One of my goals for 2018 was to start getting serious about my credit. I’ve always known in the back of my head that credit was important, but I hadn’t been a situation to where I needed to use it so I didn’t give much thought to it. (not smart – don’t do this lol)
It wasn’t until I created my very first vision board that I realized I needed to start preparing for two very big future purchases. A new car & eventually, a house. Which is pretty much impossible to do without either A) decent credit, or B) a whole lotta money! Since the likelihood of me waking up a Kardashian or winning the lottery aren’t looking too promising my only option was to start working on my credit.
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It had been a while since I looked at my score &, to be honest, I was pretty disappointed with my results. My score was way lower than I expected mainly due to the fact that I had zero credit usage and credit history.
I started researching ways to improve my credit.
I used free, verified websites like Credit Karma & Credit Sesame which not only give you your credit score & report but also provides recommendations on how to repair/rebuild your credit. Almost everything I researched told me to get a secured credit card.
A secured credit card is a credit card that requires you to make a deposit when you open the card. That way if you don’t pay your bill, the lender can take the money from your deposit. Typically, these deposits are $200 (or more), depending on how much of a risk you are to the lender. In other words, the lower your credit score and the shorter your credit history – the higher your deposit.
I had three major problems with getting a secured credit card.
Problem #1: I was one of those people who would have been considered high risk due to my lack of credit history and lower score. I didn’t want to spend $200+ just to get a credit card.
Problem #2: I was slightly intimidated to get a credit card. I never had one & didn’t fully understand how they worked. Not to mention, I’ve heard horror stories of people who ended up in thousands of dollars in debt because of them.
Problem #3: I applied for two different ones… and still didn’t approved!! Turns out you need credit to build it (annoying).
I knew there had to be another way to build my credit.
And thanks to this Facebook group, I discovered a much better (& cheaper) way! And guess what? You don’t need credit to do it!
It’s called Self (formally Self Lender) and it’s the secret tool for building your credit that NO ONE is talking about (although, they should be)!
So… what is Self?
Self is a credit-builder account. Meaning that it is a loan in reverse (money you borrow from yourself). In other words, you make the payments first, you get the money afterward.
How does it build credit?
Self reports to all three major credit bureaus. When you make your payments (on-time, of course) it will reflect on your credit report! After just one month of having my Self account, I’ve already seen a 34 point increase in my credit score!
UPDATE: I am now close to 4 months into having my Self account with a current credit score increase of 73 points!
UPDATE: I am now 11 months into having my Self account and my credit has increased 111 points!
UPDATE: I have completed my Self account (12 months)! My credit has increased 152 points total AND I saved $545.55! AMAZING!!!
How does it work?
When you start an account with Self, the bank opens up a Certificate of Deposit (CD). The CD is in your name, is FDIC insured & gains interest!
You are then given options for the amount of your CD (how much money you want to “borrow” from yourself). The lowest amount being $545 & the highest amount being $1700. You also get to choose if you would like to make your monthly payments over a course of 1 year or 2 years. Since this was my first time, I got a CD worth $545, with monthly payments of $48 for 1 year.
They have a really helpful calculator on their website that shows you how much your CD would be based on how much you can afford to pay monthly!
Is it free?
No. Self is not free, but the cost is very minimal. There is a small upfront non-refundable administrative fee that ranges anywhere from $9-$15, depending on your CD amount. There is also interest, but that is going to be normal with any loan or credit card you get. In my opinion, the interest is fairly low. For example, here is what my loan look likes with the interest:
CD Amount: $545
Monthly Payments: $48 x 12 months = $576
$576-$545 = only $31 in interest.
How is Self better than a secured credit card?
In my opinion, Self is better for a few reasons:
Reason #1: Self doesn’t use your credit score to qualify you. Literally, everyone is approved as long as they haven’t participated in any fraudulent bank activity.
Reason #2: Self is not a hard pull on your credit, like most secured credit cards.
Reason #3: Self doesn’t require a deposit to get started. The only thing you have to pay upfront is an administrative fee ranging from $9-$15. No crazy $200 deposits!
Reason #4: Self allows you to build your credit and save money at the same time. With secured credit cards, although you are building credit with on-time payments, you’re not saving anything.
Reason #5: There’s no temptation. Unlike credit cards, with Self you can’t overspend because essentially you are paying yourself and you don’t get access to the money until the end of your loan.
Okay, let’s be real… what’s the catch?
Believe it or not… THERE IS NONE. The only thing you could consider a downside is the fact that you don’t get your money upfront, but I don’t mind it at all because it’s helping me save! Plus, how nice is it going to be to get that lump sum at the end of my 12 months?!
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Self has been EXTREMELY HELPFUL!
Not only did my credit score jump 34 points after just one month but because of my increase, I was actually able to get approved for my very first non secured credit card – one without a deposit!
If you’re trying to build or improve your credit, having trouble getting approved for credit cards, want to stay away from credit cards, or just want something low cost and risk-free Self is for you! You can open up a Self account here!
Working on my credit & finances is one of my top goals for 2019! I plan on updating my blog frequently with new tips & tricks that I find & have been helpful for me. Be sure to subscribe if you want to be notified whenever I post new material.