Fingerhut FreshStart: Could This Program Jump-Start Your Credit?

Photo of a young couple going through financial problems

Are you trying to rebuild your credit? Fingerhut, an online mail-order retailer, says it wants to help you with its FreshStart program. It’s a new twist on the catalog card or magazine offers of yesteryear.

The program, which involves a special credit card used to shop from Fingerhut’s online product catalog, is designed for customers who don’t have the best credit. If that’s you, FreshStart could give you a second shot at proving your creditworthiness and qualifying for a regular credit card.

But does FreshStart deliver on its claims? First, here’s an overview of the program:

  • Good credit isn’t required. Do you have poor credit? With lenient application requirements, FreshStart could be a way to regain some credit traction.
  • You pay low payments and no annual fee. Unlike many credit cards, FreshStart has no annual fee and the payments tend to be low.
  • You may pay a high interest rate and other costs. If you don’t make your payments on time or don’t pay off the balance in full, you could be subject to FreshStart’s 25.90% annual percentage rate and other costs.
  • Your shopping power is limited. FreshStart lets you shop from Fingerhut’s catalog of products only; you can’t use it anywhere else. And you may be approved for only a small credit limit.
  • It’s not a traditional credit account. Although FreshStart lets you “graduate” to a traditional credit account after you pay off your balance, you don’t build credit with the major reporting agencies while you’re in the program.

How the FreshStart Program Works

How does FreshStart work, exactly? Fingerhut splits the program into three steps: order, pay off, and graduate. Once you’re approved for FreshStart, you place an order from the Fingerhut catalog for an item that costs at least $50 and at most your approved credit limit. You also have to make a $30 down payment. Once Fingerhut processes the order, your item is shipped.

For the next few months (the exact time depends on your program approval), you make payments toward the total balance on your account. Miss any payments and you risk paying late fees (up to $38 per incident) and interest—and you may not be eligible for a regular credit account.

If you adhere to FreshStart rules and pay off your balance, you’ll graduate to a traditional credit card account with WebBank/Fingerhut Advantage. This account lets you shop more often, build credit with the major monitoring agencies, and potentially qualify for credit line increases and other perks.

FreshStart resembles a more legitimate version of “catalog card” programs that are marketed as credit cards for rebuilding credit but can only be used to shop from the issuer’s catalogs. With those offers, the merchandise is often severely overpriced, and customers usually don’t benefit from these programs much because their credit scores scarcely change.

Fingerhut, on the other hand, has a popular catalog dating back to 1952. The catalog currently comprises over 700,000 items, including big brands like Sony, Dell, and KitchenAid. With its focus on issuing small credit limits to buy products, Fingerhut’s FreshStart program is often great for customers who have been turned down for the company’s Fingerhut Advantage credit card. From the company’s standpoint, it’s a brilliant move—shoppers with poor credit aren’t immediately turned away and Fingerhut gains a paying customer.

The Downsides of the FreshStart Program

Now for the costs. We’re concerned that some customers may focus on only the small down payment and monthly payments and lose track of how much they’ve spent in the long run. If you don’t pay off the balance within the set limits, you could pay high interest amounts. You’ll also pay up to $38 for late or returned payments.

Instead of saving money by purchasing an on-sale item, you could end up paying more than the item’s value by the time you pay off the balance. And with a 25.90% APR—which, honestly, is not unusual for a retail card or credit card if your credit is on the lower side—the potential costs could be higher than cards with the average rate of about 13% to 14%.

What’s more, you may not be able to get out of paying at least some interest on purchases. While Fingerhut says you can pay off your balance faster, the terms and conditions include this warning:

However, if you elect to pay your entire balance due at the same time as your down payment, then this will cancel your Loan and you may not be eligible to be considered for a WebBank/Fingerhut Advantage Credit Account. You may not be eligible to be considered for a WebBank/Fingerhut Advantage Credit Account if you die, file for bankruptcy, enter a consumer credit counseling service program, make any past due payments, or have any payments returned unpaid, or if you enter any other negative credit status.

Also, if you don’t read the offer carefully, you might miss the fact that you don’t build credit with any institution other than Fingerhut when using the FreshStart program. You must pay off purchases on time under this program before (possibly) graduating to a regular credit card. FreshStart isn’t designed as a way to build your credit with the major credit reporting agencies but as a way to build credibility with Fingerhut.

FreshStart Program Reviews

What do customers think about the Fingerhut FreshStart program? Unfortunately, when we searched for customer reviews, Fingerhut didn’t return stellar ratings. The FreshStart program has plenty of detractors online. We found several reviews that matched the tone of this one:

I opened a fresh start account. My credit increased due to opening a new account. Great! After paying off my items with every payment being 10 days early they closed and reopened a new fresh start account. Closing accounts decreased my credit by more points than the opening of a new account in the first place.

And this one:

Husband and I both have accounts, I pay at same time with one check and both payment stubs enclosed in envelope. They call me every time I use one check to make payment and say I didn’t make my payment, then charge late charge. Clearly it is marked on the check and both payment stubs are included. I do not always have the extra check that month to send, but regardless it is paid every month, I can’t wait till all accounts are paid and I will be DONE with this company!

Fingerhut also got into some trouble for its habit of using robocalls to solicit customers. A 2014 class action lawsuit against the company claimed that Fingerhut “negligently places multiple calls to consumers’ cell phones using autodialed robocalls, without prior express consent.”

So what’s our final take? If you love the idea of shopping from Fingerhut’s catalog and you can’t qualify for a traditional credit card, you may want to try the Fingerhut FreshStart program as a way to start building credit. It’s a good idea to limit yourself to a small purchase—perhaps something you’d buy anyway—and pay off the balance exactly on the program’s terms. Then Fingerhut may offer you its Advantage credit card that will help you build your credit with the major reporting companies.

If you’re really serious about getting a credit card to rebuild your credit, we recommend you get a secured credit card and pay the balance in full each month. To track your progress over time, you can get your free credit report summary every month on Credit.com.

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How to Build Credit Without Spending a Ton of Money

Building credit doesn't have to be expensive.

The journey to building credit can be long and difficult, but it doesn’t need to be expensive. A good credit score isn’t about how much money you have but rather how well you manage it. A poor man could have the same credit score as a billionaire — all it takes is a little work. Learn how to build credit without spending a ton of money with these tips.

Stay Active

Credit scores can only be created when there’s credit activity to report. When you’re on a budget, it can be tempting to avoid charging anything, but doing so won’t help you build credit. Keeping credit cards active doesn’t have to be costly.

Charge a Little

With credit, it’s not about how much is spent or what it’s spent on, it’s about usage. There has to be enough activity generate a score. Whether you charge your morning coffee or a wild night in Las Vegas, you’ll keep your credit issuer happy if you pay it off and monitor how much credit you have available.

If you can only afford to pay off a credit card charge of up to $30 per month, charge that amount and pay it off. Barry Paperno, a credit card expert who writes for Speaking of Credit, suggests using some credit cards for regular monthly fees, like a Netflix or newspaper subscription. This ensures cards stay active and doesn’t require much thought. Plus, you can keep these cards tucked away at home instead of in your wallet.

Become an Authorized User 

The key is finding someone trustworthy who has great credit. Being an authorized user on someone’s card can be a great credit building option. The process to be added as an authorized user is fairly easy and has no application or requirements. (Learn more by reading everything you need to know about authorized users.)

Once someone becomes an authorized user, the card is added to their credit report. If you become an authorized user on an older card, you’ll earn additional points for the length of time the card has been open, an important credit scoring factor. You also receive credit for on time payments. The only potential issue with this is if the primary cardholder starts missing payments or cultivating debt, it impacts the authorized user’s credit score, too. This method is affordable and effective, but can be slow going since some score models don’t give full credit to authorized users, Paperno said.

Try a Secure Card

Applying for a secure card is a great option for those who have poor or nonexistent credit. Secure cards require users to put down a deposit, say $300, which creates a $300 credit limit on that card. The card acts like any other and is reported to the credit bureaus as such, but your spending can’t exceed the amount of the deposit. The card can be paid off as much as you’d like throughout the month, making it a great way to limit spending while showing the credit bureaus your ability to manage credit.

The great thing about secure cards is you’re the primary user, so the credit benefits earned are even greater than being an authorized user.

Report On-Time Payments

While it doesn’t always help your credit to make on time payments for rent, utilities, etc, in some cases it can. “Keep in mind credit scores can only consider what’s on your credit report,” says Paperno. “Your landlord or utilities company has to report it to credit bureau and credit scorers must include it.”

Unless on time payments are being reported, they won’t necessarily help you build credit. Ask your landlord and service providers if they report to credit bureaus. Or, pay rent online to help build credit history or uses services like Renttrack or Rental Kharma.

Set up Automatic Payments

Automatic payments can help ensure on-time payments. This is handy for those who forget to pay bills or travel often. On-time payments help strengthen your payment history, which plays a large role in a good credit score.

Beware, if there’s not enough money in your account for payments. An unpaid balance can be reported to the credit bureaus. Generally, credit bureau information is updated every 30 days so if your payment is only a few days late, you’ll be charged late payment fees but your credit won’t be hurt. Still, it’s best not to risk it.

Keep Accounts Open

If you’ve already got cards open, avoid closing them. Credit history is a major factor in calculating credit scores, so keeping your oldest cards open and active can have major perks. So, keep that card from college, even if it’s only used to charge a monthly Netflix subscription.

Get a Credit Builder Loan

A credit builder loan, a type of installment loan, can be a simple way to build credit. Try for a credit builder loan that reports to all three national credit reporting agencies, so on-time loan payments build up your credit in reports for all three companies. Don’t bite off more than you can chew — late payments or a defaulted loan can cause your credit score to take a huge hit.

You can take out a personal loan for something smaller than a car, like a new laptop or mattress. Take one on out on something you were planning to buy anyway, to avoid spending for the sole purpose of building credit.

Monitor Utilization

Everyone knows paying on time is essential but also so is utilization, the percent of available credit you’ve used. Paperno advises keeping utilization to less than 10% of your credit limit each month. This shows you’re reasonably and responsibly using your credit within your means.

Increase Credit Limit but Not Spending

If you’ve got a decent credit history, you can probably manage to have your credit limit increased. Once your credit limit is increased, keep your spending habits the same. This can help you lower your credit utilization, making your credit even stronger.

Diversify Wisely & Carefully

Diversifying your credit with different types of loans, cards and accounts can help you build credit, but only if you have the means to pay them off. Opening accounts and taking out loans you can’t afford will only put you in the red. Before taking out loans or apply for new cards, ensure you qualify. You can check two of your credit scores for free with credit.com.

Opening new accounts and credit cards can seem like an easy way to increase the credit mix portion of your score, but proceed with caution. Opening a new card impacts the length of time your accounts have been open, a major factor in calculating your credit score. Since this number is the average of the length of time all of your accounts have been open, adding a new account can bring down your total.

As you diversify, monitor credit utilization for each individual card. If utilization is too high on one card, it can cause your entire credit score to drop. Utilization makes up 30% of your FICO credit score while different types of credit make up only 10%.

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