Having bad (or no) credit can be a challenge. I remember dealing with this myself when I was trying to bounce back after my own bankruptcy filing. As a young adult struggling to build up any credit at all, I undid my own hard work in one fell swoop. It took me a long time to increase my credit score.
The truth is that my parents never had a conversation with me about debt and credit. We never discussed how to build an emergency fund. We did not talk about savings vs. spending. They only ever taught me about making sure that I paid my bills on time. That was it.
Fortunately, my kids will be able to benefit from my mistakes. My husband and I are teaching them the importance of cash, savings, and budgeting. The hope is that when they are ready to start out on their own, they will be set up for financial success.
The only issue we are both struggling with is how to help our kids actually get credit. We don’t want them to take on debt to make this happen. But we know how important credit is to their overall financial picture.
One day, they may need to take out a loan to purchase a vehicle and will probably need a mortgage to buy a home. Both of these situations will require that they have a good credit score. If they don’t have one, they may end up having to pay more for their loan – if they’re even able to get one at all.
How then, as a parent, can you actually help your child build credit? What is the right way to go about this? There is not a single right answer, but there are some things you can try.
HOW TO INCREASE YOUR CREDIT SCORE
There is one simple way to improve your credit score. This program may be a good option for anyone who needs to rebuild credit. It is also perfect for helping people establish and build credit.
Where do you go for such a service? Self Lender is an online credit builder loan with interest charges that are actually affordable.
The way it works is pretty simple. You can sign up for a free membership which gives you credit monitoring and provides excellent blog posts and information about financial health. You then have the option to apply for a credit builder loan. Self Lender does not do a hard credit pull, so it does not negatively affect your credit score. If approved, there is only a one-time $12 administration fee to cover Self Lender’s costs.
The beauty of this loan is that it doesn’t work like a traditional personal loan; You don’t get the money upfront. Instead, it forces you to save money because you pay off the loan in 12 monthly installments, and you only receive the money at the end of the term. This is the most responsible and safe way to build credit since you can’t get in over your head.
The loan is held in a one-year, FDIC insured, Certificate of Deposit bank account and earns interest over the course of the term.
- After Self Lender approves you for a loan, their banking partner lends you $1,100, which is deposited in a CD-secured account in your name.
- You make 12 monthly payments of $97 to pay off the loan. Self Lender makes it easy to set these payments on auto-pay.
- At the end of the 12-month term, you have paid off the loan and receive the money via check or ACH.
As an added bonus, on top of building your credit history, you’re saving money at the same time. Here’s what a few Self Lender users had to say:
Derrick Camber, California: “[In five months,] My score went from a 495 to a 640!”
Brandy S., California: “The opportunity Self-Lender has afforded me is so unique – a CD and credit-building loan in one. I joined Self Lender because I wanted a CD, but didn’t have enough available funds to obtain one. Self Lender not only made it possible for me to get my first CD, but they also allowed me to rebuild my credit! Oh, and their customer service is seriously top-notch.”
WHY SELF LENDER WORKS
The reason this works is that Self Lender reports your or your child’s payment history monthly, which builds credit history and creditworthiness. Self Lender reports to all three credit bureaus: Equifax, Experian, and Transunion. The credit bureaus say that payment history makes up 35% of your credit score – a huge chunk.
The other great thing about Self Lender’s credit builder loans is that they are installment loans, which experts say is a relatively “good” kind of debt (similar to a car loan or a mortgage). This, in turn, can have a positive effect on your credit score.
So, let’s say that you have $1,100 in a regular bank account. What interest will you earn on that money over the course of a year? Probably not much. Why not put that money to good use with Self Lender?
To be honest, I wish I had an option like Self Lender back in 2002. I would not have had to wait so long to get my score built back up again. It really can make a difference.
Plus, Self Lender has a generous, $10 referral program. You can help your friends and make money at the same time. What a bonus!