Building and maintaining good credit is crucial to accessing… basically everything. Your credit score affects your ability to secure loans, rent apartments, and even your job prospects.
If you’re struggling with building credit or recovering from a financial setback, a credit builder app should be one tool in your credit-building toolkit.
If it’s a financial emergency, Cleo could spot you up to $250.* No interest. No credit checks. And an AI money coach to help you pay it back.
Credit builder apps make the process of building credit more accessible.
But it can be hard to know where to begin. In this article, we’re gonna provide you with all the information you need to choose the right credit builder app for you, and start building credit.
Why Building Credit is Important
First off, it's important to understand why building credit is so important. To lenders, your credit score is a reflection of your financial responsibility. Lenders use it to determine how likely you are to repay borrowed money. A higher credit score opens doors to better loan terms, lower interest rates, and more financial opportunities.
It’s pretty Black Mirror-y, but credit scores affect your ability to make some of the most important financial moves in your life. Like, renting an apartment, buying a car, and even getting a job.
If you’re a young adult who’s just started out on your credit journey, here’s how having no credit can be a barrier to making money moves:
• Say you’ve just got a job you’re really happy about. With the income, you decide to rent your own apartment closer to your place of work. But your landlord asks for a credit check. Because you don’t have credit history, they’re reluctant to rent to you.
• If you're dreaming of owning your own vehicle, you'll likely need an auto loan. Lenders will look at your credit score to determine whether or not you're a reliable borrower. Without a credit history, you may have trouble qualifying for better loan terms and lower interest rates.
• Your credit history can even affect your job prospects. Some employers, especially in the financial industry, may consider your credit history as part of the hiring process. They view it as a measure of your financial responsibility and trustworthiness. (They are huge nerds.)
As you continue to establish your credit history, you'll gain access to even more financial opportunities. You might be eligible for higher credit limits, which can come in handy during emergencies or when making larger purchases. When you’ve built credit history, you may qualify for premium credit cards with ✨ nice rewards and benefits ✨
Building credit isn’t a one-time task; it's an ongoing process. Consistently making payments on time, keeping your credit utilization low, and avoiding excessive debt are key to maintaining a healthy credit score.
Obvi, a barrier to building credit is if your credit score is already really low, and credit cards are charging you huge interest for it. Here’s where credit builder apps come in.
What are Credit Builder Apps?
Credit builder apps are designed to help people in establishing or rebuilding credit. These apps use technology to simplify the credit-building process.
The Concept Behind Credit Builder Apps
Credit builder apps are based around the use of a secured credit. A secured card is basically a way of using your monthly purchases to hack the credit-building system (Legally. For any lawyers reading).
The idea that you can build credit with your monthly purchases makes a lot more sense when you realize that the majority of your credit score is based on your payment history.
Here’s everything your credit score is based on, according to Experian:
Payment History (35%): Consistently making timely payments has a positive impact, while late payments or defaults can drastically lower your score.
Credit Utilization (30%): The amount of credit you are currently using compared to your total available credit. It's generally recommended to keep your credit utilization ratio below 30%.
Length of Credit History (15%): The length of time you have held credit accounts for approximately 15% of your credit score. A longer credit history with positive payment patterns can improve your score.
Types of Credit Used (10%): The diversity of your credit accounts contributes around 10% to your credit score. Successfully managing a mix of credit cards, loans, and other accounts is viewed positively by lenders.
New Credit Inquiries (10%): Applying for new credit can impact approximately 10% of your credit score. Multiple inquiries within a short period may raise concerns and temporarily lower your score.
With a secured card, users make small, manageable monthly payments into a designated account. These payments are reported to credit bureaus, establishing a positive payment history and improving credit scores over time.
This approach allows people with limited credit history or poor credit scores to make progress and prove their creditworthiness.
Credit Builder Apps: How Cleo Works
With Cleo, you can use the Cleo Builder subscription to send your credit score to bootcamp. You get access to apply for a secured card† we designed to help people repair their credit without unnecessary complications. The card comes with no interest charges and …no credit checks… obviously.
Here's how simple it is:
You Add Cash to Security Deposit: Begin by depositing some cash (a minimum of $1) to establish your credit limit.
Make Purchases and Timely Repayments: Use the card to shop, and make sure that you pay off the balance on time each month. We make repayment easy, because you can use Cleo’s free budgeting features to set up reminders for bills, and make repayments automatic with autopay.
Track Your Credit Score: Monitor your credit score in Cleo's "borrow" tab to watch your progress.
Getting Started Cleo Builder
To apply for the Credit Builder Card,† you need to sign up for the Cleo Builder subscription, which $14.99 per month.
With this subscription, you get:
Cash Advance Option:** Access to cash advances of up to $250.
Cashback Rewards:** Earn money back when you spend it at select stores.
Priority Support: Get dedicated support throughout your credit-building journey.
Access to Free Features: Full access to all of Cleo's free features. Duh.
There’s only one thing left to do.
Enjoy this post? Give it a share or send it along to a friend. You never know, it could make a big difference. Big love. Cleo 💙
*Eligibility requirements apply.
**“Cash/Salary Advance” and “Cashback Rewards” are features of the Cleo Builder Subscription and not the Credit Builder Card. The “Card Cash Advance” is a feature unique to the Credit Builder Card and allows you to advance cash at an ATM. The Card Cash Advance is subject to a $2.50 fee per transaction plus any fee that may be charged by the ATM or Bank. This feature is only available to holders of the Credit Builder Card.
† The Credit Builder Card is issued by WebBank, Member FDIC pursuant to a license from Visa USA Inc. Access to the Card is subject to approval.
If it’s a financial emergency, Cleo could spot you up to $250.* No interest. No credit checks. No stress.