Best Credit Builder Loans of 2024 (2024)

Best Credit Builder Loans of 2024

Best Credit Builder Loans of 2024

Credit Karma's Credit Builder account has many advantages because it’s free to use and flexible enough to overcome some of the downsides of traditional credit builder products. However, it will take a bit more work to actively manage. Instead of a loan, it’s actually a line of credit, which helps you build credit in different ways (it may be more useful than the typical credit builder installment loan, in fact).

When you sign up for Credit Builder, you get two accounts: a line of credit and a savings account.

You’ll set up recurring monthly withdrawals of $10 to $100 from your line of credit into your savings account, which you can’t access until you’ve saved $500. Then, you’ll set up automatic payments from your Credit Karma Money Spend account (which you’ll also need) to pay off the line of credit. You can pause and reset this anytime, such as if you’re going through a temporary budget crunch. You’ll need to do at least one transaction every three months to keep it active, however.

• Must be at least 18 years old
• Must have a credit score of 619 or below (based on TransUnion credit report)
• Must have a valid, non-P.O.-box U.S. mailing address
• Must have a valid Social Security number and a Credit Karma Money Spend account

When it comes to building credit, longer is better—and Credit Strong offers two of the longest-term credit builder loans around. Instal features loan terms from 24 to 48 months, with monthly payments of $48 to $28, respectively. CS Max loans come with five-year terms and monthly payments of $49 to $199, depending on how much cash you want to save by the end of the loan.

In addition to installment debt (i.e., loans with regular monthly payments), Credit Strong also offers Revolv, a $1,000 line of credit (increasable to $3,000) with a $99 yearly fee and 0% interest. This will add revolving credit to your credit reports, another major player that determines your credit score. You can’t use this line of credit to buy things, but you can set up recurring transfers into a savings account that unlocks after a period of time. If you set up automatic payments from your checking account, it’s a no-hassle way to save and build credit at the same time.

• Must be at least 18 years old
• Must have a valid bank account or debit card
• Available in all U.S. states except Vermont and Wisconsin
• Must have an email address and a mobile phone number or Google Voice account
• Must be a U.S. citizen or permanent resident and have a valid Social Security number and physical mailing address

Digital Federal Credit Union (or DCU for short) offers traditional-style credit builder loans. They work like this: You open the loan, DCU puts the loan funds into a locked savings account, and you make monthly payments to pay it off over time. The loan funds will earn interest in the savings account which pays 6.17% APY on the first $1,000 and 0.15% on balances above that threshhold. When you pay off the loan, those funds—plus savings interest—are released to you.

As you can see, this loan isn’t intended for borrowing money for a necessary expense—it’s meant as an easy way to start building credit, and DCU even reports to four credit bureaus, instead of the normal three (Experian, Equifax, TransUnion, and Innovis).

• Must join Digital Federal Credit Union in order to receive the loan
• Membership is free for people with ties to groups in NH or MA, people who work for certain employers, and people with family ties to existing members.
• Membership is also open to people who join certain organizations, such as Reach Out for Schools ($10 membership fee).

If you like using apps to manage your life, MoneyLion may be a good option. In addition to several other financial products like investments and banking services, MoneyLion also offers a Credit Builder Plus membership option, but it will cost you $19.99/month. This lets you apply for a small loan with no credit check—but be warned, your membership fee doesn’t cover any loan payments. Those will be separate.

Depending on how well you manage your regular checking account (you’ll need to allow MoneyLion access to your account in order to apply for the loan), MoneyLion may split your funds up so that some money is available now, and some is unlocked later. The better you are at handling your checking account, the more you’ll get upfront.

• Must purchase a MoneyLion Credit Builder Plus subscription for $19.99/month
• Must live in one of the 42 states where MoneyLion offers loans
• Must have a checking account that has been open for at least 60 days, with regular deposits and withdrawals and a positive balance

If you’re looking for an easy-to-understand credit builder loan with fewer gimmicky upsells, then Self might be a good option for you. It offers four credit builder loan plans to choose from, with pre-set monthly payment amounts and interest rates, ready to go.

Once you’ve made three on-time payments and have a $100 balance built up in your savings account, you’re eligible to open up a Self credit card, which can accelerate your credit-building journey.

While Self does show one of your credit scores, it’s not the actual credit score that lenders most commonly use (your FICO credit score)—instead, you’ll only get to see your VantageScore. This is usually pretty close to your FICO credit score, so it’s generally a good estimate, but not always.

• Available to residents in all 50 states
• Must be 18 years old and have a Social Security number
• Available to U.S. citizens and permanent residents, or people with certain visas
• Must have a debit card, prepaid card, bank account, valid email address, and phone number

Article Sources

1. Consumer Financial Protection Bureau. "Emergency Savings and Financial Security." Page 24.

2. Credit Karma. "What Is Credit Builder?"

3. MyFICO. "How Do I Go About Building My Credit History?"

4. Credit Karma. "Better Credit Is on the Horizon."

5. Credit Strong. “Instal and CS Max.”

6. Credit Strong. "Revolv."

7. Credit Strong. "Find My Answers." Click "Is CreditStrong Available in My State?"

8. Digital Federal Credit Union. "Credit Builder Loans."

9. Digital Federal Credit Union. "Primary Savings."

10. Digital Federal Credit Union. "Member Eligibility."

11. MoneyLion. "Get Funds While You Save and Build Credit."

12. MoneyLion. "How Do I Qualify for Credit Builder Plus Membership?"

13. Self. "Your Credit Building Toolkit."

14. Self. "Introducing the Self Visa Credit Card."

15. Consumer Financial Protection Bureau. "Targeting Credit Builder Loans." Page 3.