so it could help to read more about how to build your credit.
- Refer a friend.
When you start your account with Self, you’re assigned a unique referral link. Should your friends or family create an account through that URL, you receive $10 after they make their first payment toward a loan.
- Equal monthly payments.
There’s no need to worry about variable payments. Installment loans come in equal, predetermined amounts spread over a set schedule.
- Establish some savings.
The money in the CD is yours after 12 months or 24 months of successful savings, depending on your account’s value. That means having anywhere from $525 after 24 months to $1,700 after 12 months, plus any interest that’s accrued with the 0.10% APY.
The difference between an interest rate and an APY
Your interest rate is the simple interest you’re paid on an account or an investment over the period of a year. For example, if you’ve invested $1,000 into an account that comes with 1% interest, you’ll have earned $10 on that investment at the end of a year.
The annual percentage yield is a bit trickier. An APY is an effective annual rate of return that takes into account the effect of compounding interest over a year. In short, it’s the interest rate compounded monthly over the course of a year. Learn more about savings accounts.
What to watch out for
CD-secured installment loans like Self Credit Builder Account can help build your credit score as they advertise, but they affect more than one part of your score. The amount that you save with the CD is also less than what you’re paying in interest on the loan, so it’ll cost you in the end.
Here are a few things to keep in mind before applying for an account:
- Open accounts affect your credit score.
Payment history makes up 35% of your FICO score, but other factors are affected by opening a new account. How much you owe versus how much open credit you have also makes up 30%, while new accounts and credit inquiries make up 10%. It may be worth considering the impact that closing your account after the loan is up will have on your score.
- No simultaneous accounts.
While you can take out another loan after your first is up, you can’t have two open at the same time with Self Credit Builder Account. If you’re hoping to make more payments per month or save more, you may need to look for alternatives.
- The APY is very small.
Though it’s marketed as a way to save money, it’s important to look at just how much you’re saving. For a $1,700 “deposit,” you’ll pay $150 per month — which means you’ll pay $1,800 over the life of the loan. This doesn’t include the $12 admin fee you’ll pay at the beginning of the loan. The expected value of your CD on release is $1701.70 — thus you will have paid $110.30 more than what you’ll withdraw in the end.
- No funds access for 12 months.
This type of loan renders the funds inaccessible for 12 months — or until you pay the loan off completely. You won’t be able to access what’s in the CD, and you won’t have any way of pulling from what you’ve paid into it. If you think you’ll have issues making monthly repayments, you may want to consider another option.
Self Credit Builder Account eligibility
If you’re ready to start building your credit and saving with Self Credit Builder Account, you’ll need to:
- Be at least 18 years old.
- Have a valid Social Security number.
- Have a valid email address, residential address and phone number.
- Have a bank account or debit card that’s in your name.
Self Credit Builder Account privacy and security
Self uses multiple encryption levels to secure your information, including 256-bit Secure Sockets Layer. On top of the encryption, Self regularly tests and scans its security systems to prevent hacking.
As far as accreditations, Self is an FDIC member and is accredited with the Better Business Bureau, which gives it an A rating.
How do I apply?
Now that you’ve checked your eligibility, there are just a few steps to apply:
1. Visit Self’s website.
2. Choose Get started.
3. Select I want to build credit and savings.
4. Enter your contact information to create an account.
5. Complete the required form.
6. Submit your application.
The entire process usually takes about five minutes.
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Building and rebuilding credit can be a strenuous experience. Self Credit Builder Account may be able to ease some of that with a simple system and straightforward repayments.
But credit builder loans aren’t the only way of building credit. Compare other options for improving your credit score to find what best fits your needs.