StellarFi, a Self Credit Builder Alternative

1. Why is credit important?

A good credit score is the key to meeting important milestones in your life and acquiring things you need, like housing and transportation. There are some surprising ways that bad credit can impact your life and finances, too. 

Here are some of the main reasons why any consumer should focus on building credit: 

• You need good credit to qualify for a mortgage and become a homeowner.
• Consumers with poor credit pay thousands of dollars more in interest expenses.
• Having bad credit or no credit could prevent you from passing financial background checks by rental companies and landlords. 
• Many employers look at a candidate’s credit history before considering them for an open position.
• People with poor or invisible credit pay higher deposits on utilities, phone plans, and more.

2. What is StellarFi?

StellarFi is a credit builder that helps anyone increase their credit score just by paying their existing monthly bills. With StellarFi, you can build credit without the usual downsides that come with other credit-building methods:

• NO minimum score to qualify 
• NO interest charges
• NO deposit required
• NO surprise fees
• NO new debt 

How StellarFi works

StellarFi is simple to use. You just need a bank account and some recurring bills to get started.

1. Sign up as a StellarFi member.
2. Connect your primary bank account (the one you use to receive paychecks and pay bills).
3. Add your bills by replacing your current payment method with your StellarFi Virtual Bill Pay Card number.
4. StellarFi pays each bill on your behalf when it’s due, and simultaneously withdraws the payment amount from your connected bank account.

With StellarFi, your bills are conveniently automated and paid on time, AND your bills help you build credit.

How StellarFi improves your credit score

StellarFi impacts the key factors that make up your credit score: 

• StellarFi creates a credit account on your credit report, and will report your linked bills as a line of credit.
• StellarFi reports on-time monthly payments to all major credit bureaus, which contributes to your payment history.
• StellarFi optimizes your credit utilization ratio by providing a payment cushion, which appears on your credit report as a high credit limit.
• 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 positively influence your score.

3. StellarFi Pros and Cons

StellarFi is great for anyone looking to build credit or improve their credit score quickly without paying for a deposit or high interest rates.

Here are some of the best reasons to use StellarFi:

• StellarFi reports as a line of credit, with a $500 high credit limit reported for those on the Lite plan and up to $25,000 for those on the Prime plan.
• People with poor credit or no credit can use StellarFi
• There’s no credit check or inquiry to get started
• You don’t need to pay a security deposit
• You’ll build credit history with all major credit bureaus: Experian^®, TransUnion^®, and Equifax^®.
• You can view and track your credit score and credit report in your member dashboard
• You can manage monthly bills in one dashboard
• You can use your StellarFi Virtual Bill Pay Card to link any recurring bills that you normally pay with a credit or debit card
• StellarFi is NOT a term loan and will not affect your debt-to-income ratio

So, what are the downsides of using StellarFi? Here are some examples of 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 (in these situations, it’s usually best not to make any changes to your credit report)
• You don’t have a bank account
• You pay all your bills by check or money order
• You don’t have an SSN or ITIN

How does Self Credit Builder work?

Self is a credit builder that aims to build a positive payment history for their customers while also encouraging good money-saving habits. Here’s how Self builds credit:

1. New customers pick a monthly credit-building payment level and length. Plans start at $25/month and go up to $150/month, with durations of 12-24 months.
2. As customers make their monthly payments, the funds are deposited into a bank account.
3. The monthly payments are reported to all major credit bureaus.
4. Self shows up on your credit report like an installment loan.
5. At the end of the 12 or 24 month period, the monthly payments are released back to the customer MINUS interest and fees. 
6. At the time of this post, the interest rate for the smallest Self monthly payment plan is 14.14% and the interest rate for the most expensive monthly payment plan is 14.87%.
7. If the customer doesn’t make the full monthly payment within 15 days of the payment due date, they will be charged a late fee of up to 5% of the monthly payment amount. 

Self Credit Builder Pros and Cons

Here are some of the benefits of using Self credit builder:

• Self can help you get into the habit of saving a certain amount of money per month
• It can be nice to get your payments back (minus interest and fees) in one lump sum at the end of your credit building plan
• If you have only revolving lines of credit (such as credit cards) on your report, using Self can help your credit by adding an installment loan to your credit mix 
• Self is an option to build your payment history without opening a credit card
• Self reports to three credit bureaus

Here are some of the drawbacks of using Self credit builder:

• Self charges interest rates up to 14.87%
• Self charges a fee to use your debit card to make monthly payments
• Self will assess late fees if monthly payments are not made on time
• Self does not improve credit utilization and can negatively impact your debt-to-credit ratio
• When you finish paying your credit builder plan, your Self account will close. This can cause your credit score to drop, especially if it is your oldest account or your only installment loan account.

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

Each consumer’s credit profile and financial landscape is unique. It isn’t always easy to predict how a credit building product will interact with your credit report. Here are some general guidelines to help you choose between StellarFi and Self Credit Builder: 

Who should use Self Credit Builder?

Self is a good choice for people who don’t have any installment loans in their credit mix. It would also be useful to people who don’t have a bank account, since Self can be paid using a prepaid Visa^® card. 

Self can also benefit people who have trouble stashing money away – although interest charges are deducted from the savings amount before being repaid to the Self customer.

Who should use StellarFi?

StellarFi is a great choice for anyone who wants help building credit and paying bills on time, at a low monthly cost. It’s also a good choice for people who would like to build payment history AND improve their credit utilization without opening a credit card. 

Because StellarFi impacts more credit factors than Self, StellarFi may be the better choice for those who want to make a more significant credit score increase