Credit strong offers different loan options for different people and provides unique paths to those looking to build their credit. Credit Strong is part of Austin Capital Bank, meaning they are FDIC insured.
Credit Strong is FDIC insured and subject to government regulation and oversight. This enables Credit Strong to be a legitimate way of offering loans to people wanting to build their credit.
How Does it Work?
Credit Strong offers “credit builder loans,” which differ from personal loans in one crucial way. Instead of getting the funds upfront, the loan goes into a savings account that forces you to pay off the entire loan, plus interest, before the funds are available to you.
This process does establish a positive and consistent payment history, which can benefit your credit score. Credit Strong reports to all the major credit bureaus: Equifax, Experian, and TransUnion.
There’s no surefire way to determine how much of an increase your credit score will see, as there are many deciding factors, including:
· Starting Credit Score
· Length of Loan
That said, payment history is worth 35% of your credit score, so making those payments on time can only help.
The Process
Through Austin Capital Bank, Credit Strong puts a sum of money in a “savings account” in your name. The savings account is locked, and you must pay off the loan before you can access the funds.
You make a monthly payment towards the principal in the savings account and the interest to Credit Strong.
Automatic payments are not required but encouraged. Once everything is paid off, the funds are released to you.
Credit Strong also shows your credit score within their dashboard to encourage you to keep making payments.
The Quick Facts and Summary
· You pay money into your savings account through Credit Strong
· Interest goes toward credit strong, which is how they make money
· You establish a consistent payment history
· Payment history gets reported to bureaus, raising your credit score
· No initial deposit required
· No hidden fees
· No penalty for paying the loan off early
· All loans show up as an installment loan on your credit report
· Savings account is yours at the end
Other Benefits of Credit Strong
Credit Strong has an entirely online platform that you can access anywhere. Additionally, they don’t outsource anything and manage everything from customer service to handle the loan paperwork themselves.
Requirements for a Credit Strong Loan
Users of Credit Strong must provide:
· Validation that they are at least 18 years old
· Proof of permanent US residence
· Valid social security number
· Proof of pre-existing checking account, debit card, or prepaid card
· Mobile phone number or Google Voice account
· Email address
A few benefits of Credit Strong include the fact that Credit Strong does not use your current credit score to determine eligibility. They utilize past banking behavior instead.
Additionally, applying for Credit Strong does not count as a hard inquiry on your credit score. There is also no penalty for paying it back early. However, paying it off early truncates the payment history, which means your credit score might not increase as much as you had wanted it to.
Additionally, if you make a late payment, it will hurt your credit score.
Why You Need Good Credit
Having good credit enables you to buy a house or a car.
It can also be helpful in an emergency when you need a sum of money but don’t necessarily have it in your checking or savings account.
Even if you do have the cash, sometimes you cannot rent or purchase items without a good credit rating.
Having no credit can sometimes be worse than having bad credit because that means there is no proof of you having a history of paying things back on a schedule. That history shows you are responsible.
The US is a credit-based economy, which means you need to be in good standing with the credit bureaus to borrow money for large purchases or pay off higher-education tuition. So having something to help build your credit up is essential for gaining financial independence.
Costs of Credit Strong
To open a loan with Credit Strong, there is a one-time administrative fee ranging from $8.95 to $25 depending on the type of loan, plus whatever your interest rate on the loan is.
It’s essential to note the APR and the length of the loan term to calculate your total costs to ensure that it’s worth it.
One big drawback is that unlike a personal loan or a regular savings account, the funds with Credit Strong are locked until you have paid off the entire loan, which means that if you need funds fast, you cannot access the funds without canceling the loan.
However, Credit Strong’s Subscription and Magnum plans allow you to cancel the loan at any time for no penalty.
You get the funds that you paid into your savings account, but not any interest you had paid.
It is uncertain whether or not canceling the Credit Strong loan will affect your ability to get another Credit Strong loan in the future. It will not reflect negatively on your credit score.
Credit Strong Options
Credit Strong offers a wide range of loans and frequently adds more options.
Subscribe Plans
Credit Strong’s Subscribe Plans offer low monthly payment options for loans up to $2,500. However, this means that the loan terms tend to be longer. Some are up to 10 years.
These are great for proving that you can pay something consistently but aren’t a good way to build your savings account quickly.
Additionally, if your APR is high, you might not gain as much money in the end as you would have thought initially.
Build and Save Plans
This plan is the most traditional of the credit builder loan options. You pick your “loan” amount and pay it off in a year or two with generally moderate APRs. You’ll typically pay less interest because it is a shorter amount of time.
Magnum Plans
These loans also have longer repayment terms but allow loan limits up to $10,000. Credit Strong advertises these loans for more commercial purposes if necessary. The most significant benefit to the Magnum Plans is the lowest APRs.
Closing Thoughts
Credit Strong is an excellent way to establish or rebuilding credit. However, while there are no hidden fees, the costs of the administrative fee and the interest do add up.
Subscription and Magnum plans allow you to back out at any time, and Credit Strong will release your savings funds back to you.
Build and Save plans are the best for building your credit over the shortest amount of time.
Individual results will vary with Credit Strong due to all of the elements factoring into your credit score, but establishing that positive, consistent payment history is one of the better ways to improve your credit in a significant way.
Ultimately, you need to choose the plan that works best for you and your financial needs.
