Building or establishing your credit history can be a long, painful and expensive project.
Trust me, I speak from experience: My identity was stolen a few years ago, and I personally dealt with the fallout.
Whether it’s short, non-existent or you just want to improve it, the time and effort it takes to build credit history is extremely worthwhile.
In fact, it could save you hundreds of thousands of dollars over your lifetime.
After all, that credit score of yours has something in common with Miss Cleo’s crystal ball: It can predict your future.
Very important parts of your future, actually, like how expensive your first home will be — or whether or not you’ll be able to finance it at all.
But with convoluted rules written in as-opaque-as-possible legalese and insane interest rates on classic credit-building tools like secured credit cards, taking steps toward building a better credit history can be daunting — if not straight-up unaffordable.
That’s why I wish I’d known about this awesome tool years ago, when I was knee-deep in paperwork, collections calls and fear.
Bad Credit? You’re Definitely Not Alone
At the beginning of 2016, 31-year-old Southern California server Derrick Camber started to realize the full implications of his low credit score.
Having lost his job two years ago, Camber had to move home and sell his car to keep up with bills. In the middle of the mess, he’d let a number of debts go to collections.
Although each individual account was for a small amount — $300 here, $400 there — the cumulative effect added up quickly.
Once Camber finally checked his report, he made a shocking discovery.
“I let so much crap go,” he confessed. “I had 22 negative items across the three credit bureaus on my report.”
Although Camber had secured a new job, his ruined credit meant his aspiration to replace his car was completely off the table — even though he was now making $65,000 a year.
And since he’d never taken out a mortgage or used credit cards, Camber’s report had almost no positive accounts to counteract the damage.
He knew he had to do something. “I said OK, where do I start?”
While blowing off steam at the gym one day, Camber saw an ad for a credit-building loan through a company describing itself as a “payday loan alternative.”
It was expensive — its lowest advertised interest rate was a whopping 29%, and when Camber applied, his was much higher. But he needed to start building a positive credit history somehow.
So although he didn’t need the money, he took out a $200 loan, and promised to pay back $255 the following week.
Then he did it again. And again.
But although he’s successfully paid back 12 of these short-term loans, he has yet to see the line of credit even show up on his report, much less improve his score.
Meanwhile, he was hemorrhaging money paying toward the company’s insane interest fees — about $50 a week.
Something had to change.
Then Camber heard about another type of loan: a credit-builder loan. Although he was skeptical at first, he decided to do some deeper investigation… and soon discovered he’d found the perfect way out of his credit nightmare.
How One Man Improved His Credit History with an Awesome, Easy Tool
Camber stumbled across Self Lender, an online credit builder loan with interest charges that were much easier to swallow.
Camber signed up for a free Self Lender membership and took out a $1,100 credit builder loan. Unlike a traditional loan, this one is held for him in a one-year, FDIC-insured certificate of deposit bank account.
Every month, $97 is automatically taken from his bank account to pay toward the loan — and the 12.65% APR Self Lender charges to cover its own costs.
At the end of the year, the CD will mature and unlock, and its 0.10% APY growth rate means he’ll be able to withdraw $1,101.10.
Meanwhile, his credit history will benefit from a successfully-paid installment loan with fixed payments, proving his creditworthiness every single month. Plus, Self Lender reports to all three credit bureaus: Equifax, Experian and Transunion.
The account also helps diversify his credit portfolio, which has a positive impact on his score — especially since experts consider an installment loan a relatively “good” kind of debt. They’re similar to student loans or vehicle leases.
Over the course of the whole year, Camber will have paid $1,164 toward the loan, plus a small $12 administrative fee. After taking out his $1,101.10, his whole out-of-pocket cost is just about $75 — a little more than he was paying every week with the other loan.
(Here’s the math, if you’re curious: $1,164 + $12 – $1,101.10 = $74.90 out-of-pocket)
What’s better, the line of credit through Self Lender showed up immediately on his report. In fact, after signing up for Self Lender, Camber saw a 22-point jump in just one month.
Could Self Lender Be Right for You?
If you’re trying to build or establish your credit history, you might want to consider taking out a credit-builder loan through Self Lender.
After all, it’ll cost you almost nothing, and at the end of the year you’ll have stashed away $1,100.
Heck, my credit score’s been over 700 for years now… but I’m still considering doing it.
Signing up is 100% free, and you’ll get access to your credit score and free credit monitoring — so you can watch your report and get score notifications.
The $97 monthly payments will be automatically withdrawn from your bank account — but the majority of it is going right back into your own pocket when you complete your loan.
Camber says using Self Lender has been the biggest help he’s had in getting his credit score back where it needs to be.
“My score went from a 495 to a 640 since January!” he says. Not bad for five months.
He’s stopped renewing the other, high-interest loan he’d been wasting his money on, and plans for a score of 720 before September. Plus, he’ll be able to access his $1,100 CD in February 2017 — which will make for a great start on a down payment for his next ride.
“If I could have done it all over again,” Camber says, “I would have gone with Self Lender first.”
Your Turn: What tips and tricks have you tried to build positive credit history? Would you take out a credit-builder loan with Self Lender?
Sponsorship Disclosure: A huge thanks to Self Lender for working with us to bring you this content. It’s rare that we have the opportunity to share something so awesome and get paid for it!
Jamie Cattanach (@jamiecattanach) is a staff writer at The Penny Hoarder. Her writing has been featured in DMQ Review, Sweet: A Literary Confection and elsewhere.