Finances are an essential part of our lives, and one of the best ways of securing your finances is by having a good credit score. A good credit score provides leverage in deals such as; loans, insurance, apartments, and even your phone bill.
Chime offers a way to help people improve their credit scores through their Chime Credit Builder Card, and in this text, we break down how it all works.
How does Chime Credit Builder Work? The Chime Credit Builder works by offering a way to build your credit without incurring debt. You only need to use the credit builder card to make purchases and pay the balances on time to improve your credit score.
From there, they will report your activity to the major credit bureaus monthly, thereby building your credit over time.
How To Grow Your Credit Rating With Credit Builder
So, does Chime build credit? Yes, Chime builds credit. If you use the Chime Credit Builder, you can increase your credit rating by up to 30 points in 4 to 5 months.
Give it some time — about 6 months or so — and your score should start climbing steadily higher.
Chime credit builder works to build your credit with your own money in a process that involves the following steps.
Chime claims a person can raise their credit rating by up to 30 points in about four months which can be pretty helpful for anyone with a low credit score. So here’s the process one can use:
- Move money to the Credit builder secured account
- Set your available spend
- Spend money or make purchases
- Pay your balances
- Build Your credit over time
Move Money to Credit Builder Account
To grow your credit with a Credit Builder Card, you first need to move money into your credit builder secured account. To begin, you will first have to apply for the Credit builder Card for your credit-builder account. From there, you can add money to the card through your Chime spending account. The amount you add becomes the ‘available to spend’ on your card.
After setting up the card, you can start using it like any credit card, for example, purchasing items, paying bills, and other utilities. You will only be able to spend the same amount of money in your secured account.
They subtract the amount from your ‘available to spend’ to make sure you don’t spend more than you have in your account. The card is usable at any place that accepts Visa.
For example, if a person deposits $200 in their secured account and then charges $100 to their card without adding more money, their credit limit becomes $100. If they added $200 after the charges on their card, their new credit limit becomes $300.
Your balance is the amount you spend with your Chime Credit Builder card. There are two ways you can pay for your balances, manually or through their Safer Credit Building feature.
The latter works like the autopay in traditional credit cards whereby when you have a balance, Chime will automatically pay it using the money in your secure account. To set up the safer credit option, you need to;
- Go to settings
- Click on credit builder
- Safer credit building
However, if you select the manual option, they send a notification to pay your balance every month, so you will still be punctual in payment.
Build Your Credit
While you spend money and pay balances every month, Chime reports the activity on your credit cards to the leading credit bureau, namely; Transunion, Equifax, and Experian. These companies are responsible for updating your credit score.
When you make your payments on time, you will have a positive payment history which helps grow your credit. Chime reports consist of the following;
- Payment status- Whether or not you have paid your previous balances
- Amount past due- Any balance not paid from the last month
- Age of account- How long you have been using Credit Builder; an older account means you’re a trustworthy holder
- Current balance- the total amount you have spent since the last statement plus any past due.
However, they do not report on Credit limit since credit builder card does not have a set limit.
They also don’t report on Credit Card Utilization. It means that spending up to the amount you moved to the Credit builder account will not be reported as high utilization. With other cards, spending high percentages of the available credit limit negatively impacts your credit score.
The Benefits of Chime Credit Builder
Chime Credit builder card is a reliable alternative for building your credit score than other traditional methods for a few reasons.
No minimum deposits
First, there are no minimum deposits. Other cards will require a person to make a deposit to get started, which is $200 for most cards. Chime credit Builder card only requires collateral, which is the amount you can move from the spending account.
No interest or fees
Chime doesn’t charge any interest when you move a balance to the credit-builder account. Some cards claim to offer no interest, but it is usually for a specified period only. Chime does not charge any annual fees or fees for maintenance.
No credit Checks
Chime does not check your credit when you apply, and hence your credit score is not affected. Most people affect their scores through hard inquiries such as applying for other credit cards or mortgages. They lose some credit points, and it stays in their credit reports for two years. Chime promises to leave your score unaffected when you apply for their card.
No Pre-set Credit limit
Chime does not have a set limit on credit because clients determine their credit limit through the amount of money they move into their credit-builder account. And since they don’t report on utilization, you can spend up to the amount you deposited without worries.
Building credit can seem like a complicated task, but Chime makes it a little easier, especially for people who use it as their first card. However, it is a process that requires patience and some responsibility.
Like any other card, you can still damage your credit scores through late payments. So, either choose to be punctual or opt for the Safer Credit Building feature to make your payments automatically.
Chime builds your credit over time and helps you avoid fees and interest from other credit cards. However, understand that these charges teach credit card responsibility, and once you graduate to another card, the training wheels will come off.