Best Credit Builder Loans: What You Need to Know

There are two traditional ways to build credit. You can open a credit card and pay your balance in full each month. A second option is to get a loan for a significant purchase and make the minimum monthly payment until you pay it off.

However, neither of these options build credit without debt. So if you don’t feel like buying something you don’t need right now, a credit builder loan lets you receive your loan proceeds back at the end of the repayment term.

The best credit builder loans are similar to a traditional bank loan with a fixed monthly payment and term length. Each payment reports to the major credit bureaus to potentially increase your credit score.

Here is a closer look at how credit builder loans work and if they can help improve your credit history.

Table of Contents
  1. What Are Credit Builder Loans?
    1. Who Should Use Credit Builder Loans?
  2. Best Credit Builder Loans
    1. Cleo
    2. Self
    3. Kikoff
    4. CreditStrong
    5. Digital Federal Credit Union
    6. MoneyLion
    7. Fig Loans
    8. Metro Credit Union
    9. Republic Bank
    10. SeedFi
  3. Credit Builder Loans Pros and Cons
    1. Positives
    2. Cons
  4. Credit Builder Loan FAQs
  5. Final Thoughts on the Best Credit Builder Loans

What Are Credit Builder Loans?

Credit builder loans help people increase their credit score without going into debt.

Many online banks and credit unions offer them, though some institutions, like regional credit unions, require you to live in qualifying states where local branches are available.

While any credit builder loan can positively affect your credit history, it pays to look at the fine details. The loan terms can differ, and you should compare the key factors, including the following:

  • Monthly payment: Make sure you can afford the monthly payment. A higher loan amount can result in a more significant required contribution. You can usually select a loan amount between $300 and $2,500.
  • Payment term: The repayment period is usually from 6 to 24 months.
  • Fees: Unfortunately, non-refundable administrative fees and interest charges (APR) apply, so it’s not a free way to build credit.
  • Cash distribution amount: Most loans reimburse your monthly payments and earned interest but withhold the loan fees. However, some credit-building products may not refund your net loan proceeds.
  • Cancellation policy: You can usually pay off your remaining balance early or close your account and withdraw your balance early without penalty. As a tradeoff, you will stop building a payment history.
  • State availability: Some platforms cannot offer credit builder loans in your state. Thankfully, another option on this list can

After opening your credit builder loan, your monthly principal payment goes into an FDIC-insured interest-bearing bank CD. Each payment reports to the three major consumer credit bureaus (Equifax, Experian, and TransUnion).

Results vary by the person as several factors determine your credit score. However, it’s possible to see a 60-point increase over the life of the loan.

Who Should Use Credit Builder Loans?

Credit builder loans may be suitable for people looking to establish credit or rebuild a bad credit score. You can see the most benefits if you have a score below 620.

A 620 credit score is usually the start of “prime credit” to qualify for conventional home mortgages, unsecured credit cards, etc.

In addition to using this loan to build credit, you should practice other good credit practices to help increase your score. This includes making the minimum monthly payment on your outstanding debts, maintaining a low credit utilization ratio on your credit cards, and avoiding applying for new consumer loans.

Borrowers with good or excellent credit (670+) will benefit the least from this product. In this situation, you’ll be better off getting a no-annual fee credit card and making periodic purchases to keep your account in good standing.

Best Credit Builder Loans


Cleo is a quirky budgeting and saving app, short-term loan provider, and credit building card all rolled into one. While this article is about credit building, Cleo offers up a whole suite of tools that can help you better manage your money so that when you do build your credit, you can keep it high with responsible borrowing and spending.

The Credit Builder Card is designed to build credit history and does not trigger a hard inquiry when you apply, which would normally lower your score slightly.

To start, you download the app and then type ‘Credit Builder’ into it. It’ll instruct you to set up your security deposit (minimum deposit is $1) and then you can start spending on your card using your deposit as collateral (you can spend up to whatever you put as a deposit).

Cleo Builder (the tier that offers this credit builder product) costs $14.99 (only $9.99 a month for the first three) and when you use the Cleo Builder Card, you also get access to cashback rewards too. Cleo also offers cash advances of up to $120 based on eligibility.

Check out our Cleo review for more.

Why We Like Cleo

  • Available nationwide
  • Reports to all three credit bureaus, Experian, Equifax and Transunion.
  • Is a full-suite personal finance product (budgeting, saving, etc.)

👉 Learn more about Cleo


Self is one of the best overall credit builder loan providers as it’s available nationwide and has low monthly payment commitments.

Your monthly payment amount depends on your loan term:

  • 12 months: $48 or $150
  • 24 months: $25 or $35

Each plan currently charges a one-time $9 administrative fee to create your account. Then, your APR is approximately 15.9%. This is one of the highest credit builder loan APRs as online banks are more likely to charge closer to 5% interest.

The site has an interactive calculator that itemizes your finance charges and how much you get back after paying off your loan.

This service also offers a secured credit card to use your loan contributions as a security deposit. You’re eligible for this card after your loan savings reach $100 and have three months of payment history.

Why We Like Self

  • Available nationwide
  • Flexible loan terms
  • Offers a fee-free secured credit card

Read our full Self Credit Builder review for more information.

*All Credit Builder Accounts made by Lead Bank, Member FDIC, Equal Housing Lender, Sunrise Banks, N.A. Member FDIC, Equal Housing Lender or Atlantic Capital Bank, N.A. Member FDIC, Equal Housing Lender. Subject to ID Verification. Individual borrowers must be a U.S. Citizen or permanent resident and at least 18 years old. Valid bank account and Social Security Number are required. All loans are subject to consumer report review and approval. All Certificates of Deposit (CD) are deposited in Lead Bank, Member FDIC, Sunrise Banks, N.A., Member FDIC or Atlantic Capital Bank, N.A., Member FDIC.

Lead Bank. Member FDIC, Equal Housing Lender

Sunrise Banks, N.A. Member FDIC, Equal Housing Lender

Atlantic Capital Bank, N.A. Member FDIC, Equal Housing Lender

**The Self Visa® Credit Card is issued by Lead Bank, Member FDIC, Equal Housing Lender, or South State Bank, N.A., Member FDIC, Equal Housing Lender.Requirements are subject to change. All requirements are subject to change.

***Sample products are $25 monthly loan payment at a $520 loan amount with a $9 administration fee, 24 month term and 15.92% Annual Percentage Rate; $35 monthly loan payment at a $724 loan amount with a $9 administration fee, 24 month term and 15.97% Annual Percentage Rate; $48 monthly loan payment at a $539 loan amount with a $9 administration fee, 12 month term and 15.65% Annual Percentage Rate; $150 monthly loan payment at a $1663 loan amount with a $9 administration fee, 12 month term and 15.91% Annual Percentage Rate. Please refer to for the most recent pricing options.


If you struggle to afford the average monthly payments for credit builder loans ($25 to $200), Kikoff can be an excellent alternative. You can also learn about different financial topics through educational materials.

Sadly, this company no longer offers a credit builder loan to new members.

However, you can purchase a 12-month membership for $24. The $2 monthly payments report to Equifax and Experian. This fee is non-refundable but significantly cheaper than other credit services.

It’s also possible to establish a payment history through the $500 Kikoff credit line. This is a free account, but you pay on-demand for ebooks.

Each book only costs a few dollars, and you repay the balance over several months. As a result, you can also learn new skills while building credit and not going broke.

Why We Like Kikoff

  • Low monthly payments
  • Minimal fees
  • Can purchase educational material

Learn more about Kikoff in our full review.


CreditStrong offers a couple of credit-improving projects for individuals and businesses.

The Instal credit builder loan has two different lending options:

  • Build: Has a smaller monthly payment ($15 or $25) with up to 120 monthly payments. However, this loan isn’t intended for saving money, and you will receive less money than you pay in.
  • Build and Save: $38-$96 monthly payment into an interest-bearing savings account. After the 24-month repayment period, you receive the contributions minus fees.

Your Instal loan can be from $1,000 to $2,500, depending on the terms.

If you’re serious about building credit and have the cash to spare, you can upgrade to the Magnum product. This loan has a $10,000 amount of credit but requires a minimum monthly payment of $55 with a 10-year repayment term. Unfortunately, Magnum loans don’t build savings.

Why We Like CreditStrong

  • $1,000 to $10,000 loan amounts
  • Credit building and savings options
  • Helps improve personal credit and business credit scores

For more information, check out our CreditStrong review.

Digital Federal Credit Union

Digital Federal Credit Union (DCU) offers credit builder loans and traditional banking services like fee-free checking and savings accounts.

A DCU Credit Builder Loan lets you borrow between $500 and $3,000 over 12 to 24 months. The loan APR is 5% (June 6, 2022), and your estimated monthly payment is $43.87 per $1,000 borrowed.

Physical branches are accessible across New England, plus shared branches with other credit unions across the United States. You can also fee-free ATMs nationwide.

As you can access your funds online or in person, DCU can be an exciting option with competitive fees.

Why We Like Digital Federal Credit Union

  • Free checking and savings accounts
  • Fee-free ATM access
  • Local branch access in many states


MoneyLion offers credit builder loans of up to $1,000 with a 12-month repayment period. This feature is part of the MoneyLion Credit Build Plus service, which costs $19.99 monthly plus your loan payment.

Other membership benefits include:

  • 0% APR cash advances of up to $300 per pay period
  • Shopping rewards
  • Credit monitoring tools
  • Mobile banking account
  • 55,000+ fee-free ATMs

You can enjoy banking and credit building perks under one roof.

Why We Like MoneyLion

  • Short repayment term
  • Cash advances and shopping rewards
  • Online banking features
  • Local ATM access

Fig Loans

A Fig Credit Builder Account offers a 12-month payment period. The average loan balance is $1,000.

You choose a higher balance and a longer repayment term if you can afford the higher monthly payment and want to potentially see a more prominent credit score increase.

These loans charge a one-time setup fee, and you receive your payment balance at the end of the payment schedule.

The lender also offers short-term personal loans that give you money now but can have a higher interest rate.

Why We Like Fig Loans

  • Short repayment period
  • Potentially low ongoing fees
  • Access to short-term installment loans

Metro Credit Union

Boston area residents can join Metro Credit Union and open one of two credit-friendly loans:

  • Credit Builder Loan: “Borrow” between $500 and $2,000 for up to 24 months. Your funds are deposited into your Metro savings account until you satisfy the payment agreement.
  • Prosperity Builder Loan: Deposit funds upfront into a savings account and borrows up to twice your savings balance. For example, you can deposit up to $5,000 and borrow up to $10,000. You repay the remaining balance over 36 months while building credit.

The Prosperity Builder Loan can be an excellent alternative to a high-interest line of credit (it only has an 8.20% APR) if you have sufficient cash reserves. However, you must apply for this product in-branch.

Other banking products like free checking or savings accounts are available too.

You’re eligible for membership if you live in Massachusetts or southern New Hampshire. Like most credit unions, a minimum $5 initial deposit is necessary to open a bank account.

Why We Like Metro Credit Union

  • Two different loans can build credit
  • Low APR
  • Other banking products are available

Republic Bank

Republic Bank offers a Credit Builder program with a $500 to $1,500 loan limit and repayment terms of 12, 18, or 24 months.

They charge a one-time $10 processing fee, and the APR is from 5.6% to 8.3%. Larger loan amounts have lower APRs to help offset the higher monthly payment.

Unfortunately, this bank only operates in these states:

  • Florida
  • Indiana
  • Kentucky
  • Ohio
  • Tennessee

You must live in an eligible zip code to join. Most bank branches are in Kentucky, with the bank headquarters in Louisville.

If eligible, you can enjoy this product with a low APR and minimal service fees.

Why We Like Republic Bank

  • Low APRs
  • Flexible repayment terms
  • Personal and business banking services


It’s possible to get a fee-free loan through SeedFi Credit Builder Prime. When joining, you open a Line of Credit (i.e., your credit builder loan) and a free SeedFi Savings Account.

You can contribute as little as $10 per month and access your funds for every $500 you save. It’s possible to save more than $500 and continue building credit up to $1,000 through on-time monthly payments.

This product is free as SeedFi makes money from its Borrow & Grow installment program. These loans give you cash immediately but can have high-interest rates (40% to 90% APR).

Why We Like SeedFi

  • Monthly payments as small as $10
  • No fees
  • Can withdraw balance after earning $500
  • Multi-year borrowing period

Credit Builder Loans Pros and Cons

Here are the good and bad traits of using credit builder services.


  • Reports monthly payments to all three credit bureaus
  • Receive money back after final payment
  • Can be cheaper than credit cards or personal loans
  • No purchase is necessary


  • Potentially high fees and APRs
  • No upfront cash distribution
  • Can require up to 24 months of payments
  • Your desired program may not be available in your state

Credit Builder Loan FAQs

Who can get a credit builder loan?

You must be 18 years old and can afford the monthly payment for your desired loan. Your preferred lender may also require you to live in a specific state to be eligible for their product.

What are the credit builder loan fees?

Expect a one-time setup fee or administrative fee. Then, you will pay a loan APR between 5% and 40% with each monthly payment. These fees are non-refundable, but you receive your principal amount back at the end of the loan.

How much do credit builder loans increase credit score?

Lenders estimate the average borrower can see a 40 to 60-point credit score increase within six months. People with low credit or no credit history will see the highest increases. However, external factors can also impact your score, and damaging habits can potentially reduce or erase the credit builder loan benefits.

Do credit builder loans require a credit check?

No, these loans don’t require a hard inquiry, like you’d see with a credit card or loan application. Still, the lender may perform a soft inquiry to verify your identity to verify they can report your payments to the credit bureaus.

Final Thoughts on the Best Credit Builder Loans

If you cannot qualify for a regular loan or credit card, you have several options for getting a credit builder loan and establishing a positive payment history. I advise comparing the monthly payments and fees to find your best option and only take on a payment you can afford.

Any loan can help increase your score, but you want to ensure you can get as much money back at the end of the loan term. Avoiding excessive fees can also help keep your monthly payment smaller, so you’re more likely to afford it if you have a small income.

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About Josh Patoka

After graduating in $50k with student loans in May 2008 from Virginia Military Institute with a B.A. International Studies and Political Science with a minor in Spanish (he studied abroad in Sevilla, Spain for 3 months), Josh decided to sell his soul for seven years by working in the transportation industry to get out of debt ASAP and focus on doing something else with a better work-life balance.

He is a father of three and has been writing about (almost) everything personal finance since 2015. You can also find him at his own blog Money Buffalo where he shares his personal experience of becoming debt-free (twice) and taking a 50%+ pay cut when he changed careers.

Today, Josh relishes the flexibility of being self-employed and debt-free and encourages others to pursue their dreams. Josh enjoys spending his free time reading books and spending time with his wife and three children.

Opinions expressed here are the author's alone, not those of any bank or financial institution. This content has not been reviewed, approved or otherwise endorsed by any of these entities.

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  1. Mike says

    Assuming both loans are for $1000, is there a significant advantage to doing a 24 month term at a lower payment vs a 12 month term with a higher payment?

    I’d prefer to not tie up funds any longer than necessary.

    Thanks for the article and info!

    • Jim Wang says

      It’s obviously going to be a tradeoff – with the longer term, you have a longer period of “showing” you’re responsible with credit. You also pay more in interest because you’re borrowing for a longer period of time.

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