Your credit score is one of the most important financial numbers you can have. Good credit makes it easier to buy a home or car, and you can also qualify for a lower interest rate when refinancing debt. No one is born with good credit though, and Self can be one of your easiest options for building credit.
A potential employer or landlord may check your credit history to see how you handle money. Having a limited credit history can make it more challenging to get a job or find a place to rent.
If you’re struggling with your credit history, our Self review shows you how to build credit even when you have none.
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What is Self?
Self (previously known as Self Lender) offers credit builder loans that help you build credit. Not every bank offers this type of loan, yet they are an affordable tool for building credit.
So, you are probably wondering, “What is a credit builder loan?”
People use these loans to build credit without a credit card. These loans don’t require a hard credit check like a personal loan, car loan, or a secured credit card.
Instead of getting a loan for a large purchase, you put the money into an FDIC-insured bank certificate of deposit (CD). At the end of the loan period, you get CD cash balance back, and you have potentially a higher credit score.
You make monthly payments for up to 24 months. Credit builder loan companies, including Self, report each payment to the three credit bureaus:
Payment history makes up 35 percent of your FICO credit score; it’s the largest factor in calculating your score. Any on-time loan payment can help you build credit.
And with a credit builder loan, you’re not buying something you may not need simply to boost your score.
The three-bureau reporting ensures the lender will see your loan payment history. Most lenders only pull your credit report from up to two bureaus, but you can’t decide which ones.
The payment history remains on your credit report for up to seven years. This period can be enough time to continue building credit after you repay your Self loan.
If don’t want to take out a loan, but want to have positive payment history impact your score, Experian Boost could be a suitable alternative. Read our review of Experian Boost to learn more.
How Does Self Work?
Self makes the process easy to open one of the best credit builder loans. Loans are available in all 50 U.S. states by joining online or with the mobile app.
There is never a credit check to get a loan.
You can choose a monthly payment of $25, $35, $48, or $150 per month. Your total payment amount will be between $500 and $1,800 over a 12-month or 24-month repayment period.
Choose a contribution amount that fits your monthly budget, as missing a payment can hurt your credit score. A minimum $48 commitment has a 12-month repayment term.
The $25 and $35 monthly commitments require a 24-month term.
Self withdraws the monthly commitment from your linked bank account, debit card, or prepaid card. Each payment reports to the three credit bureaus.
You can track your credit score progress in real-time on the Self dashboard. Despite an initial dip, your score should start increasing soon if your other credit accounts are in good standing.
A Self loan isn’t a personal loan; you can’t access your cash until the repayment period ends. You can repay your loan early but will pay a small early withdrawal penalty.
This fee is necessary because Self places your cash into a bank CD. This CD matures at the end of the repayment period you choose.
At the end of the repayment term, the company closes the account and reports the loan as successfully paid off. You receive the CD cash balance, excluding finance charges.
There are the basic requirements to get a Self loan:
- Have a bank account, debit card, or prepaid card
- Valid email address and phone number
- Social Security number
- At least 18 years old
- A permanent U.S. resident or U.S. citizen with a physical U.S. mailing address
Self needs your personal information to report your payment history to the credit bureaus.
If you meet these guidelines, the platform can help you start building credit without going into debt. After linking your payment account, Self handles the payment collection and credit bureau reporting.
You can track all activity within account. If Self doesn’t work for your needs, some online banks like Chime also offer credit builder loans to help boost your score.
What happens when payments are over?
Self deposits each monthly payment into an FDIC-insured bank CD. After successfully closing your account, Self remits the balance into your linked bank account via direct deposit or mailing a paper check.
Either payment method takes up to 14 days.
Is Self legit?
Yes, Self is a legit option for if you’re wondering how to start building credit. They have accreditation from the Better Business Bureau (BBB) with company headquarters in Austin, Texas.
Your cash goes into an FDIC-insured CD account from one of these banking partners:
- Sunrise Banks, N.A.
- Lead Bank
- SouthState Bank, N.A.
Self reports your monthly payment history to the three credit bureaus so your credit score can increase. Potential lenders, employers, and landlords can see your credit builder loan on your credit report.
There are several fees you will pay with each loan. Self clearly displays your total loan cost when comparing your loan options.
Each loan quote also lists what your final cash balance will be when the CD matures.
All Self personal loans charge these non-refundable fees:
- A one-time administrative fee ($9)
- Interest APR (15.97 percent as of March 26, 2020)
For example, your total finance charge is $125 on a 24-month loan with a $35 monthly payment. You will get $724 back when the repayment period ends.
You won’t pay any additional fees if you make on-time payments from a bank account or prepaid card. There is a convenience fee for debit card payments.
There are other fees you might pay:
- Debit card payments: $0.30 plus 2.99 percent convenience fee
- Late payment: Five percent of monthly payment due
- Early withdrawal fee: $5 or less
You will pay the late payment fee 15 days after the payment due date. Self reports a missed payment to the credit bureaus 30 days after the due date.
Who Should Open a Self Account?
A personal loan is a good option if you have a low credit score or damaged credit. People with scores in the mid-600s or below can see the most significant gains.
Self is also a good option if you have never applied for a loan or a credit card.
These loans can also increase your score if you are close to filing for bankruptcy. An account in good standing can help offset your previous credit mistakes.
If you have a credit score above 670, you may see only small score increases. You already have good or excellent credit. The loan costs may not be worth the potential gains.
How much does Self raise your credit score?
It’s possible to increase your credit score with on-time payments. The exact increase depends on which loan amount you choose and your current credit history.
You will see a temporary drop in your credit score when the credit builder loan appears on your credit report. This drop is typical for any new loan or credit card.
But your score will quickly recover and should increase.
Most people can expect to see a credit score increase between 20 and 60 points by using Self. You will see an increase from all three credit bureaus thanks to the three-bureau reporting.
With consumer loans and credit cards, banks may only report your payment activity to one or two of the bureaus.
Choosing a larger monthly payment can create the most significant gains because your loan amount is more substantial.
If you have a subprime score below 600, Self states you may only see a 20 to 25 point increase over the loan term.
You won’t see the maximum potential score increase if you close your account early or miss payments.
Self vs. Secured Credit Card
A popular method of building credit with a credit score of 620 or less is a secured credit card. On-time credit payments can increase your credit score, but you pay interest if you miss a payment.
Credit card interest rates are likely higher than the interest rate you’ll find with most personal loans.
Secured cards require a refundable security deposit of at least $200 to open an account. You may not have the free cash upfront to pay the deposit.
Most cards don’t refund the deposit until you close the account.
A Self loan can be better than a secured credit card if you want to avoid debt. For example, you may struggle to pay your card balance in full each month.
A secured card may also cause you to overspend.
Self loans have a fixed monthly payment. You can easily set aside enough cash each month to make the loan payment.
Unlike credit card purchases, you get your payments back when you close the loan (minus finance charges).
You can get a secured credit card from Self if your loan account is in good standing. The Visa credit card they offer doesn’t require a credit check.
Your refundable security deposit is between $200 and $500, and your Self loan savings progress can double as your deposit.
It’s possible to request a secured credit card from Self if you meet these basic requirements:
- Last three payments are on-time
- Minimum $100 savings progress
- No outstanding fees
You will need to pay your card balance in full each month to build credit and avoid potential fees. Your payment activity reports to all three credit bureaus like the loan.
This card can remain open after repaying your loan to continue building credit.
Pros and Cons
- Reports to all three credit bureaus. Self reports every monthly payment the Equifax, Experian, and TransUnion credit bureaus. Future lenders will see your account is in good standing when they access your credit report.
- Build credit. Each on-time payment can improve your credit score. Self reports an average increase between 20 and 45 points over the life of the loan.
- No credit check. Self never performs a credit check like other bank loans. Your credit score doesn’t affect your approval odds or interest APR.
- FDIC-insured bank CD. Each principal payment deposits into an FDIC-insured bank CD. You receive the balance after repaying your loan.
- Small monthly payments. Your monthly commitment can be as low as $25. This payment can be affordable even when you earn a small income.
- Finance charges. You will pay a one-time administrative fee of $9. Each monthly payment includes interest APR. Self clearly lists your total loan fees before you join.
- Debit card convenience fee. Self charges a $0.30 plus 2.99 percent convenience fee for debit card payments. You can avoid fees by paying with a bank account.
- Early withdrawal penalties. Bank CDs charge early withdrawal penalties if you close your Self account before the loan term ends. Your credit score may not increase as much as possible because of the shorter payment history.
Self is one of the best credit builder loan companies if you want to increase your credit score. The monthly payments are reasonable, and you get your cash balance back at the end of the repayment period.
People with bad credit or no credit can benefit the most.
Consider opening a Self account today to improve your credit score.
Have you used loans to help build credit before? How else are you improving your score? What other struggles are you facing in attempting to improve your credit?
Josh uses his personal experience of paying off over $130,000 in personal debt and changing careers to write about saving money, investing, and paying off debt. He has regularly written for notable outlets including Wallet Hacks, Well Kept Wallet, and Debt Roundup.
Josh was previously an operations supervisor for a Fortune 500 company for seven years. He is married with three small children.