How many points does self raise your credit score?

Understanding Self and Credit Building

Self is a financial technology company that offers credit-building products, primarily revolving around credit builder loans and secured credit cards. These products are designed to help individuals with limited or no credit history, or those looking to rebuild their credit after past financial difficulties. The core idea is to help you establish a positive payment history, which is a crucial factor in determining your credit score.

Before diving into the specifics of how many points Self can potentially raise your credit score, it's essential to understand that credit scores are complex and influenced by various factors. The impact of Self, like any credit-building tool, can vary significantly from person to person.

What is a Credit Builder Loan?

A credit builder loan from Self is a type of installment loan where, instead of receiving the loan amount upfront, you make fixed monthly payments. These payments are reported to the major credit bureaus (Experian, Equifax, and TransUnion). The funds you pay are held in a certificate of deposit (CD) or savings account until you've completed all the payments. Once the loan is paid off, you receive the money (minus any interest and fees). The primary purpose of this loan is to build credit history through consistent, on-time payments.

The Secured Credit Card Option with Self

Self also offers a secured credit card. To obtain this card, you typically need to deposit a certain amount of money as collateral. The credit limit on the card is usually equivalent to the deposit. Like traditional credit cards, using the secured credit card responsibly, by making purchases and paying them off on time, contributes to a positive credit history.

Factors Influencing Credit Score Improvement with Self

The amount by which Self can raise your credit score isn't a fixed number. It depends on several individual factors:

• Starting Credit Score: Individuals with no credit history or very low credit scores (e.g., subprime) tend to see a more significant initial jump in their score when they start using Self compared to those with already established, fair to good credit. Building from zero offers more immediate gains.
• Consistency of Payments: This is the most critical factor. Making timely, full payments on your Self loan or secured credit card is crucial. Late payments, even by a few days, can negatively impact your credit score and negate any positive progress.
• Credit Utilization Ratio (For Secured Card): If you're using Self's secured credit card, keep your credit utilization ratio low. This means using only a small percentage of your available credit limit. Ideally, aim to keep your utilization below 30%, and even lower (around 10%) is better for maximizing your credit score improvement.
• Overall Credit Profile: Your credit score is a holistic assessment of your creditworthiness. Factors like the age of your credit accounts, the types of credit you have (credit cards, loans, etc.), and the absence of negative marks (bankruptcies, collections, charge-offs) all play a role. Self is just one piece of the puzzle.
• Reporting Timelines: Credit bureaus aren't updated instantaneously. It typically takes 30-45 days for Self to report your payment activity to the credit bureaus, and for that information to be reflected in your credit score.
• Other Credit Activity: Any other credit-related activities you engage in alongside using Self (e.g., opening other new accounts, applying for loans) can influence your overall credit score.

Realistic Expectations: What to Expect from Self

While it's impossible to guarantee a specific number of points gained, here's a general idea of what you might expect from using Self responsibly:

• No Credit History: If you have no credit history, you might see a significant increase in your score, possibly 20-50 points within the first few months of consistent on-time payments. This is because you're establishing a credit history where none existed before.
• Poor Credit (Subprime): If you have a subprime credit score (typically below 620), you could see a noticeable improvement, perhaps 15-40 points, within the first few months. The actual increase depends heavily on the severity of your past credit issues and how diligently you make your payments.
• Fair to Good Credit: If you already have fair to good credit (above 660), the impact of Self might be less dramatic. You might see a smaller, more gradual increase, possibly 5-20 points, as you continue to build a positive payment history and demonstrate responsible credit management. The benefit here is more about solidifying your existing good credit than making a dramatic jump.

Important Note: These are just estimates. Credit scores are dynamic and can fluctuate. The key is to consistently practice good credit habits over the long term.

Don't Expect Overnight Miracles

Building credit is a marathon, not a sprint. While Self can be a valuable tool, it's not a quick fix for years of credit mismanagement. Be patient, stay consistent with your payments, and allow time for your credit score to improve.

Maximizing Your Credit Building Efforts with Self

To get the most out of Self and maximize its impact on your credit score, follow these tips:

1. Make On-Time Payments, Every Time: This is the most important factor. Set up automatic payments to ensure you never miss a due date.
2. Use Self's Secured Credit Card Responsibly: If you opt for the secured credit card, treat it like a regular credit card. Make small purchases that you can easily pay off each month.
3. Keep Your Credit Utilization Low: Aim for a credit utilization ratio of 30% or less, and ideally closer to 10%. This shows lenders that you're not overly reliant on credit.
4. Monitor Your Credit Report Regularly: Check your credit report for errors and inaccuracies. You can get a free copy of your credit report from each of the three major credit bureaus annually through AnnualCreditReport.com.
5. Be Patient and Consistent: Building credit takes time. Don't get discouraged if you don't see dramatic results immediately. Stay consistent with your good credit habits, and you'll see improvement over time.
6. Avoid Opening Too Many New Accounts: Opening multiple new credit accounts in a short period can negatively impact your credit score, as it can lower the average age of your accounts.
7. Pay Down Existing Debt: If you have other outstanding debts, focus on paying them down. Lowering your debt-to-income ratio can also improve your creditworthiness.

Credit Score Monitoring

Self often provides credit score monitoring tools. Take advantage of these tools to track your progress and identify any potential issues that might be affecting your score.

Alternatives to Self for Credit Building

While Self is a popular option, it's worth exploring other credit-building alternatives to find the best fit for your situation:

• Secured Credit Cards from Traditional Banks: Many banks offer secured credit cards that function similarly to Self's secured card.
• Credit Builder Loans from Credit Unions: Credit unions often offer credit builder loans with potentially more favorable terms than some online providers.
• Becoming an Authorized User on a Credit Card: If a family member or friend with good credit is willing, becoming an authorized user on their credit card can help you build credit, as long as they use the card responsibly.
• Experian Boost: Experian Boost allows you to add utility bills (phone, internet, electricity) to your Experian credit report, potentially boosting your score.
• Paying Rent On Time: Some services allow you to report your rent payments to credit bureaus, which can help build credit history.

Consider comparing the terms, fees, and interest rates of different credit-building products to make an informed decision.

The Long-Term Benefits of Good Credit

Building good credit is an investment in your financial future. A good credit score can unlock various benefits:

• Lower Interest Rates on Loans and Credit Cards: You'll qualify for lower interest rates, saving you money on interest payments over the life of a loan.
• Easier Approval for Loans and Credit Cards: You'll have a higher chance of being approved for loans, credit cards, and mortgages.
• Better Insurance Rates: In some states, insurance companies use credit scores to determine premiums.
• Easier Apartment Rentals: Landlords often check credit scores when evaluating rental applications.
• Better Job Opportunities: Some employers check credit reports as part of the hiring process.
• Increased Financial Flexibility: Good credit gives you more financial flexibility and access to credit when you need it.

Therefore, prioritizing credit building is a worthwhile endeavor that can positively impact various aspects of your life.