SeedFi Credit-Builder Loan Review 2023
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Credit-builder loans differ from other loans because you can get one without a credit history — but you don’t receive the money upfront. Instead, the money is kept in a savings account and you get access after paying or ending the loan. These loans can be especially useful for credit newbies. SeedFi offers a credit-builder loan option in a majority of states.
Other options for getting on the credit radar include:
Getting a starter credit card that is relatively easy to qualify for.
Having someone with good credit add you to their credit card as an authorized user.
Using money you have saved in a bank or credit union account as a deposit for a loan. Having a loan and credit card in good standing can help build credit more quickly.
How SeedFi's credit-builder loan works
SeedFi’s Credit Builder Prime is offered through Credit Karma Money (SeedFi and Credit Karma are owned by financial software company Intuit). Credit Builder Prime puts a long-term savings spin on the traditional credit-builder loan. You sign up for a line of credit in your name and can choose a payment as low as $10 every other week (payments are timed to your paycheck or a cadence you choose). You don’t get access to the line of credit right away; instead, you make advance payments on the debt. Once your payments total $500, SeedFi moves the money to a savings account you can access. Credit Builder Prime is free — no fees or interest are charged — so you get back all the money you put in.
What makes this plan different from others is its revolving credit structure. Unlike the typical installment loan, your Credit Builder Prime account remains open after the initial $500, and the cycle repeats. Keep your payments going and get access each time $500 is saved.
The savings account and the money in it are yours. While you're repaying the loan, the funds are locked and serve as collateral. Once you hit $500, the account is unlocked and the money is yours to use as you please. You can either continue saving in $500 increments — while earning interest like a traditional savings account — or you can withdraw or transfer funds up to six times a month once your account is unlocked.
You can close the account if you're caught up on payments, you've reached the score benefit you need and you can qualify for credit on your own. From there, you're free to transfer the money you've saved to a different bank or credit union where you can more easily access the funds.
SeedFi's Credit Builder Installment edition has been discontinued, according to Jim McGinley, the lender's CEO and co-founder. SeedFi will also no longer provide Borrow & Grow personal loans, but it will service existing ones.
How SeedFi's credit-builder plan can help or hurt your credit score
Credit Builder Prime loan payments are reported to the three major credit bureaus: Equifax, Experian and TransUnion. On-time payments help build credit directly by beefing up your credit history. Once you’ve ended the loan, keeping the money in savings can help your score indirectly by providing a cushion so an unexpected expense doesn't lead to paying bills late.
If you’re building credit from scratch, just a couple of months of reported payments will likely get you a VantageScore, and in six months, you should have a FICO score. You can check to see when the account appears on your credit reports by using AnnualCreditReport.com, which offers access to credit reports from all three credit bureaus. Once you have a FICO score, it’s smart to apply for a traditional unsecured credit card and pay it off in full every month. That will also help build your credit.
If you don't sign up for the SeedFi plan's optional AutoSave feature and forget to make a payment, your account might be tagged as delinquent, which could harm your credit score. However, Credit Builder Prime offers flexibility to change the payment structure in hopes that it will prevent late payments altogether.