Does CashApp Borrow Build Your Credit?

Key Takeaways

  1. CashApp Borrow offers quick microloans up to $200, repayable in four weeks with a 5% interest rate.
  2. Eligibility for CashApp Borrow depends on factors like credit history, credit score, and state residency.
  3. CashApp Borrow does not report timely payments to credit bureaus, so it doesn't directly improve credit scores.
  4. Credit builder loans, unlike CashApp Borrow, help build or repair credit by reporting on-time payments to credit bureaus.
  5. Effective credit improvement strategies include diverse credit usage, responsible debt management, and regular credit report monitoring.
Does CashApp Borrow Build Your Credit?

“Hey, can you CashApp me $50?”

Most people these days are familiar with this refrain. CashApp, and other financial service apps like it, have recently exploded in popularity among smartphone users, and their names are even being used as verbs in sentences. It’s pretty obvious why CashApp has become so popular, but as it continues to grow in use and popularity, the company has begun to branch into the financial game a little further with extensions like CashApp Borrow, a tool on the app that allows users to borrow money with a click of a button. With all the excitement and natural gravitational pull to want to use an app as a convenient way to borrow money, it’s important to take an in-depth look at how it works, how it impacts users, and what other financial options are available.

CashApp initially came on the scene in 2013. It is a financial platform that allows users to send and receive money quickly, invest in small shares of stock, borrow money through small microloans, and invest in Bitcoin; however, it is not a bank. According to_ Forbes _Advisor, CashApp “provides banking services and debit cards through its bank partners. The balance in your account is insured by the Federal Deposit Insurance Corporation through partner banks.

So, what exactly is CashApp Borrow and what features does it offer? CashApp Borrow is a feature on the app that allows eligible users to borrow a short-term loan of up to $200 that is to be paid within a four-week period in order to avoid late fees. If you are considering using this feature, it’s important to understand how it fully functions and what it might cost you. One of the biggest questions borrowers should be asking is: Will this microloan through CashApp Borrow help build my credit?


Understanding Credit and Credit Scores

Before we get too far into the world of CashApp Borrow and other options that may be available, it’s important to understand what credit is, its importance in financial decisions, and why it’s important to have good credit. Credit is a trust-based financial arrangement that allows someone the ability to borrow money with the understanding that they will repay the money at a later date with interest. Credit plays a crucial role in financial decisions, and for most people is the only way they are able to make big-ticket purchases like houses and cars. For others, having good credit could mean investment and business growth opportunities and more.

Credit scores play a huge factor in a creditworthiness assessment given when a borrower applies for credit. Risk assessment, and historical behaviors all can be decided with credit score reporting as well as interest rates and terms, credit approval, and credit limit determination. Lenders may also consider other factors such as income, employment history, and the purpose of why the credit is being sought.

Credit scores are based on calculations of several components that contribute the overall creditworthiness of the borrower. These include:

  • Payment History - 35%
  • Credit Utilization - 30%
  • Length of Credit History - 15%
  • Types of Credit Used - 10%
  • New Credit - 10%

All of these components impact the value of someone’s creditworthiness record. It’s important to maintain a positive payment history and pay bills on time to raise your credit.

Cash App Borrow: How It Works

CashApp Borrow is a quick and easy microloan process where long-standing CashApp users can apply to receive anywhere from $20 to $200 quickly that needs to be repaid within four weeks with a standard flat interest rate of five percent. There is a grace period of one extra week for borrowers who can’t make the payment in time, but after that period, borrowers are charged a 1.25% finance charge per week late. CashApp may also suspend delinquent borrowers from using the platform until the loan is repaid.

Not everyone can borrow from CashApp Borrow. There are many factors considered before the app will loan someone $200. Credit history and credit score will have a huge impact on whether or not a borrower is approved for a loan through the app, but the state they live in also plays a part as CashApp Borrow is only available in certain states at this time.

To get a loan through this source, you need to be at least 18, reside in a state that offers CashApp Borrow, have a good credit score and history, have an activated cash card, and be a long-time user of CashApp.

CashApp Borrow is different from traditional loans in that it is geared more toward small, urgent needs that can be repaid quickly; whereas, traditional loans can be for larger amounts of money, have longer repayment options, and are typically offered by banks, credit unions, or other lending institutions.


The Relationship Between Cash App Borrow and Credit Scores

One major difference between CashApp Borrow and other forms of small loans is that CashApp Borrow does not report to major credit bureaus. For someone wanting to increase their credit score and make their credit history look better, a loan from CashApp Borrow does not help them in their quest.

Timely payments on CashApp Borrow will not be reported to credit bureaus, and there will be little to no impact at all on credit scores for those who work to make sure the payments are made on time. The positive impact of on-time or early payments is the ability to borrow more when needed and pay less in interest and fees.

For the borrower who doesn’t make their payments on time, CashApp may not be the best option to borrow from as well. If a borrower is delinquent in payments, CashApp may report negative outcomes to the credit bureaus. Any type of negative activity on a credit report can cause issues for the borrower in future efforts to get a loan. Other consequences of missed or late payments include additional fees, being suspended from using CashApp, and potentially a trip to small claims court if the borrower continues not to pay.

Cash App Borrow as a Credit-Building Tool

While CashApp Borrow may be an immediate solution for those individuals who have limited or no credit history to be able to receive a small amount of funds quickly, it’s important for borrowers to also think about the long-term effects and consequences of borrowing money in this way.

As CashApp Borrow does not build credit scores or report positive payment histories to credit bureaus it may be in the best interest of the borrower to seek other options of obtaining money that may help build their credit history.

Though CashApp Borrow is quick and semi-easy to obtain, a better option for a small loan may be to look at other credit-building options that are available.

Credit Builder Loans: An Alternative Credit-Building Option

One of the best options for borrowers looking to actually build their credit is through a credit builder loan. A credit builder loan is essentially a secured installment loan that helps individuals with limited or poor credit history to build a positive credit profile. It’s also a great way for those who have had financial difficulties or struggles to rebuild credit.

Credit builder loans are much different from traditional loans (and loans such as CashApp Borrow) as it works more like a savings account. Borrowers decide how much they want to take out and then pay money toward the amount before receiving funds. While borrowers pay payments on time, the money they pay is put into a certificate of deposit or savings account and held until the entirety of the loan is paid. When all funds are in the account, the borrower will then have access to the money.

By making timely payments on a credit builder loan, borrowers are able to demonstrate responsible credit behavior. These on-time payments are reported to credit bureaus and help those with thin or no credit profiles or poor credit profiles to build or rebuild their credit and demonstrate their creditworthiness to lenders.

Building Credit with Credit Builder Loans

Credit builder loans are designed to help individuals improve credit scores and build good credit profiles. After the individual has been approved for a credit builder loan, the lender and borrower will set an agreed small loan amount and repayment plan. Each on-time payment is reported to the credit bureaus which will help build a positive payment history and is a crucial factor in your credit score. Once the borrower has made all required payments, the loan money in the CD account is released to them to spend as they see fit. Additionally, they have now built a record of successful credit payments.

The benefits include higher approval ratings with those individuals who have little or poor credit, a possible significant impact on credit history, and a way to rebuild credit profiles. However, it’s important that individuals considering this option do the research to find the best lenders, loan terms, and interest rates available, as well as fully understand all loan terms to make sure they fit their credit situation.

There are some major factors individuals should consider when choosing a credit builder loan provider, including:

  • Interest rates and fees
  • Loan Terms
  • Reporting to Credit Bureaus
  • Credibility and Reputation of the Institution
  • Flexibility
  • Loan Amount
  • Accessibility
  • Online Tools
  • Prepayment Penalties

Complementary Strategies for Credit Improvement

The best thing any individual can do before going about any credit strategy is to research it and find what best fits their needs. There are lots of ways an individual can improve their credit and each one has benefits and drawbacks.

One way to grow credit profiles is to utilize a mix of credit types. A diverse mix of credit types such as credit cards, mortgages, CashApp Borrow, traditional loans, and credit-builder loans can showcase your financial management skills and responsible borrowing behavior. Having a mix of credit types can contribute to the “types of credit used” factor of credit reporting and lenders may see a diverse credit portfolio as less of a risk.

It is extremely important to manage credit utilization and your debt ratio responsibly as many creditors may see too much credit and debt as a risk factor and deny you loans and opportunities to grow your credit as well.

Also, borrowers will want to stay ahead of the game when trying to build credit reports responsibly by monitoring their credit report for accuracy and actually taking the time to address any discrepancies that arise in the reports. There are many free and low-cost credit reporting apps and websites that will allow borrowers to easily keep track of their reports.

Making Informed Credit-Building Decisions

The best advice for any individual seeking to grow their credit profile and meet financial goals is do your research, assess your needs, and set goals that are achievable and realistic. Take time to look at where you are financially and budget for credit-building efforts. Think about carefully spending finances and paying down debts.

One big step into growing or rebuilding a positive credit profile is to budget and plan for credit-building efforts. Credit builder loans are a great way to do just that as you tuck money away like a savings account and have access to those funds once the money is paid.

While CashApp Borrow may be the quick and easy way to get emergency funding fast, it won’t help in the long run if you need to borrow more funds from different institutions. One of the smartest things anyone can do is to work hard at building credit portfolios that allow them to get money when they need it. It’s important to really make informed choices and decisions about credit-building options that are out there and start to cultivate responsible financial habits that will help you build a positive credit portfolio. Let us help you! Contact us today for more information or any questions you may have about building your personal credit portfolio.

About The Author

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Bryan Huynh

Product Tester & Writer

Bryan Huynh, a committed Product Tester and Writer, ensures that you are well-informed, guiding you in discovering and comparing top-rated financial services, including personal loans, business loans, credit repair, and tax relief.

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