Your credit score can have a major impact on your life as you navigate financial options. As Bellingham native Melissa Bradshaw discovered, a low credit score can hamper life necessities like buying a car. Fortunately, Credit Builder Loans can help make significant improvements to your credit, in as little as one year.
Bradshaw’s 1997 Jeep Cherokee was on its last legs, needing thousands of dollars in repairs to keep going. When a low credit score prevented her from getting approved for an auto loan, Jennifer Barnhart of First Fed’s Fairhaven branch suggested she try a Credit Builder Loan.
“Jennifer’s enthusiasm was amazing,” said Bradshaw. “She understood my situation in a way that made me feel valued.”
Credit Builder Loans are a small loan of $1000 or $2500 that gets invested in a certificate of deposit (CD) and paid back over the term of the CD to build credit. Instead of having immediate access to the loan amount, the funds are held in the CD until the loan is paid off. After all the payments are made, you will have the amount of the loan plus the interest of those funds earned during the repayment period.
Loan payments are reported to the credit bureau. A steady record of on-time payments can help increase your credit score. However, if you need to close out a Credit Builder Loan early, your credit will not be negatively affected so long as the previous payments were made on time.
“Even one year of on-time loan payments can create a positive credit history that raises your score,” explained Barnhart. “The better your score, the more likely your next loan will be approved and with better rates.”
Because the funds are withheld until they are paid off, it is easier to get approved for a Credit Builder Loan than many other traditional loans. The program is designed as a low-risk way for people to improve their creditworthiness if they have lower scores or minimal credit history.
“My credit score went up nearly 100 points after just one year of Credit Builder Loan payments,” said Bradshaw. “With my higher credit score I was instantly approved for an auto loan up to $50,000.”
Soon after Bradshaw completed her first Credit Builder loan, she invested in a second CD to save for a long-overdue trip to Norway, where her great-grandparents were from.
“Improving my credit score made a huge difference financially,” added Bradshaw. “I would recommend First Fed’s Credit Builder Loan to anyone who is struggling with their credit.”
Credit scores are designed to indicate to lenders how trustworthy you are when it comes to borrowing money. It’s never too early, or too late, to start building or repairing your credit.
If you have a high credit score, you’ll be more likely to get approved for loans and credit cards at lower interest rates. Better rates mean you’ll save money in the long run. Plus, having good credit can also help you get a better deal on your rent, access to utilities, and even job opportunities.
“Everyone deserves the chance to build or improve their credit and fully participate in the economy,” said Barnhart. “First Fed is happy to offer banking solutions on the path to financial well-being and independence.”
Learn more about Credit Builder Loans: ourfirstfed.com/personal/loans/credit-builder-loans
First Fed is a Member FDIC and Equal Housing Lender.