I recently posted about how I’ve been binge watching my credit score like it’s the hottest new show on Netflix, lol.
Getting your credit score to travel in the upward direction can be extremely challenging . The algorithm is truly quite confusing, so much so that you can’t really even get anyone on the phone at the credit bureaus to explain it to you. But the main ideas are that the following will help your score increase (in order of importance):
- Good payment history – paying your bills on time is the biggest factor in your score and paying even one bill late can have a significant negative impact on your score which can hurt your score for a very long time
- Low revolving credit usage – the balance on your credit cards is low compared to your credit limits. General guidance is it should be lower than 30%.
- Your credit history aging – the longer you show a history the better
- Amount of new credit – fewer new credit accounts are more beneficial for your score (see above point). You’ll sometimes see your credit score drop right after you get a new loan or credit card.
- Credit Mix – creditors are basically looking to see that you can handle diverse types of debts and credit accounts. A personal loan can help here, which is what this post is about so let’s get to it!
So, how does one loan themselves money?
When I was younger, my mom used to advise me and my cousins to take out a Certificate of Deposit at the bank and borrow against it as a way to boost our credit (gosh that lady was smart).
Let’s start with what a Certificate of Deposit is. A CD is a savings and investment instrument where you give the bank some money and ask them to hold it for you for a certain period of time – 1 year, 3 years, 10 years. Because the bank benefits from holding people’s money (it allows them to lend other people money), they’ll pay you interest for letting them hold your money in a CD at a higher rate than a savings account since you’ve agreed on how long they can hold the money. The longer the CD is for, the higher the interest rate is.
Ok, back to my mom’s genius idea. Because the bank has your money in a CD. You can treat the CD like collateral and take a loan from the bank against the CD. The bank is open giving you the loan because if you can’t pay it back, they can take the money out of the CD. Now the loan is on your credit and you’ve enhanced your credit mix (yay). Additionally if you pay on time, your payment history boosts your score as well (body rolls).
Do I still have you? Does this sound complicated? If so, no worries, there is a company that makes this SUPER EASY!
SELF is a finance company that helps people boost their score by doing exactly what my mother suggested but super easy and without you having to give a bank any cash up front!
Here’s how it works:
- You sign up for a Self account
- You decide how much you want to “borrow” – $500, $1,100, or $2,200
- You decide how long you’ll take to pay it back – 12 months or 24 months
- Self buys a CD on your behalf for the amount you are borrowing
- You pay your loan amount monthly (an $1,100 loan has an $89/month payment)
- Once your loan is paid in full, you get a check for the amount you “borrowed”!
So you get a credit score boost AND a check at the end of this! WHHAAATTT??
I have used Self twice and saw increases of 30 points the first time and about 20 points the second time. I have friends who experienced 30 – 145 point increases!
These are comments from a fb post I made about Self 2 years ago:
Your increase will depend on the make up of your credit profile of course.
A few things I want to make sure you know before you sign up:
- There is no credit check! Let me say this again, there is no credit check required for this loan.
- You’ll pay interest on the loan that amounts to about $30 – $80 depending on the amount of your loan. I consider this amount to be completely worth it for the boost to my credit score.
Are you ready to lend yourself some money and boost your credit score? You can sign up for Self here.
Note, I get $10 if you sign up using my link. It doesn’t cost you extra. It’s just Self’s way of saying “thank you” to me for sharing the good news with you. I assure you, it’s really good news. Here’s proof from my personal inbox: