Start with a credit builder account and establish savings. Then, in as little as 3 months, use your savings to open a secured credit card with no hard credit inquiry.
Self is a financial technology company that operates out of Austin, Texas. They've been in operation since 2015, and claim to have helped over a million people begin their financial journey. Since Self is not a bank, they rely on third party banking partners to issue their credit cards.
If you're going to use Self, you should know a little bit about their partner banks. All of the partners Self works with to either hold the certificate of deposits for the Credit Builder account or issue the Secured Visa are FDIC banks, which means that your funds will be protected up to the federal limits.
While Self partners with these banks, remember that you will not work with the banks directly. They are just a stop-over for storing your money or issuing a credit card. Self will service your accounts.
There aren't many products on the market that compete with Self's offering. The closest, would be the Secured card offered by Chime. Let's take a moment to walk through what happens what you leverage Self's product combo to start your credit journey.
There's no instant gratification with Self. This is about discipline. The first thing you'll need to do is open a credit builder account. You'll pay a small account administration fee at this time. There's no hard credit pull as part of this process, but Self will verify your information. During your application, you'll take out a small to large loan (depending on your preference and goals), and determine your monthly payment.
Here's the twist. Rather than receiving the funds from your loan, they will be placed in a certificate of deposit in your name. Each month, your payment will go towards "unlocking" the value of the CD. You will be charged interest on your loan. For illustrative purposes, here's a fake account example. Let's say you opened a $500 credit builder account. The first month, you make a $25 payment. $.50 of that is interest. You now have unlocked $24.50 of your savings, and that money belongs to you. You'll continue making payments until the value of your account is unlocked.
The beauty of it? Your monthly payments get reported to the major credit bureaus. Each month, as you pay yourself back, you are also building credit.
Now that your Credit Builder account is established, you start to open up some additional credit building opportunities. Once you've made at least 3 monthly payments on time, and you've unlocked $100 in value on your credit builder account, you are eligible for a Secured Visa without having a hard credit check.
How does this all work? Using the example about, you'd need to make 5 payments in a row to have unlocked more than $100 (that pesky interest got in the way of it being only 4 payments). At this time, if your account is in good standing, you'll be eligible to open a Secured Visa card. If your monthly payment is higher, then you could have unlocked enough value to get the Secured Visa in as little as 3 payments.
Rather than putting a traditional security deposit down, Self is able to "re-lock" the value of your CD to secure your card. Let's say you've unlocked $250 in value on your CD. That can now be used to open up a secured credit card. It's kind of brilliant.
Here's where the magic happens. With this combination, you now have both an installment account (the loan) and a revolving account (the secured card). Not only does this give you the opportunity to make two payments on time every month, but the types of credit you have available to you make up 10% of your overall score. This can be icing on the cake for those looking to broaden the information on their credit profile.
There's no hard credit check to get either the Credit Builder account or the Secured Visa. Self will do a check to verify your information, but your credit score will not be impacted as part of this process. There will also not be a hard credit check once your Credit Builder account has aged enough to meet the eligibility requirements for the Secured Visa.
Like in life, all good things come with time. It'll take at least 3 months before your Credit Builder account has aged enough to be eligible for a Secured Visa. Don't let this discourage you, though. Use the time to build better financial habits, build some savings and get ready to start your next credit chapter.
The popular social site, Reddit, has overwhelmingly good things to say about the results and customer service of the Self line of products. Many users report positive results to their credit scores. While the reports are joyful to read, keep in mind that your results may vary. Everyone's credit profile is going to react differently to changes, and you have to stay on top of making payments on time. There is no magic bullet to quickly recovering from a past credit mistake.
Self has a shockingly high 4.7/5 stars on Shopper Approved. Over 85% of users reported a 5-star experience.
We think the reviews speak for themselves. Users seem very happy with the products Self has introduced to the market. We enjoy the combo product to help broaden a thin credit profile, and we think the cost structure of the credit builder account is relatively low.
The downside is that if you're looking for a credit card today, Self isn't for you. If you're relatively new to credit, we might recommend checking out the Petal unsecured card. If you have damaged credit and a security deposit in hand, OpenSky is able to approve applicants without conducting a hard credit inquiry.
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