StellarFi, an Extra card alternative

Why is credit important?

Your credit score can be the determining factor in whether you’re able to rent a home, get approved for a mortgage, or get a good interest rate on a car loan. Having good credit can save you money in the long run, through access to better interest rates and more favorable borrowing terms. Here are some scenarios in which your credit score makes a difference:

• Without a strong credit score, you may have difficulty getting approved for a mortgage.
• Consumers with higher credit scores pay lower interest rates on loans and credit cards.
• Landlords typically check your credit to determine whether or not to rent a home or business space to you.
• People with poor or invisible credit pay higher deposits on utilities.
• Some employers even check applicants’ credit before proceeding with the hiring process.

What is StellarFi and how can it improve my credit?

StellarFi is a simple but revolutionary way to build credit. With StellarFi, you can build credit without the downsides of other credit-building products and services. Get started with:

• No minimum score 
• No interest expenses
• No deposit needed
• No surprise or hidden fees
• No new debt

How StellarFi works

StellarFi is easy to use. You just need a bank account and monthly household bill payments — like your go-to streaming service, utility bill, and rent — to get started.

These are the steps to start building credit with StellarFi:

1. Sign up as a StellarFi member.
2. Connect your bank account.
3. Link any monthly bills you’d like to use to build your credit by replacing current payment information (like your debit card) with your StellarFi Virtual Bill Pay Card number.
4. These bills will now be paid using your StellarFi Virtual Bill Pay Card.
5. The amount charged to your StellarFi Virtual Bill Pay Card will be simultaneously withdrawn from your connected bank account.

With StellarFi, your bills are automatically paid and they’ll automatically help you build credit.

How StellarFi improves your credit score

StellarFi affects the credit factors that contribute most significantly to your credit score and builds credit with all major credit bureaus. Here’s how StellarFi works directly on your credit score:

• StellarFi shows up on your Experian® and Equifax® credit reports as a line of credit.
• StellarFi reports on-time monthly payments to the major credit bureaus, improving your payment history.
• StellarFi optimizes your credit utilization ratio by providing a payment cushion — reported as a line of credit on your credit report.
• StellarFi can enhance your credit mix by adding a new type of credit account to your credit report.
• As you continue to use StellarFi, the account’s age can also contribute to your score.
• StellarFi does not add hard credit inquiries to your report. Hard credit inquiries can put a dent in your credit score.

StellarFi pros and cons

StellarFi is for anyone looking to build, improve, or maintain their credit scores. Here are some of the best reasons to use StellarFi:

• StellarFi works for every stage in your credit journey. People with poor or no credit, those interested in taking their score from “poor” to “excellent”, and anyone looking to maintain an optimal score will all benefit from using StellarFi.
• StellarFi can report a credit limit of up to $25,000.
• There’s no credit check or hard inquiry.
• You don’t need to pay a security deposit.
• You use your existing bank account and build credit with it.
• You’ll build a credit history with the major credit bureaus.
• You can manage your monthly bills in one dashboard.
• Access your credit report, current credit score, and advanced credit tools such as personalized score projections.

So, what are the downsides? Here are some situations in which StellarFi may not be a good fit:

• You’re currently in the underwriting, pre-approval, or under-contract phase of buying a home and have been advised against any changes to your credit report.
• You don’t have a bank account.
• You pay all your bills by check, cash, or money order.

How does the Extra Debit Card work?

The Extra Debit Card is similar to StellarFi in that you can use it to pay all your bills. To use the Extra Debit Card:

1. You need to first have a bank account that is compatible with the payments transfer platform Plaid. 
2. Then, you link the checking account with the Extra Debit Card to make purchases.  
3. Once you link your bank account, Extra gives you a spending limit called Spend Power based on your bank balance and other factors. This is not a credit limit, just how much you’re able to spend with your debit card at any point in time.
4. Extra “spots you” or pays the merchant on the spot for that purchase and then “pays itself back” on the next business day with the funds available in the linked checking account.
5. Extra then sums up all the transactions and reports them to credit bureaus Experian and Equifax at the end of the month as creditworthy payments. 

Extra Debit Card pros and cons

Here are some of the benefits of the Extra debit card:

• The Extra Debit Card can be used wherever a Visa debit card is accepted.
• The Extra Credit Building + Rewards plan gives you rewards with every purchase just like a credit card which you can redeem at its Extra Rewards Store to buy your favorite brand products. 
• You don’t need to pay a security deposit since it isn’t a secured card.
• Balance isn’t carried over so there’s no interest. 
• There are no other hidden fees, annual percentage rates, or other charges apart from the membership fee.
• You can track your spending with the Extra spend tracking app.

Here are some of the drawbacks of using the Extra Debit Card:

• Though there are no additional costs or hidden fees to use the Extra Debit card, the annual membership fee is high enough for many to consider getting a secured card without annual fees instead.
• You may have to make new purchases every day or every month, making it a hard choice for those who are just learning to watch their spending habits. It contributes to building more impulsive rather than stable, regular spending habits.
• The spending limit is determined as a percentage of the user’s bank account balance, which can be very low day-to-day. If a user tends to get low balances toward the end of their pay period, they won’t be able to use the card for significant purchases. 
• If a user keeps unused funds in a savings account (or anywhere besides their Extra Debit Card-linked checking account), they’ll have minimal spending options.
• With spending limits associated with a user’s frequently changing bank account balance, it’s risky to use the Extra Debit Card for bills that are paid automatically. If the payment is not processed because the spending limit isn’t sufficient, the user may incur late fees from the biller.

StellarFi vs Extra: What’s the best way to build credit? 

Every individual’s credit and financial situation is different, so building credit is not a one-size-fits-all scenario.

Like most credit-building products, your chances of building a good credit profile also depend on making on-time payments and maintaining good credit behavior across the multiple credit accounts you may be using. Neither StellarFi nor Extra can impact any past transactions – missed or late payments and the resulting negative credit history. They can only impact your future credit scores and credit history with consistent usage.

Extra would be a good choice for those who want to take a more gradual approach to building credit by starting with small daily purchases. Extra is also a good option if you already have a Plaid-compliant bank account from where you make most or all of your primary daily and monthly transactions. 

StellarFi is a good option for members across different points in their credit-building journey, and not just for beginners. StellarFi reports up to $25,000 of bill payments. Since Extra reports your total daily expenditure every month, the amount it reports may vary. Also, the daily spend limit is relatively lower than a monthly spend limit so you may not be able to make large purchases on a single day. This means you can only use Extra for smaller bills and purchases like a restaurant dinner and not larger bills like rent.

StellarFi is meant for those who want to make a more significant long-term impact on their credit by using substantial monthly bills they are already paying. Monthly bills are more manageable and consistent, helping consumers build a more solid, reliable financial behavior profile. StellarFi’s also a great solution for those who would like to manage their bills and view their credit scores and reports in one dashboard. 

By comparing credit builders side-by-side, you’re sure to find the right tool, or combination of tools, for your goals.