5 Best Credit Builder Loans for July 2024


Your credit score impacts many parts of your financial life, including the interest rates you get, your credit limits, and your ability to be approved for loans or credit cards.

couple at the beach

If you have low or no credit, it can be tough to be approved for credit when you need it. Credit builder loans are a solution designed to help you establish credit with manageable risk. These loans work by having you make payments over a set period before you access the funds.

5 Best Credit Builder Loans

With various options from banks, credit unions, and online lenders, it can be overwhelming to find the right fit. Below we highlight some of the best credit builder loans available in 2024:

1. Self

Self introduces a credit-building solution that directly tackles the paradox that Founder and CEO James Garvey highlighted: the need for credit to obtain credit. This catch-22 often leaves many without a starting point to establish their creditworthiness. Garvey’s vision for Self was to break down these barriers, providing a platform where consumers can build their credit from the ground up.

Through Self, individuals gain the opportunity to demonstrate their credit reliability without prior credit history. It’s a progressive step toward redefining access to credit, where the only prerequisite is the commitment to build a solid financial foundation. Self is not just a product; it’s a catalyst for financial inclusion and empowerment.

Self offers four different credit builder plans:

Plan TypeSmallMediumLargeX-Large
Cost Per Month$25/month$35/month$48/month$150/month
Term24 months24 months12 months12 months
Admin Fee (Single Fee)$9$9$9$9
Total Payments$600$840$576$1,800
Get Back$520$724$539$1,663
Final Cost$89$125$46$146
Interest Rate14.14%14.70%12.44%14.87%
Annual Percentage Rate15.92%15.97%15.65%15.91%


  • No hard credit pull on your credit report
  • Automated payments
  • Track your credit score
  • Reports to all three major credit bureaus
  • Anytime cancelation
  • Optional secured credit card

Self credit builder loans are a suitable option for people with lower credit scores and no outstanding debt. Repayment plans start at $25 per month, and you can safely apply for a Self credit builder loan without taking a hard credit inquiry.

Conveniently, Self also offers an easy cancelation option. This means you can cancel your loan at any time and your money will be returned to you, minus interest and fees.

2. MoneyLion

MoneyLion stands out in the credit-building landscape, established in 2013 with a mission to empower rather than exploit American consumers. Their innovative Credit Builder Plus loan not only aids in building credit but also provides immediate financial relief by granting access to a part of the loan funds upfront, with the remainder becoming available upon the fulfillment of the loan’s terms.

Structured over a twelve-month period, MoneyLion’s loans can reach up to $1000, catering to a range of credit-building needs. While there is a monthly membership fee of $19.99, this investment in your financial health is complemented by the potential growth in your credit score. Additionally, users should be cognizant of certain administrative costs associated with the loan. Nonetheless, MoneyLion’s approach is designed for those seeking a robust tool to build credit while enjoying early access to loan funds.


  • Early access to a portion of your loan funds
  • Ability to monitor your credit score and progress
  • Reports to all three major credit bureaus
  • Options for rewards

MoneyLion could be a viable option if you need to build your credit but also need to access some of your loan sooner. And you also don’t need to worry about a hard credit check.

MoneyLion’s credit monitoring tool provides useful insights that can help you get comfortable keeping tabs on your credit score.

3. Digital Federal Credit Union

At the heart of Digital Federal Credit Union (DCU) lies its member-centric ethos, functioning as a not-for-profit financial cooperative truly run by its members. DCU extends beyond typical banking services, offering a suite of products including consumer and business banking, alongside essential insurance coverages for auto, home, and liability.

DCU’s credit builder loans present a strategic avenue for members to strengthen their credit, with loan amounts tailored to individual needs, ranging from $500 to $3,000. The loan terms are equally flexible, spanning 12 to 24 months to accommodate various financial plans.

A standout feature is DCU’s transparent fixed annual rate of 5.00%, which, combined with an estimated monthly payment of $43.87 per $1,000 borrowed, makes for a predictable and straightforward repayment process. While rates and payments are subject to change, DCU’s commitment to its members’ financial growth remains a steadfast principle.


  • Establish credit as you repay on time
  • Personal loan calculator
  • Ability to earn dividends from your DCU savings account

DCU also offers checking accounts, auto loans, savings accounts, retirement accounts and more. However, because DCU is a member-owned credit union, you’ll have to qualify for membership before making use of their services. You can qualify through your employer if they are associated with DCU, or by having a family member who is a member.

4. Credit Strong

Credit Strong is a branch of Austin Capital Bank and a preeminent community bank. Their credit builder loan is a simple four-step process. First, you must open an Instal account with them. Then, select your plan type, “Build” for credit building or “Build & Save” to save and build credit.

Next, make your monthly payments on time. And finally, unlock your savings account when you close your credit builder account or finish paying off your loan.

Credit Strong offers several credit builder accounts for people looking to improve their credit score:

  • Revolv: Revolv requires a $99/year subscription fee. With Revolv, you can instantly build $500 of revolving credit, improve your credit mix, build payment history, optimize your utilization, and build savings. Additionally, you can get a free monthly FICO Score report.
  • Instal: Instal offers three different payment plans. For $28/month, you can save up to $1,010 in just 48 months and have a $1,010 installment account reported on your credit history. For $38/month, you can save up to $1,100 in just 36 months and have a $1,100 installment account reported on your credit history. And for $48/month, you can save up to $1,000 in just 24 months and have a $1,000 installment account reported on your credit history.
  • CS Max: CS Max offers several payment plans with different installment account sizes. For $49/month, you can have a $2,500 installment account reported on your credit history, demonstrate repayment on larger credit obligations, supercharge your personal credit for business purposes, and build up to 60 months of payment history.

With just $99/month, you can have a $5,000 installment account reported on your credit history and get the same benefits. For $199/month, you can have a $10,000 installment account reported. And for $449/month, you can have a $25,000 installment account with the same benefits. In all cases, you can cancel at any time with no penalty.

5. SeedFi

Established in 2019 as a forward-thinking alternative to conventional bank lending, SeedFi has recently become a part of the Credit Karma family. Their flagship offering, the Credit Builder Prime, operates on a unique incremental savings model. Users determine a contribution amount to be deducted from each paycheck, which SeedFi then channels into a Credit Builder account. Once your savings reach the $500 threshold, the funds are yours to utilize.

The service boasts a minimal monthly fee of just $1, coupled with an accommodating payment scale that varies from $10 to $40. Interest rates are appealingly low, with an APR that ranges between 4.03% and 5.26%. Additionally, SeedFi offers flexible loan terms that span from 7 to 27 months, allowing customers to find a balance that aligns with their financial capabilities and credit-building goals.


  • Automated payments
  • Monthly reports to all three credit bureaus
  • Interest-free loan
  • No initial credit check

SeedFi’s Credit Builder Prime allows you to take on a rolling credit builder loan. Once your first loan is paid off, the money is transferred to a second account, and the loan begins again.

This allows you to continuously build your credit up with a safe and easily manageable loan. This is great if you’re worried about maintaining your credit once the loan ends.

What is a credit builder loan?

A credit builder loan is a type of loan designed specifically to help you build credit. Taking out a traditional loan is about needing to borrow money, but a credit builder loan is more about building credit.

With a credit builder loan, you make regular deposits into a locked savings account for a specified period of time. As you make your monthly payments on the loan, the lender will report your payments to the three credit bureaus. These regular reports are key to building your credit up.

When you’ve completed the repayment terms, the money you’ve saved up will be “unlocked”. So with a credit builder loan, you’ll receive the loan amount only after it’s been paid for. In some cases, the loan funds might be released throughout the loan term rather than at the very end.

Credit builder loans typically range from $300 to $5,000 with repayment terms available from six to twenty-four months.

Who should use credit builder loans?

Credit builder loans are best suited for people with thin or bad credit, or those looking to rebuild damaged credit. The greatest benefits will typically come to those with a credit score below 620.

The great thing about credit builder loans is that they can also help establish good credit practices. This is important because once you have built up your credit, you need to know how to maintain and improve it. Things like making monthly payments and maintaining a low credit utilization ratio are essential habits to develop.

Those with good or excellent credit scores will naturally benefit the least from this kind of loan. If that’s you, you might instead consider a low-fee credit card to make periodic purchases with. This can help to keep your credit healthy.

Will a credit builder loan raise my credit score?

A credit builder loan has the potential to raise your credit score by demonstrating a consistent record of on-time payments. As lenders report your repayment behavior to the credit bureaus, these positive financial actions contribute to the payment history aspect of your credit score, which is a significant factor in credit scoring models.

By successfully completing a credit builder loan, you can also diversify your credit mix, which may further improve your credit scores. However, the extent of the impact varies per individual, depending on the entirety of their credit profile and financial activity. It’s essential to manage the loan responsibly and ensure all payments are made on time to optimize the potential credit score benefits.

Pros of Credit Builder Loans

Establish Good Credit

The biggest benefit of credit builder loans is, of course, the opportunity to establish a good credit standing. And in theory, it should be relatively simple for you to increase your credit score as long as you can continue making payments.

In contrast, if you have poor credit, a credit builder loan can provide you with financial stability.

Low Risk Loan

The reason credit builder loans work so well is due to the removal of the usual risks that come with traditional loans. Because you’re not getting the loan amount until it’s been paid for already, this negates the temptation of seeking a loan you can’t really afford.

Lower Fees

The best credit builder loans tend to come with lower fees, and even interest rates, compared to credit cards or traditional loans. This is partly due to the lack of risk for the lender.

For those who don’t have the means to afford a regular personal loan, a credit builder loan can present a more affordable alternative.

Cons of Credit Builder Loans

Risk of Further Credit Damage

While a credit builder loan is designed to build credit in a relatively safe manner, failing to make timely payments is still a real possibility. If you’re using this kind of loan to repair damaged credit, missing the payments could be particularly detrimental to your finances.

Paying Interest in Advance

Most credit builder loans come with rates under 10%. But some can be higher, and if you’ve got a negative credit history you may have to settle for a higher rate.

In any case, it can be frustrating to pay interest on money you can’t access for perhaps a year or two. This might feel wasteful, and if you eventually fail to fulfill the loan term, you can end up losing money.

How to Compare Credit Builder Loans

Choosing the right credit builder loan is crucial to your financial journey toward better credit. It’s not just about finding any loan; it’s about finding the one that best suits your financial goals and circumstances. Consider these key factors when comparing the best credit builder loans to ensure you select a loan that effectively supports your credit-building strategy.

  • APR: When borrowing money, the APR will always be a major factor in your decision. This is a figure which represents the total cost of the loan, including both the interest rate and any necessary fees.
  • Loan amount: The loan amount will be a major factor in your decision. Most credit builder loans are no more than $1,000. But if you’re looking to build a bigger windfall of cash while you improve your credit, there are options out there for bigger loans. A lot of folks will use a credit builder loan to help build savings, too. For that purpose, a higher loan amount might be sought.
  • Loan term: The loan term refers to the length of time you’ve got to make payments for. Loan terms for credit builder loans are typically short, with most between twelve and twenty-four months. The reasoning here is that after two years, you should have a good enough credit score to continue building credit without the help of a loan.
  • Credit bureau reporting: Credit builder loans work to increase your credit score by reporting monthly payments. But don’t take it for granted that a lender is reporting payments. Make sure that any lender offering a credit builder loan is committed to reporting your monthly payments to all three credit bureaus. Whether borrowing from big banks or local credit unions, always check for regular credit bureau reporting. This is what helps you to build a positive payment history.
  • Secondary benefits: Depending on your financial needs, the availability of secondary services may be of interest to you. Some lenders offering credit builder loans will also have things like credit monitoring, educational finance tips, or a secured credit card.

Keep in Mind

There are a few things to remember when reviewing the best credit builder loans.

You will want to pay attention to the annual percentage rate (APR). The APR is the total daily periodic rate multiplied by the number of times the interest is compounded in a year. It includes interest and any fees that come with a credit builder account. In some cases, you may find that other types of loans, like personal loans, have better APRs than credit builder loans.

Credit builder loans are designed to help you build a positive credit history. However, they can be detrimental to your credit if you overextend yourself and are unable to make your monthly payments in full and on time. Moreover, on-time payments are not the only component of your credit score. Your credit amount and mix, total debt, credit utilization, credit history length, and more contribute to your credit scores.

A credit builder loan is still additional credit, so it may temporarily lower your credit score.

Other Ways to Improve Your Credit

Credit builder loans are a great way to improve your credit, but they aren’t the only option. Let’s run through some alternatives worth considering:

Secured Credit Cards

Secured credit cards are a fantastic starting point for building or rebuilding your credit. Unlike a standard credit card, a secured credit card requires a cash deposit that serves as your credit line. This reduces the risk for lenders and helps establish a pattern of responsible credit use, as long as you make payments on time.

Build Credit While You Bank

Current is an online bank that has introduced a seamless way to build your credit through daily transactions. Use your Current card for purchases or ATM withdrawals and boost your credit score with each swipe.

The process is designed to help you build credit without accruing debt, as it uses the funds you already have. AutoPay further simplifies your finances, ensuring you never miss a payment. Best of all, Current makes this accessible without a credit check, welcoming individuals regardless of their credit history to start improving their score right away.

Rent Reporting Services

Various rent reporting services are available that can report your monthly rent payments to credit bureaus, potentially boosting your credit scores.

While not every credit scoring model includes rent payments in its calculations, many do, and utilizing these services can be particularly advantageous for those with a limited credit history or looking to establish one. Consistent, on-time rent payments can reflect positively on your credit report, giving you an accessible way to demonstrate financial responsibility to future lenders.

Personal Loans

Taking out a personal loan through a credit union or an online lender can be a strategic move towards building a solid credit history. By adhering to the scheduled monthly payments and ensuring they are made on time, you’re able to show a pattern of reliability.

These timely payments are recorded by credit bureaus and contribute positively to your credit profile. Personal loans can also diversify your credit mix, which is another component that credit scoring models consider, potentially improving your overall creditworthiness.

Become an Authorized User on Another Credit Card

If someone you trust has good credit, you can ask to be added as an authorized user on their credit card account. You’ll benefit from their credit history, and as long as the account is in good standing, it can positively impact your credit score.

Frequently Asked Questions

Who can get a credit builder loan?

To qualify for a credit builder loan, you must be at least 18 years old, have a valid bank account, and a Social Security number. You’ll also have to prove that you can afford the monthly minimum payments for your desired loan.

Moreover, take note that depending on the state you’re in, your desired lender may not be able to offer credit builder loans.

How can a credit builder loan help build credit?

A credit builder loan can help build credit by providing an opportunity to make regular, on-time payments. When these payments are reported to the credit bureaus, they contribute positively to the payment history aspect of your credit score.

As payment history is a significant component of credit scoring models, consistently meeting these payment obligations over time can help establish a pattern of financial responsibility and potentially increase your credit score.

How much can you “borrow” with a credit builder loan?

The amount you can “borrow” with a credit builder loan typically ranges from a small sum like $300 to a larger amount up to $1,000 or more. It’s designed not to provide immediate funds but to assist in establishing a history of on-time payments. The actual amount depends on the lender and the specific terms of the loan aimed at helping to build or improve your credit profile.

How much does a credit builder loan cost?

The cost of a credit builder loan can vary depending on the lender, but typically includes the interest you’ll pay over the life of the installment loan. There may also be additional fees, such as an administrative or origination fee. Some providers may also charge late fees. Generally, the APR ranges from 5% to 15%. It’s important to read the terms carefully to understand the total cost.

How much do credit builder loans increase credit score?

The impact of a credit builder loan on your credit score can vary. Typically, if you make timely payments, you could see an improvement in your credit score over several months. The actual increase will depend on various factors like your current credit history and the details of the loan. It’s not uncommon to see an increase of 40 to 60 points over the course of a loan.

Do credit builder loans require a credit check?

Credit builder loans do not typically require a credit check. Instead, lenders may focus on your income and bank account standing. However, when some lenders may perform a soft inquiry to verify your identity.

Bottom Line

Credit builder loans are a valuable resource for establishing or improving your credit history. They provide a clear path to demonstrate financial reliability through regular payments, which can significantly influence your credit score.

With options to “borrow” varying sums, these loans can accommodate different financial situations. It’s essential to carefully review the terms, interest rates, and fees before selecting the most suitable loan. Managed well, a credit builder loan can pave the way to greater financial opportunities and a more secure credit future.

Kiara Taylor
Meet the author

Kiara Taylor is a financial writer and Research Analyst. She is an expert at risk-based modeling having worked in the finance vertical for the past twenty years. She has a Master's Degree in Finance from Ohio State and has worked at Fifth Third Bank, J.P. Morgan, and Citi in emerging markets and equity research.