Millions of Americans struggle to apply for apartments, auto loans, and credit cards because they have a poor credit score and burdensome debt. Others, especially immigrants and those who come from low-income backgrounds, may not have a credit history at all. Without the safety net that credit and savings provide, people can fall further and further behind in times of crisis. Our Accion Venture Lab portfolio company Self Financial is in the business of helping people become financially resilient through life’s challenges by offering tools to build a credit history and save.
“Over 100 million Americans either don’t have a credit score or have a low credit score. The challenge is if you need a credit history in order to get credit, then how do people get started? And so that’s where Self comes in. We’re creating the opportunity for people to help themselves,” says CEO James Garvey. The Self Credit Builder Account offers people an opportunity to build credit history and emergency savings, minus interest and fees — especially pertinent for people who encounter unexpected medical bills or need a financial boost because of the pandemic. Self provides a loan for customers to purchase a certificate of deposit, which they then pay back in installments. Because the purpose of the loan is to build credit history, customers don’t get the loan proceeds upfront; instead, the money is held in a bank account while the payments are made. Once their loan is paid off, they receive the principal back, minus interest and fees, and their credit scores may benefit as they pay back their loan responsibly.
Anton J. managed to raise his credit score by 121 points since he began using Self’s Credit Builder product in August 2019. He was drawn to “the fact that it was literally my money that I was saving while also building my credit at the same time.” Now that he’s improved his credit score, he can access loans that weren’t available to him before. “It’s helped me improve my credit to the point where I was able to move into my first home, and I’m looking into [getting] a car in the next few months,” says Anton.
Sharita Humphrey experienced a time in her life when she struggled financially and experienced periods of homelessness with her two young boys. She learned how to build financial health and used Self’s product to improve her credit, eventually rebuilding it to the point that she was able to access unsecured credit products and a home for her family. “I was able to get myself into a position where I have and maintain excellent credit. I’ve broken the chain of generational debt and generational poverty,” she says. “I’ve become my family’s trailblazer.”
Finding financial stability during COVID-19
A significant number of Self’s customers have been negatively impacted by the pandemic: In response to a recent survey in conjunction with Financial Health Network, 48 percent reported being laid off or furloughed due to COVID-19, nearly half have reported a decrease in income, and many have lost their health insurance. In addition to their standard 15-day grace period for late payments, Self is offering further flexibility and support to their customers who are struggling during the pandemic, like giving customers the option to close their accounts early without a penalty fee.
Many customers are still benefiting from Self’s credit product during the pandemic. One customer shared that their income was reduced due to COVID-19, so they’ve had to turn their focus to credit options to get by. They’re using Self as a method to provide structure and a plan to build credit during a time when credit is most needed. Despite the new stressors and financial setbacks, in a recent survey, 60 percent of Self customers reported they are still saving money for emergencies each month, and more than 80 percent of customers reported they are interested in using the money they receive from their Credit Builder Account for savings. With support from Self, their customers are upholding their commitments to themselves and continue to work on their financial health.
A financial tool like Self gives people who have fallen on tough times the ability to overcome their past financial difficulties and invest in their long-term goals. Sharita’s journey to rebuild her credit and educate herself about financial health has even inspired her to devote her career to helping others do the same. She became a Certified Financial Education Instructor and started working with Self so that others can get help rebuilding their credit as she did. “Now, I help people to change their financial trajectory,” she says. Watch her inspiring story here.