No credit or poor credit? Credit repair services don't match your needs? Credit builder loans may be the answer. Credit builder loans do not require good credit for approval, but they do require income in order to make monthly payments. Your on-time monthly payments are reported to the three major credit bureaus, helping establish a positive payment history.
Last Updated: January 20, 2023
Having a positive and established credit history is essential to taking out a loan, renting an apartment, or even getting a job.
With bad credit or no credit, everyday tasks become much harder since lenders can't take a close look at your credit history.
So what to do next? A good solution is to look into a credit builder loan, which can help you build or rebuild your credit. When used correctly, this loan builds a history of positive payments and eventually generate a good credit score.
Credit builder loans are offered by local banks, credit unions, and online services. The borrowed amount is held in a secured account while you make regular payments on the loan. These payments show your potential lenders that you are serious about improving your finances and that you can be trusted with loans, credit cards, and mortgages.
Once the credit builder loan is completely paid off, the funds are released to you.
(Note: Before taking out a credit builder loan, make sure your lender reports to all three bureaus rather than just one or two of them in order to receive the full benefits.)
Because your credit score matters! If credit repair services don't align with your financial needs, a credit builder loan is an excellent alternative.
However, it is extremely important that you take the process seriously and make on-time payments to receive the full benefits.
Credit builder loans are specific loan products offered by banks and credit unions to help borrowers with little, no, or bad credit to build and improve their credit history. Your lender will report your payments to the three major credit bureaus: Experian, Equifax, and TransUnion, which establishes and builds your credit history.
There are many places where you can shop around to find the right credit builder loan for you:
Credit builder loans are best for those who have little or no credit and need to improve their credit, like recent college graduates or those who are trying to rebuild their credit after serious financial problems.