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This is a review of Self (formerly known as Self Lender) in which I share my personal opinion. I also include the pros and cons of their credit-builder account also known as a credit builder loan. But first, I'll tell you a little bit about my story with credit.
How I ruined my credit
If there is anything I could go back and tell my younger self about personal finances, it would be to take better care of her credit. Like millions of other young women, I quickly got caught up in the student loan trap that many of us fall into once we seek post-secondary education.
Along with my student loans, I lacked proper information when it came to taking out a car loan and making timely payments. I cringe when I think about it. Despite my super low car payment, there were times when I didn't make my payments on time. Sometimes I didn't even pay it at all. This amongst other things, had a very negative long-term impact on my credit.
While my older self is so much wiser, it has still taken me years to fix my credit rating. That being said, I'm proud of the financial accomplishments I’ve been able to achieve on my own. Especially as it relates to improving my credit.
Most recently, I went into a car dealership by myself. I had a downpayment, negotiated an awesome deal and was able to leave in less than three hours with a car, financed at a great interest rate. This is something I would never have been able to do years ago as a result of my poor credit. Thankfully platforms like Self make it easier to correct your credit mistakes.
Self is a fin-tech (financial technology) company that allows you to build your credit. This is especially useful if you have no credit or to rebuild your credit if you have bad credit. The way this occurs is with a credit-builder account that is backed by the FDIC approved financial institutions that they partner with.
A credit-builder account, also known as a credit builder loan, is a small loan taken out in your name. However, instead of the funds being disbursed directly to you, Self holds onto it in the form of a secured loan by placing your money into a CD (certificate of deposit).
What is a certificate of deposit?
A certificate of deposit is basically a certificate issued by a financial institution. This certificate is for a specific time period after which you can withdraw your funds with added interest. They pay higher than average interest rates compared to a money market or savings accounts. They are also one of the safest saving vehicles offered by banks.
Once the initial loan is paid off through on-time monthly payments over 12 or 24 months, they then release the funds to you.
Essentially, you’ll be rebuilding your credit rating without you having to take out an additional loan or line of credit. Instead, you’ll be collecting on a small secured personal loan that you have made to yourself. Cool, right?
A DIY credit repair approach
Leveraging Self as a DIY credit repair process to improve your credit is a sure way to avoid paying ridiculous fees to improve your credit. I am very wary of the various credit repair companies that I see in ads online. It's almost like I see them everywhere I go online after I do a google search on "improving my credit". I've heard of scams and tons of negative outcomes and I'm just not interested. I've also read a few reviews online and decided to take it for a test run.
How the Self credit-builder account works
Once a credit-builder account is opened, the terms of service are agreed upon by the consumer with the financial institution Self has matched them with. Monthly payments can then be paid into the account.
As mentioned earlier, funds in the account are placed into a certificate of deposit which is then returned to you at the end of the term via check or direct deposit depending on what you select. Every month, on-time payments, are reported to all three major credit bureaus on your behalf by Self.
Your secured loan will show up on your credit report anywhere between 30-60 days. Most customers that have used Self, report a rise in their credit score as soon as three months.
The lifetime of the account going anywhere between 12-24 months, dependent on the monthly payments you choose. As a result, this ensures your score will continue to rise with on-time monthly payments.
- 2"Activation cost," is the one-time non-refundable administrative fee to open the credit builder account.
- 5 "Your total cost," means successful on-time payments throughout the life of your credit builder loan, and you including your one-time non-refundable activation fee.
- 6 “You get at the end” means with on-time payments, this is the amount of money you'll get at the end of your loan term. This amount does not include interest that you earn on the CD, which is less than the interest you pay on the loan.
What does the Self credit-builder account cost
To use their credit-builder account, they charge a one-time non-refundable administrative fee of $12 or $15 dollars. This depends on how much you would like to pay monthly to help you reestablish your credit. For example, you can start with as little as $25 a month to help you save $525 over 24 months.
For those who are looking to establish credit faster, there are options to pay anywhere from $48-$150 per month over a 12-month term loan. This means a larger credit builder loan. (see additional examples in the below images).
The annual percentage rate (APR) for all accounts comes out to a lower interest rate than many other creditors would charge, including those such as auto and credit cards. Since you have the open to pay off your account early without penalty, the amount of interest you pay is totally up to you.
All certification of deposit accounts have FDIC backing, up to $250,000.
The benefits (pros) of using Self
One of the main benefits of Self is being able to improve your credit score without taking out any additional debt.
Experian states the most influential item on your credit report that affects your overall score is your ability to make on-time payments to any creditors you owe. By reporting to all three credit bureaus monthly, your credit score will increase as you make on-time monthly payments into a CD, which you will be getting back at the end of the term you have requested. This is a unique way to work on your credit score without making a major financial purchase.
Despite your past, Self is a chance to rebuild your credit in preparation for a future life event; For instance, purchasing a home or a new car. With a higher credit score, you have access to more traditional financial products. In addition, you are also able to save thousands in interest over time.
Other benefits of using Self include 24/7 access via an app for your smartphone as well as online account anywhere there is internet access. It doesn’t get any easier than that, including a FAQ’s page as well as additional customer support if you may need it. The bottom line is that it’s an easy tool to use to better your financial health.
The cons of using Self
One main con is the cost of the fees (the one time administrative and interest fees) which you'll have to pay.
In addition, you will not be able to get the funds until after your credit builder loan matures or you have made all your payments according to your agreed-upon plan.
How to open a Self account
The ability to open a Self account is determined by the following requirements:
Credit builder account requirements
In order to qualify, you must:
- Have a valid social security number
- A checking account or prepaid debit card
- Legal residency in the United States
- You must also be at least 18 years of age.
Good news! There is that there is no minimum income requirement to open an account.
If you have an existing credit history, you may need to answer some verification questions based on it to verify your identity. If you have no credit history, you may need to take additional steps to verify your identity manually. The application process will guide you through all of this.
Is Self right for me?
Many people avoiding debt or living a more minimalist lifestyle may also love the fact that their money is being saved in a CD and will be returned back to them. This is more attractive than a frivolous purchase they didn’t want in the first place. There is a reason Marie Kondo is so big right now and that’s because being surrounded by useless stuff stinks.
A Self account is also not a good idea if you plan to use it as an emergency fund or in place of one. Funds are not for immediate access so if you need fast cash for unexpected expenses, it would be wise to build one of those first before pursuing this.
Customers have left online glowing reviews which may leave some skeptical but I'm a huge fan and I believe the reviews. After meeting with Self several times over the past year, including once at FinCon, I truly believe they are a financial product looking to help others.
They acknowledge that people are being taken advantage of due to poor credit. As a result, they are looking to turn the financial industry on its head. This approach of putting people ahead of profits is one that resonates with me. It makes me feel like I'm more than just a number at a big corporation.
A reminder of why improving your credit score is so important
To drive the message about improving your credit home, remember this; Your credit score is the most important tool you have in regard to your financial health.
Because everyone from a landlord to an employer can use the results of your credit report to deny you opportunities. The deciding factor is solely on the basis of your past financial mistakes reflect in your report.
What a poor credit score means
Without a healthy credit score, you are subject to subprime financial products and services. These products and services will cost you thousands of dollars, both in fees and interest. Banks will take advantage of your low credit score because they know you have limited options. This in turn which means more money for them.
If your score is low enough, you might not even be able to open up an account with that financial institution, let alone qualify for financing from many others. This is one of the reasons why “Buy Here, Finance Here!” car lots are so popular. This is also another reason for the rise of payday loans and check-cashing services charging exorbitant fees.
It's not just about being subject to less than stellar financing options for major life purchases, such as for a home or car. A low credit score can also cost you housing even when you aren’t looking to purchase. Many landlords do background checks which now include your credit report and score.
If you are a financial liability, someone else may swoop in and take your spot just because they have demonstrated they can pay their bills on time. Ouch, right?
It doesn’t stop there. Utility companies may request you place a hefty deposit up-front. This is primarily out of fear that you’ll skip out when a bill is due. The point is, your credit score is more important than you think.
While many of us may need to repair, or even build, our credit, all hope is not lost. There are so many tools and options out there, in regards to how easy it is to fix your credit. Self is one of those companies leading the way.
If you are looking to build or reestablish your credit, Self may be a great fit for you. With various plans fitting all budgets, access to FDIC backed banks and an easy online platform, it may be a tool to help you achieve the credit score you deserve.