Americans credit card debt has just hit a disturbing record of $1.02 trillion according to the federal reserve.
Traditionally, we’re told that it’s important to build credit, and that in order to do so, we need to get a credit card. But with no credit history, or with a poor credit history it’s usually difficult to get one.
And if we can’t qualify for a regular unsecured card, then the only other options seem to be to apply for a secured card, or to become an authorized user on someone else’s account.
But for some people who are strapped for cash, even the minimum deposit for a secured card – usually around $200 for most – can be difficult to meet. Or someone may not be willing to trust you to be an authorized user on their credit line.
At that point, you may wonder what else you can do to build your credit. Luckily, there are other options out there that are not risky and don’t require a lot of cash up front.
So what can I do?
One option that’s available is Self-Lender. Like thousands of other people, you can start a Self-Lender account with poor or no credit history. Based out of Austin, Texas, Self-Lender is a company dedicated to helping consumers save money and build a positive credit report. It’s basically like loaning yourself money.
How does self-lender work?
The way that a Self-Lender account works is you invest your money in a CD savings account for 12 months. You choose the total amount – starting as low as $525 (monthly payments of $25). Upon signing up, you pay a non-refundable administration fee for setting up the account (this varies by the amount you invest and is higher if you invest a greater amount). For the next 12 months, you make a monthly payment that goes into your savings account. After the 12 months are up, you get your money back – along with interest. Your on-time payments are also reported to all three major credit bureaus (TransUnion, Equifax, and Experian), so it works like an installment or loan account, and a positive credit history shows up on your credit reports.
Is self-lender a good way to build credit?
Using Self-Lender is a great way to build credit because it helps you build a credit history without jumping through hoops trying to get a credit card, or relying on someone else to make you an authorized user and maintain their good credit history. Plus, it’s a cost-effective way of building credit because you’re making a little bit of extra money on interest from the account, instead of paying extra money in interest to a lender. Having a solid payment history accounts for 35% of your score and having a credit history makes up 15% of your score (that’s half your score!)
Remember, building credit takes time, and it won’t happen overnight, but it’s definitely worthwhile if you’re trying to purchase a car or a home, or even just want to qualify for a rewards credit card. If you’re not sure where your credit stands, you can sign up for your free credit report card at Credit.com and receive two scores updated each month. While Self-Lender can help those with no credit history or poor credit, it may well be worth it for those who have fair to excellent credit as well, especially if you need to show a greater variety in your credit mix by adding an installment account. Another awesome advantage is Self-Lender will also help you save money, and who couldn’t use a little extra cash?
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This article originally appeared on Credit.com. Credit.com is a USA TODAY content partner offering personal finance news and commentary. Its content is produced independently of USA TODAY. Elisa has been with Credit.com since 2014 where she started out as a paralegal. Since then, she has developed a passion for understanding credit and personal finance. More by Elisa Ortiz
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