A credit builder loan is a financial product that can help consumers establish a positive credit history. Unlike a traditional loan, borrowers will receive a deposit after they make a series of fixed payments over the course of several months. Do you think a credit builder loan could be the right choice for you? Check out more information about how credit builder loans work below!
Where Can I Get a Credit Builder Loan?
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In general, a few places that offer credit builder loans include:
- Credit unions
- Small community banks
- Online lenders
While many types of loans can help build credit, not every lender specifically offers credit builder loans. So, you’ll want to keep a close eye when researching lenders to make sure they offer the type of financial product you’re looking for!
What Does a Credit Builder Loan Do?
A credit builder loan is a type of financial product designed to help people with a non-existent credit history or those with an extremely “thin” credit profile. After getting a loan and making consistent on-time payments, borrowers will start to establish a positive payment history, which will work towards improving their credit score. Depending on the credit builder loan plan you go with, your lender may be able to report additional payments that credit bureaus typically overlook, like rent payments. Once the loan term ends, borrowers should see an improvement in their credit scores, making it easier to get approved for traditional loans in the future.
In addition to helping people build credit and establish positive financial behaviors on their credit report, credit builder loans can also help people save money. To use a credit builder loan successfully, users need to consistently make payments until the loan term ends. It works like a savings account, where funds are accessible only after a predetermined date.
How Does a Credit Builder Loan Work?
- Pick a lender – Research lenders so you can pick the lender and the credit builder loan plan that works best for you.
- Make payments on time – Make payments on your credit builder loan every month, and on time!
- Monitor your credit score – Keep making timely payments every month and keep an eye on your credit report. You should see your score start to improve the longer you’ve been making consistent and timely payments!
- Get paid! – At the end of the loan term you’ll receive your money back, minus any interest charges and fees. At this point you’re free to use your money any way you’d like!
Who Are Credit Builder Loans For?
Credit builder loans can be a helpful credit improvement tool for consumers who have no established credit history (also known as being “credit invisible”), or for those who have very little established credit. People with little to no credit history may have trouble getting approved for loans—such as personal loans, mortgages, or auto loans—due to a lack of positive financial history. Credit builder loans can help fix this issue by providing a way for people to have payments reported to the major credit bureaus.
If you are looking to improve your credit score because you have past due payments, excessive debt, or other financial problems, credit builder loans most likely won’t be able to help you out. Instead, you should look into other credit building opportunities like paying off debt, becoming an authorized user, etc.
How To Find the Best Credit Builder Loan Online
Follow these steps to find the best credit builder loan for you!
- Assess your situation – Look at your most recent credit report. If you see a lack of information, a credit builder loan may help you start to establish credit.
- Research your options – If you decide a credit builder loan is the right option for you, it’s time to research your options. Look at a few different lenders and compare important loan details like loan amounts, interest rates and fees.
- Extra Tip – You may also want to check out online reviews to see what kind of experience other people had with a particular lender!
- Pick a lender and a credit building plan – The last step is to pick the lender that looks like the best fit for you, and apply.
A Quick Comparison of Online Credit Builder Loans
Here is a quick chart to help you compare lenders and credit builder loan options below:
| Lender | Loan Amount | Loan Terms | Interest Rates (APR) | Fees | Approval Requirements | Key Features |
| Self | $520–$1,800 | 12–24 months | 14.14%–15.97% | $9 administrative fee | No credit check; US citizen/SSN required | Reports to all 3 credit bureaus; mobile app; savings-building. |
| Kikoff | $12/month line | Open-ended (membership-based) | 0% | $5/month subscription (optional) | No credit check; US resident required | Instant approval; reports to credit bureaus; flexible usage. |
| Intuit Credit Karma | Varies (partner offers) | Varies | Varies (partner-dependent) | Typically no fees (varies) | Partner-specific approval terms | Free credit monitoring; prequalification tools. |
| BMO | $1,000+ (depends on branch) | 12–60 months | 5.99%+ | Varies by loan | Traditional credit evaluation | Accessible at branches; competitive rates for good credit. |
| DCU (Digital Federal Credit Union) | $500–$3,000 | Up to 24 months | 5% APR (as low as) | No fees for members | Membership required; soft credit pull | Reports to all 3 bureaus; membership benefits. |
| MoneyLion | $25–$1,000 (Credit Builder Plus) | Monthly subscription (membership-based) | 5.99%+ (varies) | $19.99/month subscription | No credit check; active bank account | Credit monitoring, cash advances, and financial tools. |
Disclaimer: The information provided in the table is for informational purposes only and is subject to change. Loan terms, fees, interest rates, and approval requirements may vary based on location, individual qualifications, and lender policies. It is recommended to verify details directly with each lender before applying for a loan. This table does not constitute financial advice or an endorsement of any specific lender.
Other Ways to Build Credit: Alternatives to Credit Builder Loans
Credit builder loans aren’t the only way to build credit. In fact, depending on your financial situation, they may not even be able to help improve low credit scores at all! Some other ways consumers can go about improving their credit include:
- Stay on top of your financial obligations – Payment history has the biggest impact on your credit score, so making payments on all your current financial obligations is crucial.
- Paying down existing debts – In addition to making payments on time, it may also be a good idea to make extra monthly payment or submit larger payments on debts like loans or credit cards to pay them off faster.
- Secured credit cards – Unlike a traditional credit card, secured credit cards require users to pay their credit limit upfront. Because of this security deposit, people with poor credit are often able to get approved for secured credit cards, allowing them to build and improve their credit when they make payments on time.
- Become an authorized user – Instead of getting a secured credit card, you may also consider becoming an authorized user on someone else’s credit card. This will give you access to a credit limit that will be documented on your credit report, but you won’t be responsible for making payments on the balance!
- Personal installment loans – If you’re going through a financial emergency, a traditional loan like an unsecured installment loan can also be a great way to give you access to money right away and help build credit over time as you pay off the balance.
Credit Builder Loan Frequently Asked Questions
Yes! Products like credit builder loans or even unsecured personal loans have the potential to help people improve their credit when used responsibly. However, keep in mind that taking out a loan shouldn’t be the first step you take in improving your credit. Paying off existing debts while avoiding acquiring new debts will help improve credit more than getting a loan.
For those with little or no credit history, credit builder loans can help establish a history of making positive payments on a loan, as well as report other payments not normally recorded by credit reporting agencies, such as rent or insurance payments.
While you don’t get money right away in a credit builder loan, lenders do pay borrowers who repay their balance on time and in full. If you want access to cash right away, you’ll have to go with a traditional bank loan or a personal installment loan.
Credit builder loans typically won’t improve your credit score instantly. Instead, it may take a few months of consistent and on time payments on their credit report before borrowers see an improvement in their credit scores.
You should normally be wary of lenders offering ‘guaranteed approval’ or ‘instant approval’ on loans. However, credit builder loans are designed for people with no credit history, so getting approved is relatively easy.
Typically, yes. The goal of a credit builder loan is to report positive payment history to credit bureaus and ultimately see an improvement in your credit. Lenders should state if they report to one or all three major credit bureaus clearly on their website. To see the fastest improvement in your credit report, you’ll want to go with a lender that reports to all three credit bureaus!
You could pay off a credit builder loan early, but that would essentially defeat the purpose of getting this type of loan in the first place. The whole point of credit builder loans is for lenders to report your on time payments to the three major credit bureaus. Paying off your credit builder loan before its due date means less positive payment history reported.
Assuming you made all your payments on time, after you pay off your credit builder loan you’ll receive your original deposit back minus interest rates and fees. You may also see an improvement in your credit score, especially when compared to the score you started with at the beginning of your loan.
A Word From CreditNinja About Credit Builder Loans
Credit builder loans can be a helpful tool for people who have absolutely no credit history, or a very thin credit profile. But if you are looking to improve your credit score because you have a bunch of debt or other financial problems bringing you down, you may not find credit builder loans very helpful.
If you need money immediately and want to build your credit over time, consider a CreditNinja personal loan. Our bad credit personal loans were designed to help people get access to fast cash during financial emergencies, and they can help improve your credit score over time as you pay back your loan! Check out our easy online application to see how much you could get today!
