Best Credit Builder Loans

If you want to find a way to establish credit or boost your credit score, you’re not alone. More than 45 million Americans have a slim or no credit profile. One way to do so is to apply for a credit builder loan, which can help you increase your score through small, on-time payments over several months.

Keep reading because we’ll share our top choices for the best credit builder loans, what makes them stand out, and the pros and cons to consider before choosing a lender. None of the lenders on this list—Chime, Self, CreditStrong, and Kovo—do a credit check, so you can apply regardless of where you are on your credit journey.

Reviews of the best credit builder loans

We believe the best credit builder loans have a demonstrable history of helping borrowers improve their credit scores—and don’t overcharge for this service. We prioritize transparency, eligibility, and customer experience.

You have many choices when it comes to choosing a lender for a credit builder loan. We look for lenders that are transparent about how their products work, what they charge, and how easy it is for customers to improve their credit.

Here are the lenders that came out on top. 

• Best for a credit-building card: Chime
• Best for added benefits: Self
• Best for a collection of products: CreditStrong
• Best for a small credit-building plan: Kovo

Chime

Best credit-building credit card

5 _/5

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Why Chime is one of the best

• Build credit with everyday purchases
• No annual fee or interest
• No credit check to apply
• Withdraw cash at 60,000+ ATMs

Chime offers a credit-building card that’s perfect for those who want to learn how to use a credit card responsibly. It’s a secured card, meaning you deposit money in a separate account and can spend up to that amount.

Chime helps you build credit by reporting all your payment activity to the three major credit bureaus: TransUnion, Experian, and Equifax. Its unique feature is its integration with cash advance apps, which adds a layer of flexibility for users.

Account	Total fees	Security deposit
Credit Builder	No fees	No minimum security deposit is required. You decide how much to add to your Chime Credit Builder account, and you can spend up to that limit on your Chime Credit Builder Secured Visa credit card.

Self

Best for added benefits

4.8 _/5

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Why Self is one of the best

• Payments are reported to all 3 credit bureaus
• Track your credit score as it changes over time
• No hard credit check when applying

Self is more than just a financial company that offers credit builder loans. It aims to be inclusive and help you build your credit from scratch. Additional benefits include getting access to a credit card after several months with no hard credit pull. You can also pay off your loan early and close your account anytime.

With Self’s loan, you don’t get money upfront; instead, you send in monthly payments and get back the money minus fees and interest at the end of your term. Self also offers a Self Visa Credit Card if you meet specific requirements.

To start with Self, you’ll pick one of four plans. The plans are similar but allow you to choose how much money you want to commit to your credit-building journey. Self doesn’t do a hard credit check to apply, and all loans are paid off in 24 months, but you can cancel at any time and get your savings back, minus interest and fees.
Each plan has a nonrefundable $9 administrative fee. Here’s a breakdown:

Plan	Total payments	What you get at the end
Small Builder	$600	$511
Medium Builder	$840	$717
Large Builder	$1,152	$985
X-Large Builder	$3,600	$3,069

Because you pay an admin fee and get less money at the end of the loan than you paid into it, this loan costs you money. Think of it like the interest on a traditional loan. For borrowers without credit or with poor credit, the cost of a Self Credit Builder loan is often worth the average 49-point credit score increase.

_{Credit Builder Accounts & Certificates of Deposit made/held by Lead Bank, Sunrise Banks, N.A., or First Century Bank, N.A., each Member FDIC. Subject to credit approval.}

CreditStrong

Best collection of products

4.6 _/5

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Why CreditStrong is one of the best

• Offers 3 credit builder loan plans and 2 other credit building products
• Accounts are FDIC-insured
• No hard credit check to apply

CreditStrong provides a collection of credit-building products tailored to different financial goals. 

A CreditStrong Instal credit builder loan comes in three sizes, each with unique monthly payments and terms. You also get your free FICO score monthly to track your progress.
The option you choose will depend on how much money you want to commit and how long you want to spend repaying your loan. All three Instal accounts come with a nonrefundable $15 administrative fee. Here’s a breakdown of the three different Instal plans:

Monthly payment	Length of loan	What you get at the end
$28	48 months	$1,010
$38	36 months	$1,100
$48	24 months	$1,000

You’ll pay more over the life of a CreditStrong Instal credit builder loan than you’ll get at the end—this is effectively the interest you pay for borrowing money. But assuming you made on-time payments at the end of the loan, you’d walk away with a boosted credit score (average of 45 points) and savings.

The main difference between CreditStrong and Self is that CreditStrong doesn’t offer a credit card. So if you want access to your cash and the convenience of a card, this might not be the best option for you. CreditStrong is not available in Vermont and Wisconsin.

Kovo

Best for small credit-building plan

4.6 _/5

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Why Kovo is one of the best

• Payments unlock credit-building courses
• No credit check
• Small incremental payments

Kovo makes it easy to start building your credit. With its small, straightforward credit-building plan, you only owe $10 per month for 24 months. No hidden fees or interest charges apply. Kovo reports payments to TransUnion, Equifax, Experian, and Innovis.

Kovo is unique because while you make payments, you’ll unlock access to credit-building courses you can use in other areas of your financial life. After four on-time monthly payments, you’re eligible for other loan offers through the Kovo platform. Some of these offers can result in up to 1% cash back.

A drawback of Kovo is that you don’t get your money back at the end of your payment term. So, if you want to build savings using a credit builder account, Kovo isn’t suitable. It’s more similar to a membership site where you pay for credit-building courses. In exchange, it reports your positive payment history to the credit bureaus.

How do credit builder loans work?

Credit builder loans are accessible personal loans with an easy approval process designed for borrowers who need help establishing or improving their credit. Approval doesn’t usually require a hard credit pull, so you shouldn’t have trouble getting one, regardless of your credit score.

Unlike traditional loans involving upfront money from the lender, most credit builder loans don’t require initial funding. Instead, the lender will add your monthly payments to a savings account on your behalf and report those payments to the credit bureaus. At the end of the loan, you’ll walk away with the money in the savings account—and, as long as you’ve made your payments on time, an established or improved credit score.

Here’s how it works:

1. Apply for a loan: The application process is usually fast, easy, and online. You’ll include basic personal information in your application.
2. Pay any fees: Even some of the best credit-building loans have a nonrefundable administrative fee you must pay before you can begin the credit-building program.
3. Make on-time payments: Start making payments every month for the loan term. The lender will hold this money for you, often in a savings account or certificate of deposit, and report your monthly payments to the credit bureaus.
4. Get the money at the end: Once you complete the loan process, the lender will release an agreed-upon amount of funds to you. This is often less than you paid into the loan—the lender takes a cut—but you’ll walk away with a decent chunk of cash to fund a purchase or establish an emergency fund. Assuming you made on-time payments, you should also have established or improved your credit score.

Building credit takes time, so these loans often last multiple years. The length of your credit history affects your credit score, so longer credit builder loans are advantageous. These longer loans also allow you to make more on-time payments, which play a major part in boosting your credit score.

Don’t expect your score to increase overnight, but you should see gradual improvements over the loan.

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Credit Builder Loans That Give You Money Upfront 

How to get a credit builder loan

Because you repay your loan before gaining access to the money—or because the cash in your savings account secures the loan—lenders assume no risk by giving you a credit builder loan. 

You can get approved even with no credit history, limited credit, or a poor credit score.

But lenders may have eligibility requirements, such as:

• Proof of income to demonstrate your ability to repay the loan
• A clean banking history (some lenders may review your ChexSystems report)
• An administrative fee to start the loan

Don’t just take the first credit builder loan you find. Review our list of the best credit builder loans, compare their fees and structures, and apply for the one that best suits your needs.

Pros and cons of credit builder loans

Credit builder loans offer several advantages when establishing credit for the first time or overcoming a negative credit history. Many consumers use these products to build credit and save money, regardless of their credit score.

However, be sure to consider the drawbacks as well.

Pros

• Available to consumers with all types of credit scores.

  Credit builder loans are available to poor-credit, fair-credit, or even no-credit borrowers. Whether you have a limited credit history or none, you’ll likely get approved for this low-risk product.

• Build your score fast.

  Credit builder loan terms often last several years, but your credit-building efforts will have an immediate effect. Most credit builder lenders report on-time payments to all three bureaus, helping grow your score and payment history.

• Build up a savings account.

  You don’t often get access to your loan funds right away. Instead, the lender will stash the money in a dedicated savings account that secures your loan. The cash is yours after you’ve made all the required monthly payments.

Cons

• You could hurt your credit if you don’t pay on time.

  A credit builder loan exists to improve your credit score, but this will backfire if you fail to make on-time payments. You should not take out a credit builder loan unless you’re confident you’re ready to pay it when it’s due.

• You could pay high fees.

  Some credit builder loans charge application fees. If you don’t pay your bill by the due date, you might owe a late fee, which could add significant costs.

• You may pay interest on money you don’t yet have access to.

  The interest rates on credit builder loans are usually under 10%, but that’s not always true. Paying interest on money you can’t access until you repay the loan can be frustrating and feel like a waste of money.

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Credit Builder Loans Like Seedfi

Tips for using credit builder loans to improve your credit

Credit builder loans can help your credit—but they could also hurt it if you don’t make on-time payments. If you’re taking out a credit builder loan to boost your score, follow these tips to ensure success:

1. Be smart about which loan you pick: Because on-time payments are crucial, choose a loan with a monthly payment you’re confident you can afford.
2. Monitor your credit report to keep tabs on progress: Check your credit once a month as you pay off your credit builder loan to ensure lenders are reporting your positive payment history. You can also check your credit score to see how much it’s climbing. This will help you stay motivated.
3. Pay your credit builder loan on time, every time: You must never be late when paying your loan. We recommend setting up autopay of the monthly minimum balance. Even a single late payment could cause your score to drop, especially if you don’t have much of a positive credit history to offset it.
4. Take advantage of other resources and offers: Many credit builder loans offer educational resources to help you improve your credit score. They may also offer additional products that can supplement the work you’re doing with the loan.
5. Have a plan for the nest egg at the end: Use the money you save responsibly, such as to pay off other debts or fund a high-interest savings account to establish an emergency fund.

How can I check my credit to ensure my payment history is correct?

Whether you’re considering a credit builder loan or have been paying toward one for years, checking your credit annually with all three credit bureaus is a solid habit. It helps you watch the progress of your credit history, ensure that lenders are reporting as promised, and it may encourage you to keep up the good work.

Not sure how to check your credit? American adults can now access a free weekly credit report from all three credit bureaus through AnnualCreditReport.

You can also sign up for a free credit monitoring service. These apps and platforms will send you an update monthly or as new reports are added to your credit report and may give you a proprietary credit score along the way to show your progress.

Alternatives to credit builder loans

Credit builder loans are one option to improve your credit, but they aren’t the only way to raise your score. 

You may also consider the following:

Apply for a secured credit card

A secured credit card is similar to a credit builder loan. For example, Chime offers a Credit Builder Secured Visa credit card. With the card, you put money equal to your credit limit in an account with the creditor to secure or guarantee the loan and use the card like a typical credit card.

With a credit builder loan, you make monthly payments as you would for a typical loan payment, but at the end of the term, you get your money back minus fees and interest.

These options are solid if you have little to no credit history or want to improve your credit score. A secured card is a terrific place to start if you want the convenience of a credit card.

Become an authorized user on someone else’s credit card

If a trusted person in your life has good credit, they could help you boost your score by adding you as an authorized user to one of their cards. This card’s history will show up on your credit report, and you’ll benefit from their positive payment history.

FAQ

Are there credit builder loans with no credit check?

Yes, several lenders offer credit builder loans without a credit check to help those with a thin credit profile or poor credit score. All four lenders mentioned on this list, Chime, Self, CreditStrong, and Kovo, do not check your credit.

Do credit builder loans work?

Yes, credit builder loans work if you pay on time each month. Your payment history is the single biggest factor in your credit score, and late payments can damage it.

How can a credit builder loan affect my credit score?

Research from the Consumer Financial Protection Bureau (CFPB) found that credit builder loans (CBL) improve credit scores by 60 points on average for customers who did not have debt. However, 39% of CBL borrowers made at least one late payment, and those who had debt when they opened a CBL saw a slight decrease in their score.

To ensure a CBL helps your score, make on-time payments to improve your credit report’s payment history, the single biggest factor of your credit score. If you haven’t had an installment loan on your credit report, a credit builder loan will improve your credit mix, considering the types of credit accounts you’ve managed.

How much does a credit builder loan cost?

Every lender is different; some charge a one-time fee, monthly administrative fees, and interest. For example, Self charges a $9 admin fee and a 15% to 16% interest rate, depending on your plan. 

The CFPB studied CBL. To complete the study, the CFPB partnered with a bank that charged about $4 per month for the CBL products. However, the bureau said fees and interest vary by lender. 

Can you get credit builder loans for bad credit?

Yes, you can get a credit builder loan if you have bad credit. These loans are designed to help borrowers with bad credit or a thin credit profile. Most lenders don’t conduct a credit check because you submit your monthly funds into a savings account. In turn, the lender reports positive progress to the credit bureaus. 

Are there credit builder loans that give you money?

No, credit builder loans don’t give you money upfront. Instead, you put funds in a dedicated account every month and get your money back when the term is up. If you need money upfront, consider a cash advance or personal loan.

How we chose the best credit builder loans

Since 2020, LendEDU has evaluated personal finance companies to help readers find the best credit-building solutions. Our latest analysis reviewed 198 data points from 11 companies, with 18 data points collected from each. This information is gathered from company websites, online applications, public disclosures, customer reviews, and direct communication with company representatives.

These data points are organized into broader categories, which our editorial team weights and scores based on their relative importance to readers. These star ratings help us determine which companies are best for different situations. We don’t believe two companies can be the best for the same purpose, so we only show each best-for designation once.

Higher star ratings are ultimately awarded to companies that create an excellent customer experience while offering proven credit-building solutions. This includes offering online eligibility checks without impacting your credit score, cost transparency, little to no fees, and other unique credit benefits.

Recap of the best credit builder loans