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How to Lend Yourself Money and Increase Your Credit Score

With real estate investing, some hard truths are difficult to get around. One of those involves your credit score. In the underwriting process, Sharestates looks at a variety of sponsor and deal criteria and credit score is one of them. You can see how we score sponsor credit, and other criteria on our risk matrix.

To some degree, you have control over track record and experience. Sometimes, deals go bad through no fault of your own, and it takes time to increase experience. Credit scores, however, can be improved with relative ease simply by borrowing money and paying it back. Self Lender is a new service designed to help you do that.

What is a Credit Builder Loan?

Credit scores are calculated based on several factors related to how you borrow money. You can take out loans for vehicles, furniture, or other large purchases, enter into mortgage agreements, and take out lines of credit for business or personal needs. All of these contribute to your credit score as you pay down the loans over time. Your credit score is based in part on payment history, length of terms, types of credit, and the amounts of the money you have borrowed.

The credit builder loan is actually a certificate of deposit (CD). You borrow $1,000, which is placed in an FDIC-insured CD in your name for 12 months earning .10% APY. In the meantime, you pay down the loan with monthly payments and Self Lender reports your earnestness to the credit bureaus, which increases your credit score by as much as 60 points. At the end of the year, you can take your money out of the CD and use it. The total cost of this service is just under $75 (a $12 administrative fee plus interest on the loan).

Is Self Lender The Only Way To Increase Your Credit Score?

Until now, consumers have had no practical way to loan money to themselves and use that loan to increase their credit scores. The more traditional way has been to take out new loans, pay down old loans, and to monitor credit reports to ensure accuracy of information. Sharestates still recommends monitoring your credit reports. If your credit score is poor or very poor, you may not be able to get a traditional lender to take a risk on you. It’s a catch-22. In that case, your only options may be a high-interest loans or self-lending. While both of these vehicles have their risks, the self-lending option may be less risky as the interest rate is lower. At the end of the process, you’ll have some extra cash that you can re-invest, use, or place into a savings account.

Download Our Free Real Estate Crowdfunding White PaperIf the only thing holding you back from funding an investment is your credit score, try Self Lender and improve your FICO (Fair Isaac Corporation) credit score.

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