There is a lot of talk these days about using a self credit builder to help to build or repair your credit score. On the one hand, if you have no credit, this is probably an unnecessary step, though it can help to teach young people a little bit more about credit and how it works. It is however, one of many tools that can be used for the sake of rebuilding and repairing your credit if you are one of the many people who has experienced financial hardships during the covid pandemic.
If you do not yet have any credit, the biggest challenge you face will likely be in retaining a sense of fiscal responsibility and ensuring that you can continue to pay all of your bills on time. If you can manage that from the beginning of learning how to build credit, it should not take you very long to establish a credit line that will allow you to live on the upper end of your financial situation.
It is always a good idea to remember never to try to extend your financial use beyond your ability to pay off all of the debts that you have incurred. Credit is a good thing, and can be a powerful tool in helping you to live a better life, but you will need to build your credit before it can help. However, going too far into debt may result in bankruptcy or other financial challenges that can make life substantially worse as well.
What Is a Self Credit Builder and How Does It Work?
A self credit builder is a financial company that allows for you to be extended a level of credit, and to have that money deposited into what is generally a secured bank account. As you make your payments, the money in the account may or may not be released, and the payments are then reported to the big three credit reporting agencies.
The big three credit reporting agencies are TransUnion, Equifax, and Experian. These are the only relevant agencies who will track all of your credit and financial history, and be responsible for determining and proving how good or bad your credit score may be. When the payments are reported and you have paid on time, the loan payments with a self credit builder will help to improve your credit score.
If there are any limitations to the self credit builder concept, it is that apparently there is only so much that they can be used for in terms of learning how to rebuild or repair your credit score. They are certainly an effective tool, though their efficacy may be called into question by some. That being said, it also may depend on what state your credit score is in before you turn to the use of a self credit builder.
Is a Self Credit Builder Enough to Fix My Credit Score?
According to ACCION reports, the Self Credit Builder improves the average credit score by a total of about 32 points. This figure is based on more than 40,000 accounts that have completed one to two years of loans through the Self Credit Builder system. This may or may not be sufficient to rebuild or repair your credit to the extent that you desire, but it is still a proven and viable financial tool.
There is yet one more benefit that may be easily overlooked by people who do not have a complete understanding of how credit works. The retention of funds in the savings account at the same time as loan payments are made on time will certainly help to improve your credit score some, even to a limited degree as may be noted above.
Unforeseen by many, there is also the added benefit of having a reduced debt to credit ratio, which should also assist in increasing your credit score and making it easier to increase, improve, rebuild, or repair your personal credit score. How much credit has been extended to you, and how much of that credit you have been “forced” to use, will assist the big three credit unions in determining that you are a much better credit risk if you keep the amount of debt to a minimum.
Can I Use a Self Credit Card to Build or Repair My Credit Score?
If you want to increase your ability to repair and rebuild your credit score, you can use the Self Credit Card tactics in order to increase the efficiency and the ability of the self credit builder to repair your credit score faster and more efficiently. Using these tools concurrently will allow for you to increase your ability to rebuild and repair your credit score so long as you are careful about how you are using the two powerful financial tools.
If you are using the Self Credit Builder in order to rebuild and repair your credit, it may very well be possible that you are going to need a secured credit card as well. Make sure you find a company that issues secured credit cards that help your credit score, and that do not charge interest unless there is an outstanding balance on the credit cards. Once you have your credit card, you can begin to combine the two builders in order to rebuild and repair credit faster.
Use the self credit card or secured credit card to pay off any bills that you can pay every month, including the payments for yourself credit builder. While you are doing this, do not be fooled by all the money you now see sitting idly in your bank account. You are going to need that money at the end of the month if you really want to use the self builder system to rebuild and repair your credit.
At the end of the month, most of your bills should have already been paid on your credit card. Note, this will not work if you are using a debit card, and you must use a secured credit card that reports to the big three credit reporting agencies.
Now use all that extra free money that you were looking at all month sitting in your bank account, and pay off your credit card balance in full. If you can keep this process off through one to two years of using a self-credit builder, you should be well on your way to complete financial recovery.