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Building your credit so you can secure those lower interest rates can be hard.
Self (formerly Self Lender) is a company that looks to help people build credit through credit builder loans. This Self Lender review will tell you everything you need to know about the service.
How Does Self Work?
Self helps its customers build their credit scores through credit builder loans. A credit builder loan is a special type of personal loan designed not to help you pay for something you can’t afford, but to help you build a history of paying off debt.
With a credit builder loan, you don’t get the money when you’re approved for the loan. You have to make your final payment before receiving the cash. In a way, it works like a forced savings plan.
Like any other loan, the process starts with submitting an application. You’ll have to provide some basic details to Self, such as your name, social security number, and where you live.
If you’re approved, the process looks like this:
- Self puts the amount of your loan into a savings account on your behalf.
- Each month, Self sends you a bill.
- You pay your loan bill each month and Self reports your payments to the credit bureaus.
- Once you make your final payment, Self releases the funds in the savings account to you.
Some of your monthly payments go toward principal, and some go towards interest.
At the end of the loan, you’ll get a lump sum of cash from the principal payments and hopefully have a better credit score than you did before you got the loan.
Self Pricing and Plans
Monthly Payment Plan
Amount You Pay Over the Life of Loan
Overall Financing Charge
Amount You Get at the End of the Loan
Is Self Legit?
Yes, Self is a legitimate company. The company is based in Austin, Texas, and has partnered with real, FDIC-insured banks to help manage its accounts. That includes the loans it offers and the savings accounts it uses to hold your loan funds.
You can even view the bank statement from the partner banks that hold your funds to make sure your money is safe and sound.
Self’s product is completely legitimate. If you fit the company’s customer profile and make sure to make each loan payment by its due date, Self can help you build credit. However, the product isn’t perfect, so it might not help everyone.
How Much Can Self Raise Your Credit Score By?
It’s hard to gauge how much Self can help you raise your credit score. Credit scoring is complex and relies on a variety of factors. The primary factors that influence your credit score, in order of importance, are:
- Payment history
- Amount owed (overall and compared to the credit limit of your credit cards)
- Length of credit history
- Credit mix
- New credit
Assuming you make every payment on time, Self can help you improve your payment history, but it can hurt your length of credit history and it adds a new credit account to your report. In the short term, getting a Self loan could drop your credit score.
But then it quickly goes up after the first couple of payments are made.
According to Self, the average customer sees a 32-point increase in the credit score. Individual results can vary. For example, some customers have seen scores rise by more than 70 points.
It’s also worth keeping in mind that Self can help you build a credit history if you don’t have a credit score at all. This is a major benefit for people who haven’t started building credit yet and who want to work toward getting good deals on larger loans.
How to Apply for a Self Loan
Applying for a Self loan is a lot like applying for any other loan. It starts with you providing your name and basic information, such as your address and Social Security number.
To be eligible, you must:
- Be at least 18 years old
- Be a permanent resident of the United States
- Have a Social Security Number
- Have a bank account with a debit card or a prepaid card
Next, you need to select the terms of your loan. This includes both the number of monthly payments you’ll make and the amount of each payment. Self lets you select a monthly payment ranging from $25 to $150 and terms of 12 or 24 months.
Depending on the payment you select, you may only have one option for the length of the loan. Generally, Self offers a shorter loan term when you opt for larger payments.
Keep in mind, your credit score will increase largely based on the number of timely payments you make. The benefit of larger payments is forcing you to save more but may come at the cost of a smaller improvement in your credit.
If your primary goal is building credit, signing up for a lower payment and a longer loan can help you achieve that goal.
Can Self Hurt Your Credit?
Before you sign up for a loan from Self, you should take a moment to consider whether Self will actually help you build your credit. It’s possible that Self will instead hurt your credit, thus reducing your score.
By default, opening a new credit card, loan, or line of credit will hurt your credit score. Credit bureaus track new inquiries and new accounts. Additionally, adding more debt to your credit report won’t boost your score because it affects your credit utilization ratio.
Over time, the Self loan will age and you’ll pay down the balance, reducing the drag that these factors have on your score. The good payment history you build is typically enough to further counteract these factors and boost your score overall.
However, “good” is the operative word in this situation. Self loans rely on your ability to make the monthly payments you sign up for.
If you miss a payment on your Self loan, Self reports that missed or late payment to the credit bureaus alongside any of the timely payments you make. If you miss a payment or two, that can have a big impact on your score.
Miss even one payment and your Self loan will probably have an overall negative effect on your credit.
Before you sign up for a Self loan, you have to be completely certain that you will make every payment without fail. If you miss payments, you’ll be turning a credit-builder loan into a loan that only damages your credit.
Pros of Self
There are lots of reasons to like Self.
Reports to All 3 Bureaus
Self will report your credit-builder account activity to each major credit bureau: Equifax, Experian, and TransUnion. These are the three companies lenders look to first when they want to know more about a customer’s credit score.
If you handle your credit builder loan well, making each monthly payment before its due date will boost your credit score on record with each credit bureau.
That means that no matter which credit bureau a potential lender checks, it will show your good credit habits.
Accepts People With Bad Credit
Building a credit history can be something of a chicken and egg problem. Lenders won’t lend to someone with no credit or poor credit, but you can’t build credit without getting a loan.
You can get a Self credit-builder account even if you have bad credit because the company is willing to lend to almost anyone. Remember that Self doesn’t give you the cash directly. It places it in a savings account on your behalf.
If you stop making payments, Self can simply take the money back from the savings account. That means it takes on almost no risk, making it willing to lend to anyone who wants to build credit.
Easy to Use Interface
A lot of financial companies, especially smaller ones, have poor technological infrastructure and complicated, hard-to-use websites.
Self has a sleek website that’s easy to understand. It also offers a great iOS and Android app that makes it easy to access your account and make payments on your credit-building loan.
Cons of Self
There are drawbacks to Self that you have to keep in mind before opening an account.
Plans Start at $25 While Others Have Cheaper Plans
The lowest monthly payment you can select when signing up for the Self credit builder program is $25. This is a relatively small amount but it may still be out of some people’s budgets.
There are other companies out there, such as Credit Strong, that help people build credit, some of which let people set up a credit-builder account with lower monthly payments.
The amount of the monthly payment doesn’t have an impact on building your payment history, so it can be worth finding a company with a lower monthly payment option if you’re only looking to build credit.
Partner Banks That Show Up On Your Credit Report May Be Confusing
Each Self loan comes from a partner bank rather than from Self. When you borrow money, the name of the lender will show up on your credit report for other lenders to see.
If you’re trying to get approved for another loan and have to talk to a lender about specific loans on your report, it can get confusing if you try to explain what the loan is, because it will show up under the partner bank’s name rather than Self’s.
The Terms are Only Up to 24 Months
When it comes to building your credit, the number one thing you can do is improve your payment history. Each monthly payment you make will help your credit score.
Self only offers an installment loan with a term of 12 or 24 months. A longer-term would give you the opportunity to make more payments, building an even longer history of timely payments.
How Much Does the Self Credit-Builder Account Cost?
Self’s credit-builder account isn’t free. You do have to pay for the service the company provides.
The company charges an upfront, non-refundable fee of $9. This fee applies regardless of the details of the loan.
You also have to pay interest on the loan. The APR will vary with market interest rates, but at this time of writing it is 15.97%.
Ultimately, you’ll get some of the money back when you finish paying the loan, but you’ll wind up paying more than you get back due to the interest and fees.
For example, with a 24-month loan with payments of $25 each month, you’ll pay a total of $600 but only get $504 back from Self when the company releases the funds to you at the end of the loan.
In the end, you can expect to get about 85% – 95% of the money you pay back at the end of the loan. The larger your monthly payment, the greater the percentage you get back,
To see full cost details of Self’s loans, you can check out the company’s cost calculator.
How Does Self Compare to Secured Credit Cards?
Self’s credit-builder account is just one of the tools that you can use to build your credit. One popular alternative is a secured credit card.
With a secured credit card, you have to provide a security deposit to open the account. If you’re approved, the card issuer will give you a credit card that you can use, with a credit limit equal to the security deposit you provided.
Because you’re providing collateral, you can usually get a secured credit card regardless of your credit profile. You can find them at many banks or your local credit union.
You use the card like any other card, making purchases at any store that accepts the card. Each month, you’ll get a bill outlining your credit card balances. Like with a Self loan, making your monthly payments will help you build a positive payment history and improve your credit rating.
The card issuer keeps your security deposit in a bank account for safekeeping. You can add to the security deposit to increase your credit limit. When you close the account, you’ll get your security deposit back.
Self offers a secured credit card option, the Self Visa credit card ties in with its credit-builder account. Once you’ve made three monthly payments and have built up $100 in the savings progress, you can open the account.
You can keep the Self Visa credit card after you finish repaying your loan, or close it to receive the funds you’ve used as a security deposit.
Getting a secured credit card alongside your self loan gives you more opportunities to make monthly payments, boosting your score and proving yourself as a potential borrower for other lenders.
A Self credit-builder account is a good option for people who want to build their credit. The combination of a credit-builder account with the Self Visa credit card is a powerful way to build a payment history and boost your credit score.
However, the service isn’t perfect. It still relies on your ability to make your monthly payments and missing a payment or two could damage your score rather than help it. The interest and fees also mean you’re paying for the privilege of improving your credit.
There are alternatives, such as a fee-free secured credit card, that you can use to build credit without having to pay. However, a Self credit-builder account serves as an enforced savings plan, giving you a bank account full of cash when you finish paying your loan.
In the end, Self is a good way for people to build credit. As long as you’re aware of the potential drawbacks and alternatives, you’ll do well with a Self credit-builder account.
TJ is a Boston-based freelance writer who specializes in credit, credit cards and bank accounts. In his spare time, he enjoys reading, writing, cooking, playing games (of the video and board varieties), soccer, and ultimate frisbee.