For those of us with little or poor credit, the cards seem to be stacked against us. Banks, credit card companies, and even phone companies like to see a solid credit history before offering you their products, but it’s hard to build your credit unless you have access to them. So where do we start?
There are dozens of financial products aimed at helping us build our credit (just look it up), and many of them look great. The problem is that nearly all of these products have hidden costs, upfront administrative fees, or odd restrictions.
The best product in our opinion for anyone looking to begin building their credit (and frankly the only one we really like) is the Credit Builder Plan offered by a Financial Technology company called Seedfi.
As the name implies, it’s a great way to start building your credit, and as you’ll see, helps build great savings habits as well. Here’s how it works:
When you start a Credit Builder Plan with SeedFi, $500 is deposited into a savings account under your name. Over the next 6-24 months, a small amount (chosen by you) from each paycheck goes towards that account until you reach $500. It feels just like putting aside a bit of money every month for an emergency fund, savings account, or vacation fund. However, what makes this plan so valuable is that each contribution is actually a loan payment that SeedFi reports to all three credit bureaus.
For those of us with little or poor credit history, this can be a huge step towards building your credit. In fact, customers with less than 3 credit accounts saw an average increase of 45 points after six months on the credit builder plan with on-time payments!
After payments are complete (see options below), the $500 is yours to move back to your bank, leave in your SeedFi account, or cash out for something important to you. What makes us like this plan so much, especially for military personnel with little to no credit history, is that you’ll not only have a bit of cash, you’ll also have a successfully paid off a loan on all of your credit reports and 6-24 months of credit history. Most importantly (in our opinion) you can develop a habit of saving with every paycheck.
What’s the Catch?
The “catch” is that it costs $1/month. Frankly, for anyone with little to no credit, we think of this as a bonus rather than a catch. If you start looking around at other similar products, you’ll quickly find that most (if not all) are more pricy, more confusing, or less convenient. Here is what a typical plan looks like.
In a Nutshell
The Credit Builder Plan puts $500 into an account under your name. You then make automatic payments with every paycheck, according to one of the options to the right. Over the course of the plan, you’re building credit, good financial habits, and a $500 rainy day fund. The cost? $1 a month over the course of the plan.
|Automatic Payment||Plan Length|
That’s a 5 minute/ $24 (max) solution to build your credit.
SeedFi charges $1 a month to access the Credit Builder Plan. In a typical Plan, at the end of one year the consumer would have paid $512 and would have $500 of savings. If you’re trying to shop or compare this against other credit builder loans that charge an interest rate, the $1 a month is equivalent to a 4.6% APR. SeedFi will provide the Credit Builder Plan for free after you’ve referred one friend.
How to do it:
- Go to SeedFi.com.
- Select Credit Builder Plan.
- Answer a few survey questions.
- Create your account.
- Link your bank manually or using Plaid (same bank connection service Robinhood uses).
- Let your plan work for you.
Please reach out to us at firstname.lastname@example.org with any questions, or see FAQs on SeedFi’s website via the link above.
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“SeedFi customers with fewer than three tradelines on their credit profile experienced an average increase to their VantageScore 3.0 credit score from 579 to 624 (+45 points) after six months of consecutive on-time payments (data gathered from Dec ‘19 through Nov ‘20.)”
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