StellarFi, a Self Credit Builder 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 The amount charged to your StellarFi Virtual Bill Pay Card will be simultaneously withdrawn from your connected bank account.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 Equifax® and Experian® 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.
• Because a new account is created on your credit report, StellarFi can enhance your credit mix.
• 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. These 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: Equifax® and Experian®.
• 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 Self Credit Builder work?

Self is a credit builder that aims to build a positive payment history for its 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 24 months.
2. As customers make their monthly payments, the funds are deposited into a bank account.
3. The monthly payments are reported to the three major credit bureaus.
4. Self shows up on your credit report like an installment loan.
5. At the end of the 24 months, the monthly payments are released back to the customer after deducting interest and fees. 
6. At the time of this post, the annual percentage rate for the smallest Self monthly payment plan is 15.97% and the interest rate for the most expensive monthly payment plan is 15.88%.
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. Since that money is locked away, you aren’t tempted to spend the money, and hence have it saved up for at least two years until you pay off the credit builder loan.
• You 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 new credit card.
• Self reports to all three credit bureaus.
• You can pay off your credit builder loan early and close your credit builder account whenever you want.

Here are some of the drawbacks of using Self Credit Builder:

• Self charges interest rates up to 15.97%.
• 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.
• Since the money you pay back to the credit builder account is locked as a certificate of deposit, you cannot use this money until the loan is paid off in case of an emergency. You’ll need to have other credit or savings accounts to help you meet any immediate financial needs.

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: 

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.

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 a 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.

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