How Do Credit Builder Services Work and Are They Legit? 

If you struggle with poor credit or are new to credit, you may have heard of credit builder services as a way to increase your credit score. But how do they work, and are credit builder loans and credit cards legit?

Like anything else, credit builder services aren’t for everyone, but if used properly, they can be helpful. In this article, I’ll explain how credit builder services work, share some examples of companies to consider, as well as some credit builder alternatives.

Table of Contents
  1. What Are Credit Builder Services?
  2. What Is a Credit Builder Loan? 
  3. What Is a Credit Builder Credit Card?
  4. Where Can I Get a Credit Builder Loan?
    1. Self
    2. Cleo
  5. Are Credit Builder Services Legit? 
  6. Who Should Use Credit Builder Services? 
  7. What Are Other Ways I Can Build My Credit? 
    1. Secured Credit Cards
    2. Secured Loan
  8. Get a Co-signer
  9. Final Thoughts on Credit Builder Services

What Are Credit Builder Services?

Credit builder services use small, easy to qualify for loans and credit cards to help you raise your credit score. In most cases, you are using your money to secure the ‘credit,’ so there is little to no risk to the credit builder company.

The benefit to the borrower is that the credit builder app or company reports your payments to the credit bureau, which helps to increase your credit score over time and build your credit history.

While credit builder companies charge fees for their service, they are usually reasonable and not something you must pay indefinitely.

What Is a Credit Builder Loan? 

Credit builder loans are installment loans meant to help you build credit. Depending on your company, the installment loan will have different terms and conditions.

However, many credit builder loans use the following model:

  1. Open a loan account.
  2. The loan funds are placed in a secured savings account.
  3. As you make each monthly payment, your loan balance decreases.
  4. Each payment is reported to one or more of the three major credit bureaus
  5. When the loan is paid off, you get the funds in the secured savings vehicle minus any interest or fees due.

Loan and payment amounts, and fees, can vary based on the company you’re using. 

What Is a Credit Builder Credit Card?

Credit builder credit cards work similarly to credit builder loans. However, your available loan amount is a revolving balance with credit cards. 

Depending on how the credit builder company works, you might pay monthly payments on your credit card’s balance or pay the balance more often than that.

For instance, the Extra Debit card is a debit card that functions as a credit card. You connect the card to your bank account and then use the card to make purchases.

On the following business day, the total amount of any purchases made on the prior day will be taken from your linked bank account to cover expenses made with the Extra card.

Those purchases are then reported to the three major credit bureaus as credit purchases. 

Where Can I Get a Credit Builder Loan?

Several companies offer credit builder loans. Here are a few popular choices. 


Self Homepage Screenshot

Self offers credit builder loans are 24 months in term. You can choose a Small, Medium, Large, or Extra Large loan with payments starting as low as $25 per month. 

Your loan funds are held in a secured bank account until the end of your loan term. At that time, you get the loan proceeds minus interest and fees.

You will pay a one-time $9 administrative fee when you use Self, along with an interest rate in the 15% range. Self also offers credit builder credit cards. Learn more in our full Self review.

👉 Learn more about Self

Credit Builder Accounts & Certificates of Deposit made/held by Lead Bank, Sunrise Banks, N.A., SouthState Bank, N.A., First Century Bank, N.A., each Member FDIC. Subject to credit approval. Self Visa® Credit Card issued by Lead Bank or SouthState Bank, N.A., each Member FDIC. See for details. Card eligibility: Active Credit Builder Account in good standing, 3 on time payments, $100 or more in savings progress. Criteria subject to change.

***Sample loans: $25/mo, 24 mos, $9 admin fee, 15.92% APR; $35/mo, 24 mos, $9 admin fee, 15.97% APR; $48/mo, 24 mos, $9 admin fee, 15.72% APR; $150/mo, 24 mos, $9 admin fee, 15.88% APR. See


Cleo Credit Builder Landing PageScreenshot

Cleo combines credit building, budgeting, savings, and short-term loans into one app. The Credit Builder card is a secured Visa card that offers cashback rewards and no interest, and no hard credit inquiry is pulled when you apply.

You will, however, need to pay for a Cleo Builder subscription to qualify, which is $14.99 monthly.

Cleo reports your account activity to all three credit bureaus, including Experian, Equifax, and Transunion. Because the card is secured, your spending limit can’t exceed the funds on deposit.

Check out our Cleo review for all the details.

👉 Learn more about Cleo

Are Credit Builder Services Legit? 

Most credit builder services are legit, but you must do the proper research before signing up, as there are plenty of scams. The companies mentioned in this article are legit, but they might not be the right ones for you. I recommend checking ratings and customer reviews online before you sign up for any credit builder service. 

Also, remember that for any credit builder serve its purpose, you must follow the necessary steps and use it properly. If you don’t, you may end up hurting your credit score and wasting money.

Who Should Use Credit Builder Services? 

Credit builder services are advertised to those who have poor credit or those who have no credit history. 

And although many services are legit and can help you build credit, they should be used as a last resort. The problem is that they can be expensive when you factor in the monthly fees and interest if it’s charged.

If you have poor credit and are having trouble managing your existing obligations, adding one more payment could make it even more challenging to meet your monthly obligations.

If you have no credit history and can afford the payments, a credit builder loan will help you build a credit score. But you will eventually need additional items reporting to the bureau; don’t rely exclusively on a credit builder loan.

What Are Other Ways I Can Build My Credit? 

There are other ways to build credit. One, for example, is a secured credit card. You can get a secured loan or a cosigner for a regular loan.

Secured Credit Cards

Secured credit cards require a cash deposit equal to the amount of your credit card limit. The cash deposit is in place to cover non-payment of the credit card balance. 

You could use the card each month and then pay the balance in full. These cards often have no monthly or annual fee and can be used to improve your credit score. 

Secured Loan

Secured loans are another credit-building option. With a secured loan, you deposit money in a Certificate of Deposit held by a bank.

That same bank will issue you a loan with installment payments amounts you’re comfortable with. Payments are reported to the three major credit bureaus, and your on-time payments will help improve your credit.

Your CD funds are released after your loan is paid in full. 

Get a Co-signer

While I don’t recommend it in most situations, if you have a parent or other close family member willing to co-sign for you on a loan, it will increase your chances of approval and build your credit as you make payments over time.

Your co-signer will have to be financially sound with well-established credit. The financial institution will take steps to ensure that the co-signer can carry the debt alone if you default on the payments.

I don’t like this option as it ties up both parties financially for an extended period, and if something goes wrong, it may hurt your relationship with your family member. I am including it, however, as it is an option.

Final Thoughts on Credit Builder Services

Credit builder services are legit and can help you build your credit when used properly, but they’re not for everyone. They are also not a one-size-fits-all solution. You will need to take additional steps to build and maintain good credit.

*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.

**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 loans: $25/mo, 24 mos, $9 admin fee, 15.92% APR; $35/mo, 24 mos, $9 admin fee, 15.97% APR; $48/mo, 24 mos, $9 admin fee, 15.72% APR; $150/mo, 24 mos, $9 admin fee, 15.88% APR. See

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About Laurie Blank

Laurie Blank is a blogger, freelance writer, and mother of four. She’s psyched about teaching others how to manage their money in a way that aligns with their values and has been quoted in Bankrate.

She's a licensed Realtor with Edina Realty in Minneapolis, Minnesota (also licensed in Wisconsin too) and has been freelance writing for over six years.

She shares powerful insights on her blog, Great Passive Income Ideas, that will show you how you can create passive income sources of your own.

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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