Building great credit can be tough. It takes careful planning, positive financial habits, and enough responsibility to pay for a loan or credit card without falling into debt. But once you’re ready to build your credit history, you still have to decide exactly how you’re going to do it — and there are lots of options worth considering.
One of those options is Self’s Credit Builder Account.
Self was known as Self Lender until it rebranded in August 2019. At the time of publishing, the details contained in this review still apply to its Credit Builder Account product.
Self Credit Builder Accounts are, unsurprisingly, exclusively designed for building credit. They’re available in various amounts and terms, and they function a lot like the credit builder loans available through many regionally focused banks and credit unions.
Plus, because they’re designed for easy approval, Self’s loans require no hard inquiry.
Are you seeking a simple way to work toward good credit scores or build credit from scratch? Self might be the right choice.
The Pros & Cons
There’s a lot to talk about when it comes to Self Credit Builder Accounts and how they work, but first, we’ll offer an overview of the service’s perks and drawbacks.
- All payments are reported to the three major consumer credit bureaus, allowing you to build credit with on-time payments.
- Several plan options let you pick a Credit Builder Account that complements your financial situation.
- No credit check is required.
- Affordable administrative fees and interest.
- Adding an installment loan to your mix of credit accounts could help your credit scores.
- Great way to start a savings account or an emergency fund.
- Because all payments are reported, that includes any late payments, which will likely damage your credit.
- Approval isn’t guaranteed — certain indicators in your bank account history may disqualify you.
- The interest your account will earn is extremely low, and will be offset effortlessly by the interest fees charged.
- You have to pay an administrative fee to start using a Credit Builder Account, as opposed to alternative credit-building methods, such as becoming an authorized user.
- There’s an additional fee if you pay after the 15-day grace period.
What Is a Credit Builder Loan?
Before digging into the specifics of the Self system, let’s talk about credit builder loans, how they work, and why you might want to use one.
True to their name, credit builder loans were developed to help individuals with poor or no credit build their credit scores. They’re often available through regional banks and credit unions, though online providers, including Self, have also become very popular.
Much like a traditional personal loan, a credit builder loan involves making equal monthly payments for the life of the loan. You’ll also pay interest, and there will generally be some additional fees involved. The key difference is that, whereas with a typical loan you’d receive the money from the get-go, you don’t get the cash from your credit builder loan until you’re finished paying it off.
While you make payments on a credit builder loan, the money is held in a bank account (like a CD), where it remains until you’ve paid off the loan in full. Each on-time payment is reported to the nation’s credit bureaus and can contribute positively to your credit scores — as long as the lender reports activity to the bureaus. That’s something you should look into while determining whether a credit builder loan is right for you (Self reports to all three major credit bureaus).
Because you don’t get the money right off the bat, credit builder loans are relatively low-risk products from the perspective of lenders. This makes them pretty easy to qualify for, and that’s why they’re a popular tool for individuals with poor or no credit.
But just like any loan, late credit builder loan payments can be reported to the credit bureaus once they’re at least 30 days past due, so they can do more harm than good if you’re not careful.
Does Self Work?
Now, let’s tackle another common question: Does Self actually improve your credit?
The answer, put simply, is yes — Self should help your credit scores as long as your Credit Builder Account (and any other credit accounts in your name) is managed responsibly while you’re paying it off.
For example, if you decide to open a Credit Builder Account and you start skipping credit card payments in the meantime, your scores will still plummet.
But if you make all of your Self payments on time and in full, and continue to pay any other loans or credit card balances in your name, your scores will almost certainly start to look better.
If you don’t have any other credit in your name, then just make your Self payments, and you should be good to go. It’ll take some time, but you should be on your way to establishing solid credit scores by the end of your payment term.
How Does Self Work?
Self only began in March 2016, but it’s already accumulated thousands upon thousands of customers, opening more than $100 million in Credit Builder Accounts in 2018 alone. They claim that most people who use their credit builder loan go from a 0 to 650 FICO Score in six to nine months, or see a 60+ point improvement in their scores.
Realistically, results are likely to vary significantly between one individual and the next. But even so, the system is straightforward, and it encourages good credit-building practices.
Here’s an overview of how the Self Credit Builder Account process works, followed by more detailed instructions:
- You sign up for a Self account, choose your loan amount, and apply.
- Your loan amount is put in a CD, where it accumulates a tiny bit of interest, at a rate of 0.1%.
- You now also have a separate installment loan in your name, which requires equal monthly payments. This loan will accrue interest, at a rate higher than the CD gains interest.
- After you pay off the entire loan, plus the accrued interest, you’ll get the original loan amount back (the funds in the CD).
- When all is said and done you’re left with a new loan account on your credit reports, which can help you build credit if all your payments were made on time.
Before you begin…
Before you apply for a Self Credit Builder Account, there are a few minimum requirements you have to meet. Fortunately, they’re pretty simple.
Here’s the bare minimum:
- You must be at least 18 years old.
- You have to be a permanent U.S. resident.
- You have to have a Social Security number.
- You have to have access to a bank account, debit card, or prepaid card that you’ll use to pay for the loan. You can’t pay with a credit card. Note that debit/prepaid cards incur a convenience fee.
If you satisfy these four requirements, you should be able to build credit with Self. However, if you’re having trouble applying, you can always contact Self customer service.
1. Sign up for a free Self account
Start by creating your free account on the Self website. You’ll be able to monitor your credit and explore the variety of options Self offers for its Credit Builder Accounts once you’re registered and verified.
2. Choose your loan amount
Head to the pricing page, and you’ll see that Self allows you to select your monthly monetary commitment.
From a credit score perspective, there isn’t much value in picking a larger loan over a smaller loan. Payment history is the main factor here — whether your payments are on time or late. So, it’s best to just pick a loan amount that works well for your budget.
The pricing page will describe how much you’ll be paying per month, how long you’ll be paying, and the final amount you’ll receive once your account is paid in full. You’ll also find information about Self’s one-time administrative fee, as well as the other costs associated with your loan, including interest rate and APR.
However, it’s worth noting that interest is already factored into the payment plan outlined on Self’s pricing page. So you can see exactly how much you’ll need to pay each month.
Another point to keep in mind is that the interest rate listed on the pricing page is what you’ll be paying, rather than what your CD is accumulating.
Remember that you’ll get the “Full Loan Amount” back once your Credit Builder Account is completely paid off, so in the end, the actual cost is just the interest paid plus your administrative fee (plus any convenience fees from debit/prepaid card payments).
When it comes to credit cards, interest and APR refer to the same thing. But with loans, including those from Self, the APR may be greater than the interest rate, because it usually also takes into account the applicable fees. In Self’s case, the APR encompasses the interest rate, plus the one-time administrative fee.
3. Apply for the credit builder loan
After you’ve determined the loan amount that best suits your financial situation, it’s time to complete the application.
Self’s bank partner will place the funds in a certificate of deposit (CD), which behaves a bit like a savings account. That means the money remains where it is until the loan’s fully paid off, just as a standard CD remains under lock and key until its maturity date.
Unlike many loans, there’s no hard inquiry involved when you apply for a Self Credit Builder Account, so you shouldn’t have to worry too much about what your current credit situation looks like.
Because it’s in a CD, your “loan” will garner interest over time. Unfortunately, the interest on the CD itself isn’t nearly as high as the rate you’ll be paying for the loan. It might be enough for a small coffee.
4. Make a payment every month to Self
With your Credit Builder Account set up and ready for action, it’ll be time to start making your payments. There’s nothing particularly complex about this step, but it’s where Self’s greatest benefit lies.
Just make your monthly payment on time and in full, and Self will report your activity to all three of the nation’s major credit bureaus. In turn, your credit scores will likely benefit (all other things being equal), because many scoring models factor your payment history into their formulas as the most significant consideration. Self can also bolster your credit scores by adding to the variety of credit accounts in your name. So you might get a bit more of a boost if you’re not already paying any other installment loans.
Of course, your payment activity will be reported to the bureaus whether or not you’re making on-time payments.
That means Self can hurt your credit, but only if you manage your finances irresponsibly. Paying late or not at all will damage your credit scores, and totally defeats the purpose of getting a credit builder loan.
Self offers a 15-day grace period beginning on your payment due date. If you miss a payment, you’ll be charged a late fee equivalent to 5% of your scheduled monthly payment, but only after 15 days have passed. The payment will be reported late to the credit bureaus after 30 days. This is different than a credit card’s grace period, which allows you to use your card without incurring interest fees, so long as you pay down your statement balance in full by a certain date.
Self’s Credit Builder Accounts offer a convenient autopay feature to help you keep on top of your loan. You’ll also enjoy complimentary credit monitoring to help you gauge your progress throughout the term of the account. Users can check on their repayment schedules, download account-related documents, and more through the Self dashboard.
Note that you can close your account early, if necessary. You’ll be charged a fee of less than $1. The loan will be reported as complete and will be paid off with the funds held in the CD account. Any payments you already made will remain on your credit reports.
Closing the account early is unlikely to lower your credit scores. However, it will reduce the length of the account’s payment history, limiting the potential score boost you can receive from your Credit Builder Account.
5. Collect your cash and enjoy the benefits of improved credit scores
Once your loan term is complete, provided you made all your payments on time, you’ll receive the full amount of the loan, plus any interest the CD accumulated throughout its term.
If you’ve maintained good credit-building habits on all of your credit accounts — including loans, credit cards, and the like — then it’s likely that your credit scores will be higher than when you opened the Credit Builder Account. If you had no credit prior to using Self, you’ll probably be considerably better off thanks to your freshly established history of on-time, in-full payments.
After paying off your Self Credit Builder Account, the loan should remain on your credit reports for ten years, positively impacting your credit scores all the while. But if you want to build your credit scores even higher, consider opening other credit accounts, such as credit cards, and using them responsibly.
How Long Does It Take to Build Credit with Self?
Self’s Credit Builder Accounts are a popular way to build credit relatively quickly. But exactly how long does it take to build credit with Self?
Like most questions concerning credit, the answer will vary based on your unique financial situation. Self’s own data (which is no longer available on the web) indicate that customers have seen notable increases (around 45 points, though increases were lower for those with subprime credit) in as little as six months. There’s no guarantee this will happen for you.
The actual increase you see will depend on your credit history, and your ability to make Self payments on time while responsibly managing any other credit accounts open in your name.
But Self says you can generally expect your first payment to appear on your credit reports between 30 and 60 days after it’s paid. Just remember that Self sends payment information to all three credit reporting bureaus, and each bureau compiles information in its own way. So your payments may not appear on your credit reports at the same time.
How Much Does Self Raise Your Credit Scores?
There’s no way to tell how much Self will affect your credit scores until you actually begin to use it.
In 2018, Self reported that users had seen an average increase of about 45 points, and that Self users who began with no credit whatsoever climbed to an average score of 670. Those numbers have likely changed by now, but they still provide a good starting point for the kind of changes you can expect to see.
Regardless, as we’ve mentioned there’s no guarantee that Self (or any other credit builder loan) will improve your credit at all.
The impact of a Self Credit Builder Account can vary based on all sorts of things. So, if you’re not careful with your credit outside of the loan, your scores may drop, rather than improve.
The Self Process Illustrated
Self offers a simple process that’s pretty easy to wrap your head around. To make it even easier, we’ll provide a realistic example of how things would flow if you were to get your own Credit Builder Account.
Let’s say Darren is a recent college grad who let his credit card use get out of hand during his studies. His balances were high, and he missed a few due dates — enough to take a serious toll on his credit scores.
He’s finally caught up on his bills, but now that he’s looking to enter the “real world,” Darren’s ready to revamp his credit to prove himself a worthy borrower. So, he peruses his options and decides to take a chance with a Self loan because of their fairly low up-front costs.
After gathering all the information he needs — his bank account number, email address, phone number, Social Security number, age, and address — Darren creates his account on the Self website.
Then, once his information is validated, he checks up on his credit scores with the complimentary third-party monitoring tools. It’s not looking great.
Picking a Loan
After grumbling over the reminder of his choppy credit history, Darren navigates to the Self pricing page, examining his options and attempting to choose a price that fits best into his budget.
He’s still in an entry-level position, and he’s paying rent, so he doesn’t have too much disposable income to work with. But that’s fine — he goes for the $48 option. It’s not the lowest, but he’d rather the loan last for a year than 24 months. Plus, that $48 already has interest factored in, so he knows exactly what he’s in for.
Activating the Credit Builder Account
With his selection in mind, Darren applies for the loan. The $48 monthly commitment option requires a one-time administrative fee of $15, so he shells out the cash to activate his account.
Darren applies for and activates his Credit Builder Account in the middle of March. That means his payments start in April, a month after his account is opened.
He’ll make his final payment in March of the next year due to his loan’s 12-month term.
After connecting his bank account, Darren activates Self’s convenient autopay feature so he doesn’t have to remember to pay manually each month.
This positive payment activity is then reported to all three U.S. credit reporting bureaus — Equifax, Experian, and TransUnion. The account appears on his credit reports a little over a month after his first payment is made, and it’s classified as a “secured-installment loan.” His scores begin to climb, and he happily monitors their progress with the free tools we mentioned earlier.
Reaping the Benefits
His job’s going smoothly, so Darren has no trouble paying off the loan throughout its term.
He wraps up his last payment, grabs dinner with a friend in celebration, and applies for a credit card with no annual fee to begin the next leg of his credit-building journey. It’s a pretty standard cash back rewards card with a solid signup bonus, so he’s accepted, and the rest is history.
Should You Use Self?
The importance of credit in adult life might lend Self a great deal of appeal. But while it could be useful for certain individuals, a Credit Builder Account isn’t right for everyone.
Here are two instances in which you will likely benefit from Self.
- You’re totally new to the world of credit. If you have no credit and you’re not sure where to start, you’re not alone. Using a secured credit card or becoming an authorized user on another person’s card are popular starting points, but if you’re not confident in your budgeting skills, your debt could spiral out of control. Self’s Credit Builder Accounts, on the other hand, have very clear terms from the get-go, so you know exactly what you’re paying and for how long. They just depend on your ability to pay on time.
- You’re looking to improve bad credit. First, it’s important to note that you’re not guaranteed to qualify for a Credit Builder Account if you’ve developed poor credit. But you’re still more likely to be approved for Self than many traditional types of unsecured loans. If you can’t find a cosigner for a loan or don’t have the up-front cash to fund a secured credit card, Self could be an effective alternative.
What Are the Alternatives?
Self has its advantages, and even with the additional fees taken into account, it’s a fairly affordable way for people with bad or no credit to build their credit scores. With that in mind, there are other options.
These could serve as alternatives, though you may benefit more from using a Credit Builder Account alongside other credit-building tools, like secured credit cards.
- Credit builder loans from other sources: Many banks and credit unions offer credit builder loans, though they may not always be called credit builder loans. Terms can differ from one lender to the next, and not every lender is guaranteed to report to all three credit bureaus, so shop around before settling on a single option.
- Secured credit cards: Secured credit cards require you to fund your own credit limit with a refundable security deposit, minimizing risk on the lender’s end. Because there’s so little risk, it’s much easier to be approved for secured cards than most unsecured cards. That said, the deposit required to fund your credit limit can be a serious obstacle for some, even if it’s refundable.
- Become an authorized user: A family member or friend can add you as an authorized user on an existing credit card account. You don’t even have to get a physical card of your own — the activity for that account will usually be automatically reported in your name once you’re added. That’s why it’s essential to choose someone who’s always on top of his or her finances. Plus, make sure the card issuer actually reports authorized user information to the credit bureaus before choosing this route, because some may not (all the major credit card issuers report authorized user information).
The Bottom Line
Self’s Credit Builder Accounts really can work — they’re an effective and fairly affordable way to build credit if you’re dealing with low scores or looking to establish credit history. But there are a couple important points you should keep in mind.
First, it’s of the utmost importance that you keep on top of your payments, regardless of which strategy you take. A Self Credit Builder Account can contribute positively to your scores, but only if you actually make the payments on time and in full.
Second, for best results, you may want to use a Credit Builder Account in conjunction with one or two of the other credit-building tactics above. One properly managed loan can help build your scores, but maintaining a healthy mix of accounts is a great way to bolster your payment history and improve your credit even faster.