NEW YORK (MainStreet) — It’s the maddening vicious circle of consumer credit: you need a credit score in order to qualify to get credit. For young adults just starting out, or recent immigrants with solid incomes but no credit files, it can be a barrier to a better life. Perhaps the solution is to do it yourself.
That’s the idea James Garvey, a software engineer, and Bill Butler, well-versed in the alternative credit industry, have developed in their Denver-based startup SelfLender.
Under-banked individuals, college students and “thin” credit file consumers can build – or repair – their credit scores with a loan to themselves.
SelfLender offers small loans with terms up to 12 months. While you make monthly payments, the proceeds of the loan are held in escrow. When the loan is paid off, the money is yours. Meanwhile, the company says your positive payment history is generally reflected on your credit report within 60 days from your first payment.
Garvey and Butler aim to help one million consumers save $250 billion in fees and interest over their lifetime. Garvey does the math: "The average person saves $250,000 in fees and interest if they go from not having a credit score to having a 'prime' credit score." He says a “prime” credit score is 700 or better.
Monthly payments can be drafted from a bank account, or if a customer doesn't have one, they can be made in person at 7-11 and Family Dollar stores through a service called “Pay Near Me.”