If you’re trying to establish credit for the first time or rebuild after a previous misstep, a Fingerhut credit account might help you do it.
These days, good credit is more a must-have than a nice-to-have. Keeping your credit in tiptop shape can make it easier to rent an apartment, buy a house and even get a job. That said, building credit can feel like a Catch-22: It’s hard to prove that you can use credit responsibly when you can’t qualify for credit in the first place.
If you’ve been turned down for credit in the past, or if you’re looking to recover from a few missed payments or past charge-offs, consider applying for a store credit card, which is usually easier to qualify for than a general-purpose card. And while it won’t get you an actual piece of plastic, opening an account with an online retailer like Fingerhut can put you on the path to good credit – and the benefits that come with it.
What is Fingerhut?
Long before there was Amazon, there was the mail-order catalog, which is exactly what it sounds like: a printed list of merchandise that consumers can order through the mail. Montgomery Ward produced the first one back in 1872, and believe it or not, you can still order its catalog today.
Founded in 1948, Fingerhut was one of the first mail-order catalog retailers to extend credit to customers. Like Montgomery Ward, Fingerhut continues to offer a printed catalog, but today it operates primarily online, where it sells goods from name-brand companies like Samsung, Apple, Dyson, Birkenstock, Skechers, Keurig and many, many more.
Fingerhut also has a long history of working with people who have credit challenges, so much so that it positions itself as a way for shoppers to build or rebuild credit by making low monthly payments on their purchases. While not technically a credit card, a Fingerhut credit account is similar to a closed-loop store card, meaning it has no annual fee and can be used only at Fingerhut (and a few select retail partners). However, be warned: A high APR and other factors can make Fingerhut a pricey way to shop.
But if you think that’s a price you’re willing to pay for better credit, keep reading to learn more about how it works, the pros and cons and how you can make the most of a Fingerhut credit account.
How Fingerhut works
Fingerhut offers two types of credit-building products: the Fingerhut Advantage Credit Account and the Fingerhut FreshStart Credit Account.
If you’re not approved for the Advantage account, WebBank (the issuer) automatically considers you for FreshStart, a one-time loan that lets you demonstrate your creditworthiness as a borrower. Think of it like an entry-level class: Upon successful completion of the FreshStart program – meaning you made all of your installment payments on time and in full every month – you’ll “graduate” to a revolving Advantage account.
See related: Graduating from a secured card to an unsecured card
To apply for a Fingerhut credit account, you need to meet a few basic requirements:
- You have a U.S. mailing address.
- You’re at least 18 years old.
- You have a Social Security number.
- You have sufficient income or assets to afford your monthly payments.
While Fingerhut doesn’t specify a minimum credit score for either account, you might not qualify for an Advantage account if you’re currently enrolled in a debt management plan with a credit counseling service, if you’re in the middle of bankruptcy or if you have any past-due payments on your FreshStart loan.
Applying for a Fingerhut credit account is pretty straightforward. Simply navigate to the application page and plug in the usual information, such as your name, address, phone number, Social Security number and date of birth, as well as your annual income. (You’re also prompted to create a Fingerhut account if you don’t have one already.) It usually takes just seconds to receive a decision, but what happens after that depends on which account you’re approved for.
If you’re approved for an Advantage account, you’ll be assigned a credit limit (typically $200 to $800 to start) and can start shopping right away. One caveat: You might be required to make a down payment for your first order, and you won’t find out until after you apply.
Minimum monthly payments on an Advantage account are based on your balance, as seen in this payment chart:
If you’re given the option to enroll in the FreshStart program instead, the process is a little different. Here’s what you have to do:
- Once approved, make a one-time purchase of at least $50.
- Provide a $30 down payment at checkout (required before your order is shipped).
- Make on-time payments until your balance is paid in full.
Minimum monthly payments in the FreshStart program are based on your initial order total, as seen in this example payment chart:
With the exception of a credit card or savings account, you have the same payment options with a FreshStart loan that you do with an Advantage account. If you pay off your balance within six months – with no instances of late or returned payments – you’ll move up to an Advantage account with a potentially higher credit limit. However, if you decide to pay your full balance at the same time as your down payment, your FreshStart loan is canceled, which means you won’t be eligible for an upgrade.
Pros and cons of paying with Fingerhut
It’s usually much easier to be approved for a Fingerhut account compared with an unsecured credit card, even if you have a limited or spotty credit history. That said, a very high APR can make Fingerhut a pricey way to shop if you carry a balance. Here are some of the pros and cons you should consider before you apply:
- Buy what you need now and pay off your purchase over time.
- Get $25 off your first order of $100 or more when you’re approved for a Fingerhut Advantage account.
- Advantage accounts are reported to all three credit bureaus and can help boost your score.
- You may qualify for higher credit lines and special offers when you maintain a history of on-time payments.
- Receive free access to your credit score (plus educational content) through the FICO Score Open Access program.
- Fingerhut prices are often higher than what you’d pay for the same item at other retailers.
- You won’t earn points, miles or cash back for your spending.
- Advantage accounts and FreshStart loans carry an extremely high APR of 29.99%, regardless of your credit score.
- Missed payments on an Advantage account can result in a lower credit line (not to mention ding your credit scores).
- FreshStart loans don’t appear on your credit report, so they won’t help your score.
- You’re responsible for paying shipping costs and, in some cases, unspecified “additional fees” to return a purchase.
Tips for maximizing Fingerhut
To get the most out of your Fingerhut credit account, keep the following tips in mind.
Automate your payments
If you make a late payment, you’ll be charged a fee of up to $40 and could see a drop in your credit scores. Set up autopay instead, and make sure you have enough money in your payment account to cover it every month – otherwise, you’ll face a returned payment fee of up to $40.
Compare prices before you buy
As mentioned above, Fingerhut prices can be inflated compared with some other retailers. Before you make a purchase, check the price of the item you’re eyeing on Amazon, as well as on the brand’s website or any other stores you shop at. While paying a little more for the sake of building your credit might make sense in some situations, paying a lot more may not.
Do the math
In addition to comparing prices, find out the real cost of what you’re buying prior to checkout. Each listing on the Fingerhut website displays the item’s estimated monthly payment and full retail price, like this:
However, those numbers don’t reflect the item’s true cost of ownership. If you pay for the iPod touch over 16 months (the maximum number of payments for a Fingerhut item in this price range), you’ll end up forking over $428.26 for something with a retail price of $309.99, according to this payment chart:
That’s a difference of roughly $120, which isn’t chump change. Consider the bigger picture before finalizing a Fingerhut purchase.
Keep your credit utilization low
If you demonstrate responsible credit behavior over time, Fingerhut may provide you with a higher credit line. That doesn’t mean you should buy more stuff just because you can, though. By keeping your spending the same, a higher credit line can lower your overall credit utilization ratio and benefit your credit score.
Fingerhut can be a good way for some shoppers to build or rebuild their credit, but the potential drawbacks mean you should consider your ability to consistently make on-time payments before you sign up. You’ll also want to pay off your purchases as early as possible to save on interest charges. By using your Fingerhut account responsibly, you can boost your credit score over time and, hopefully, qualify for an unsecured card – with a much lower APR – down the line.