Credit cards are notorious for their high-interest rates and often have both late and annual fees. Chime has none of the above.
A standard secured credit card will require a minimum deposit to qualify, but if you only have $10 to spare this month, you can use that as your deposit for the credit card and still reap the benefits of another timely payment.
You can arrange a direct deposit agreement with your employer so that a flat amount of your paycheck goes directly into the account. Once you set it up, your credit building process is essentially automated.
• No Credit Check to Apply
Credit builder accounts are all about finding creative ways to keep lenders safe so they feel comfortable working with potentially risky borrowers. Chime does this by requiring a deposit, which becomes your credit limit.
As a result, they don’t need to run a credit check, and you can qualify for the account whether you have no credit or bad credit.
It’s better than working with a traditional secured credit card because, while those might accept someone with no credit history, they still trigger a hard inquiry.
• Safe and Efficient Credit Building
When you take out a traditional secured credit card, there’s always the possibility that you could miss a payment. The potential for a backfire is a problem with a lot of credit accounts.
Chime’s Safer Credit Building feature eliminates that risk. Once you activate it (do not forget installment loans in Virginia to do this), the app will always automatically pay off your balance in full when it’s due.
Because Chime reports these payments to all three major credit bureaus, your activity will show up in whichever credit report your future lenders prefer.
• Revolving Credit Account
Credit builder accounts are usually installment debt, even though they don’t pay out until the end. While that has its advantages, there are also benefits to having a revolving credit-builder account.
- Diversification opportunity: Your credit mix is worth 10% of your FICO credit score, and it’s always best to have both types of debt.
- Increased affordability: Because your balance will never carry over to the next billing period, you can’t accrue any interest. There’s also no required monthly payment, so you can always decide not to use the account.
You can take out a Chime account and a traditional credit builder loan to get the best of both worlds.
Cons
While Chime does have a lot to offer, it’s not the right fit for everyone. Here are some of the most significant drawbacks to be aware of, especially if you’re comparing the account to other credit builder loans.
• Fund Your Own Deposits
Credit builder accounts always use a form of collateral to make the account safe for the lender. If the borrower fails to pay their balance, the lender can always seize the deposit to avoid losses.
Credit builder loans allow borrowers to benefit from this without having to contribute their own funds because the loan proceeds serve as collateral for the account.
• No Cash Savings
One of the primary benefits of a credit builder loan is that you get to walk away at the end with a pile of savings, but Chime’s credit builder card is a revolving account. That means you don’t receive a lump sum at any point in the process, beginning or end.
It won’t help you fund a purchase upfront like a traditional loan (or even a traditional credit card), and you don’t ever get to cash out any savings either.
Because there’s no credit check, qualifying for a Chime credit card is relatively easy. Here’s what you’ll need to do to get approval for their credit-builder account: