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Digital Federal Credit Union Credit Builder Loan Review

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As the name suggests, a credit builder loan can help you build credit and improve your financial standing. Digital Federal Credit Union (known as DCU) offers one such loan with a low interest rate, nationwide availability, and no credit check requirement, earning it a place among our best credit builder loans. However, DCU imposes several eligibility requirements that may complicate the enrollment process. Read on to see whether DCU’s credit builder loan is a good fit for you.

DCU Credit Builder Loan Overview

Chartered in 1979, DCU manages over $9.9 billion in assets, making it the largest credit union in New England in that respect. Based in Marlborough, Massachusetts, DCU operates 23 full service branches in Massachusetts and New Hampshire, and boasts over 1 million members nationwide.

DCU’s credit builder loan is available in all 50 states. Furthermore, DCU doesn’t require a credit check, so applying won’t result in a hard inquiry on your credit report. However, you’ll need to become a DCU member to apply, and membership has its own set of eligibility requirements.

DCU has received mixed reviews from customers online. The company has a Trustpilot rating of 1.8 stars out of five across 47 reviews, and its Better Business Bureau profile has a rating of just 1.28 stars out of five, with nearly 200 complaints filed in the past three years. However, these ratings are based on limited reviews (fewer than 120 total). Its mobile app has received an average of 4.7 stars across 3,570 reviews on its Google Play store. DCU’s iOS app has an average of 4.9 stars across over 40,000 reviews on its Apple app store page.

A larger volume of customer feedback is available through Google reviews of DCU’s banking branches. Collectively, those locations have a better rating of 3.3 stars out of five based on over 5,000 reviews. However, those reviews are attached to brick and mortar offices in Massachusetts and New Hampshire, and may not reflect the experience of remote customers.

Common issues cited among all negative reviews of DCU include poor customer service and trouble with the website and mobile app.

How the DCU Credit Builder Loan Works

DCU offers credit builder loans from $500 to $3,000, with loan terms between 12 and 24 months. The interest rate is currently a fixed 5% APR, resulting in an estimated monthly payment of $43.87 for every $1,000 borrowed on a 24-month loan. That rate is far below the current average rate for personal loans, though DCU notes it is subject to change at any time. 

To apply for DCU’s credit builder loan, you’ll need to first join DCU. Membership is available to those who meet certain eligibility requirements, such as living in a participating community, having a familial relationship to a current DCU member, or working for a company on DCU’s list of participating employers. If none of those apply, you can gain eligibility by joining one of several non-profit organizations (memberships cost as little as $10). Membership makes you eligible for other DCU accounts services beyond the credit builder loan. As a bonus, your family will also be eligible for membership.

Once your DCU membership is confirmed, you can apply for a credit builder loan online or by calling the loan origination team at 800-328-8797 (ext. 7614). You won’t need to complete a credit check, but you’ll need to provide identity and other information, including your Social Security number, mortgage or rent amount, income, and employment status. If your application is approved, the loan amount is deposited into a DCU savings account (specifically, a member described savings account), where it’s held until the loan is paid off. The account is FDIC-insured and earns dividends at the published dividend rate (currently 0.15%).

As you make payments on your loan, DCU reports the status of the loan to the three major credit bureaus. Each on-time payment adds a positive data point to your payment history, which is the most important component of your credit score. While that should improve your credit score, DCU makes no guarantees about the impact of your credit builder loan.

Once the loan is fully paid off, you’ll be able to access the funds in your DCU savings account immediately. You can make payments for the full loan term or pay off the loan early with no penalty. Though paying the loan off early will limit the effect it has on your credit score. 

Currently, you can take advantage of no payments for the first 60 days after the closing of the loan. In that case, your first payment will apply first to interest that accrues from the date the loan is funded, and then to the principal due. There’s no origination fee associated with DCU’s credit builder loan, but you will be subject to a late fee of 4% of the payment due (with a $5 minimum) when payment is more than 15 days late.

DCU Credit Builder Loan Pros and Cons

DCU’s credit builder loan is much less costly than many alternatives, but you’ll have to jump through some hoops to become eligible.

DCU Credit Builder Loan Pros

  • Reporting to three credit bureaus — DCU reports your payments to all three major credit bureaus (Equifax, Experian, and TransUnion), so you can improve your credit score across the board.
  • Low costs — The fixed 5% APR on DCU’s credit builder loan is exceptionally low. That interest rate combined with no origination fee or other fees (except for late payments) make this an affordable option for building credit.
  • Flexible loan options — You can choose loan terms between 12 and 24 months, and loan amounts between $500 and $3,000. That flexibility gives you control over how much you pay each month and how long you make payments.

DCU Credit Builder Loan Cons

  • Membership required — DCU’s eligibility requirements aren’t overly stringent — if you don’t qualify otherwise, you can join with membership in an affiliated non-profit organization — but they create an extra hoop to jump through for enrollment.
  • Low yield on locked funds — The “member described savings” account where your loan funds are kept earns interest at only 0.15% APY. That’s below the national average of 0.42% for savings accounts, and disappointing given that DCU’s Advantage Savings account offers an APY over 3.5%.

How Does the DCU Credit Builder Loan Compare to Its Competition?

The DCU credit builder loan offers some of the most flexible terms and lowest interest rate, even among the best credit builder loans. Let’s see how DCU compares to its competition.

DCU vs MoneyLion

MoneyLion Credit Builder Plus Loan – Brand Name is another credit builder loan provider included in our guide on the best credit builder accounts. It is similar to DCU in that both services include an array of online banking services. MoneyLion members get access to benefits like a $500 cash advance and investment accounts. However, MoneyLion services cost $19.99 monthly while DCU memberships don’t have monthly costs. 

MoneyLion’s credit builder loan is also less flexible than DCU’s. MoneyLion’s credit builder loan maxes out at $1,000 with a 12-month loan term compared to DCU’s $3,000 limit with up to 24 months. MoneyLion’s interest rates are also higher, ranging from 5.99% to 29.99%. DCU’s interest rate is a fixed 5%.

Read our MoneyLion credit builder loan review here. 

DCU vs Self 

Self Credit Builder Account – Brand Name is one of the most widely available credit builder loans on the market, available in all 50 states. While DCU’s credit builder theoretically has the same availability, you have to jump through several hoops to gain access to the loan. 

Both companies offer comparable flexibility. Self has four plans with total loan amounts ranging from $600 to $3,600, all with a 24-month loan term while DCU credit builders range between $500 to $3,000 across loan terms up to 24 months. That said, DCU loans are much cheaper, with a 5% interest rate compared to Self’s interest rates, which range from 15.72%-15.97%.

That said, Self also offers a Visa secured credit card after you’ve made three on-time payments. The card uses the amount you’ve paid off as collateral for the secured credit card. 

Read our Self credit builder loan review here.

DCU vs. Fizz Credit Builder Debit Card

While DCU offers the best interest rates compared to other credit builder loans, there are other products that help you build credit. For example, Fizz Credit Builder Debit Card – Brand Name offers a debit card that reports transactions to the credit bureau. Geared toward college students, the card comes with no interest payments, making it cheaper to use than DCU. You can also earn points when you pay with the Fizz card at businesses often found around college campuses.

Read our Fizz credit builder debit card review here. 

Who Is the DCU Credit Builder Loan For?

The DCU credit builder loan is a good fit for anyone with limited or negative credit history who is looking to build (or rebuild) their credit profile. If you’re already a DCU member or qualify for membership, then applying for a credit builder loan is easy. If not, DCU’s terms are favorable enough to make the extra steps worthwhile.

Applying for a credit builder loan (from DCU or otherwise) is only a good idea if you know you’ll be able to make monthly payments on time and in full. Late or missed payments may be detrimental to your credit, defeating the purpose of getting the loan in the first place.

While a DCU credit builder loan can improve your credit score, it doesn’t have to be exclusive. You should also explore other ways to build credit, such as rent reporting or a secured credit card. 

DCU Credit Builder Loan Frequently Asked Questions (FAQ)

Does DCU work with bad credit?

You won’t have to complete a credit check to apply for DCU’s credit builder loan. So long as you meet the other eligibility requirements, you can be approved even with bad credit.

How much does DCU lend?

DCU offers credit builder loans in amounts between $500 and $3,000.

Does DCU help build credit?

DCU’s credit builder loan can add positive data points to your credit history when you make on-time payments. However, there’s no guarantee that your credit score will go up as a result.

Read the original article on Business Insider


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