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Credit builder loans are still somewhat new. But they’re definitely not all the same in quality and price.
We analyzed the nine most commonly searched for credit builder loans on the market, then compared them based on a variety of factors including minimum monthly payment, term length, loan amount, and more.
The Best Credit Builder Loans in 2022
The Best Credit Builder Loans Compared
| Lender | Reports To | Fees | Interest (APR) | Minimum Monthly Loan Payment | Term Length | Loan Amount |
| TransUnion, Equifax, and Experian | Instal: $15 one-time fee | Instal: 7.75-15.73% | Instal: $15 | One to ten years | Up to $10,000 | |
| TransUnion, Equifax, and Experian | One-time admin fee of $9 | 24.24% | $25 | Up to 24 months | $600 to $1,800 | |
| TransUnion, Equifax, and Experian | N/A | N/A | N/A | N/A | N/A | |
| TransUnion, Equifax, and Experian | $19.99 monthly membership fee | 5.99% to 29.99% | $43 | One year | $500 to $1,000 | |
| Fig Loans | TransUnion, Equifax, and Experian | One-Time onboarding fee equal to monthly payments | 18.85% | $42.50 | One year | Up to $1,000 |
| DCU | TransUnion, Equifax, and Experian | N/A | 5% | $21.94 | One to two years | $500 to $3,000 |
| Metro Credit Union (MCU) | TransUnion, Equifax, and Experian | N/A | 4.1% | $21.75 | Up to two years | Up to $3,000 |
| MCU (Prosperity Builder Loan) | TransUnion, Equifax, and Experian | N/A | 8.2% | $15.72 | Up to three years | $500 to $10,000 |
Credit builder loans come in all shapes and sizes. They each have a unique interest rate, require a different minimum monthly payment, and vary significantly in their repayment terms.
If you’re looking for an online credit builder loan or an unsecured credit builder loan, we’re got you covered here. These are all no credit check credit builder loans.
Here’s a deeper dive into the details of the loans listed above.
CreditStrong (Best Overall)
CreditStrong is the best credit builder loan on the market today. It takes the top spot (or very nearly does) in all the most important categories. For example, among the competitors above, it offers the:
- Longest possible repayment term
- Smallest possible monthly payment
- Third-lowest APR (only 0.83% more than second place)
- Largest reported loan amount and final savings (tied with MCU)
- Reports to all three credit bureaus (so you build credit with each)
It also belongs to the esteemed Austin Capital Bank, an FDIC-insured financial institution that many well-regarded companies have given five-star ratings, including BankRate and Bauer Financial.
CreditStrong products solve the problems that others on this list often cause. Namely, that credit builder loans can damage your creditworthiness slightly if they drop your average loan size or credit utilization ratio.
First, CreditStrong offers the highest credit builder loan value on the market. Average loan size might not affect your credit score directly, but it impacts the strength of your credit profile overall.
For example, having a $1,000 paid loan on your credit report is much less impressive to lenders than having a $10,000 paid loan on your credit report.
Second, CreditStrong lets you prepay your accounts with no penalty. As a result, you can give your score a significant boost by paying off most of the balance upfront, lowering your utilization.
For example, you could take out a $1,000 loan, pay the balance down to $150, and benefit from having an ultra-low utilization ratio until the end of the repayment term.
Many Senior Contributors on the myFICO forum recommend this strategy for maximizing your credit score.
Also Read: Chime Credit Builder Review
Now, let’s dive into CreditStrong’s loan offerings more specifically.
CreditStrong’s standard product is also its most flexible. Known as instal, it boasts five different plan options with various monthly payments and loan amounts, ranging from $15 to $96 and $1,000 to $2,500, respectively.
For those looking for higher loan amounts, CreditStrong offers its MAGNUM product. With accounts up to $10,000, it’s ideal for those looking to demonstrate their ability to repay more significant credit obligations, such as prospective small business owners.
Speaking of, CreditStrong is also the only provider to offer credit builder loans to business entities. If you’re looking to improve your business credit scores, you can use your company’s EIN to open a financial tradeline as a brand new company.
Finally, CreditStrong offers a unique account that it calls Revolv. Unlike other credit builder loans, it shows up in your credit report like a credit card, which you need to properly diversify your credit mix.
However, you can’t actually use the account to make purchases. You simply contribute to it like you would a savings account, and each contribution counts toward your payment history. You can then access the funds once you reach a certain threshold.
The Downside: After reading customer reviews and complaints, we didn’t really find much of a downside to CreditStrong’s credit builder loans.
Complaints mainly came from customers who thought that they’d get cash after qualifying for the account, like you would with a normal personal loan, but that’s not how it works for any of these credit builder products.
Self
Self offers a balanced credit builder loan. It might not stand out much in any particular category, but it’s average among the rest of the best in most areas.
For example:
- It has a one-time $9 set up fee, which is in the middle of MoneyLion’s $19.99 monthly fee and the free options
- Its APR is roughly 13%, while the others range from 4.1% to 29.99%
- Its lowest monthly loan payment is $25, while the others range from $15 to $43
- It maxes out at a two-year loan term when most range from one to three
- Its maximum loan amount is $1,800, and most others range from $1,000 to $3,000
Self is FDIC-insured and lets you build credit with all three of the major credit bureaus. You can also use your loan proceeds as collateral instead of funding the deposit yourself.
The Downside: Some customers reported that their credit score dropped after using Self. This could be due to having a new account, or because of the short term length of 1 year.
Some customers were unnerved that the loan reported to the credit bureaus wasn’t from Self. Self Financial, Inc. (formerly Self Lender) doesn’t authorize loans. They have partner banks issue the loans, such as Sunrise Banks. If you read the paperwork when you sign up, you’ll see that you’re notified of this.
Overall, we still like Self because it works. It should be noted that customers with bad or new credit almost always see a net increase in credit score when they make their payments on-time.
Chime
Chime is unique on this list in that they don’t technically offer a credit builder loan. Instead, they provide a credit builder card.
That makes the numbers less cut and dry than they are with loans. However, the most important details to be aware of are the following:
- There are no fees or interest on the card
- The credit limit is equal to the amount of money that you transfer to the card
- The account automatically pays your balance at the end of the month using the transferred funds
It looks a lot like a secured credit card in practice.
For example, at the beginning of the month, you’d deposit $300 in the account, which would then lock. Next, you’d use the credit card to make up to $300 in charges. At the end of the month, Chime would pay off your balance using the deposited funds.
The strategy protects you from missing your regular payments. However, the downside is that it requires customers to fund their deposits. It also won’t help you save money as a credit builder loan would.
The Downside: As mentioned earlier, this isn’t an installment loan. If you’re looking specifically to get an installment loan on your credit report, this isn’t the product for you.
Chime does have higher-than-normal customer complaints compared to banks like Wells Fargo and Chase. However, it looks like the vast majority of complaints are regarding their checking accounts, not their credit building product.
MoneyLion
MoneyLion reports to all three credit bureaus, has a competitive APR for its most qualified customers, and offers standard loan amounts and repayment terms.
It has just one main drawback. Unfortunately, it’s a sizable one: the $19.99 monthly membership fee. They try to give you some value back in return, such as:
- Credit monitoring
- Higher InstacashSM limits (0% cash advances)
- A MoneyLion Investment Account
- A RoarMoney Account
- Potential for cashback through their Lion’s Share Loyalty Program
If these bonuses are something you’re already really interested in, the account might be worth it, but there are many cheaper credit builder loan options.
The Downside: The monthly membership fee is required on top of any loan payments. The extra $19.99 per month may not be worth it for some people.
Fig Loans
Fig Loans credit builder loan is probably the weakest on this list. Its repayment term and loan amount are on the low end at one year and $1,000, respectively. That means that it probably won’t have as much impact on your score as some of the others.
It doesn’t have the highest interest rate of the bunch, but it’s close to it at 18.85%. While the others have a floor that might allow some customers to qualify for an APR around 5% or 6%, Fig Loans has no such variability.
The onboarding fee is also expensive, at a minimum of $42.50.
However, it still reports to all three credit bureaus and offers a unique feature that automatically cancels your account at no cost if you’re about to be late 30 days, which protects your credit rating.
The Downside: A low repayment term, low loan amount, high APR, and high onboarding fee.
DCU Credit Loans
DCU (short for Digital Federal Credit Union) provides a solid credit builder loan with above-average scores across the board. Their loans are affordable, flexible, and impactful.
All of their credit builder loans cost 5% interest, which is the second-lowest rate on this list and less than a single percent away from the one that takes the top spot.
Every customer is guaranteed that rate, as opposed to some lenders who advertise a rate range with an affordable low end but then never offer that to customers in practice. There’s no start-up or admin fee, and their minimum monthly payment of $21.94 is low.
The loans can be anywhere between $500 up to $3,000, and the repayment term can be either one or two years (with no prepayment penalty).
The Downside: The DCU is a traditional Credit Union. As such, it may be harder to do business with them if you are located out of their state and can’t talk with them during normal business hours.
Metro Credit Union
Last but not least, we have Metro Credit Union (MCU). The MCU (no, not the Marvel Cinematic Universe) has two credit builder loans, both of which are high quality.
They offer a traditional credit-building loan whose proceeds serve as collateral. It has no fees, the best interest rate on the list at 4.1%, and a low minimum payment of $21.75.
The max borrowing amount is a respectable $3,000, and the max repayment term is a standard two years.
MCU also offers what they call their Prosperity credit-builder account. It has a higher interest rate of 8.2%, a slightly lower minimum payment of $15.72, and a max repayment term of three years.
However, the main difference between the two is the maximum loan amount. The Prosperity account allows customers to report up to $10,000 in “borrowed” funds.
The big catch is that they have to bring half the amount themselves.
The Downside: Like the DCU, the MCU is a traditional credit union. This makes doing business with them out of state and outside of normal business hours difficult.
Other Credit Builder Loans
While the loans above are among the best, they’re not the only credit builder loans on the market. Here are two other options for you to consider, or at least to compare to the previous loans for perspective.
Kikoff
Kikoff’s credit builder program is similar in concept to Chime’s. It functions more like a credit card than a personal loan.
Upon receiving an account, you’ll get a $500 revolving credit line. However, you can only use it at the Kikoff store, which only sells things like personal finance and self-help books.
Store items are between $10 and $20. After a three-week grace period, users pay off their purchases in monthly installments as low as $2.
Kikoff doesn’t charge any fees or interest, which is nice, but they only share your payment history with two credit bureaus: Experian and Equifax.
That means that it won’t show up on your TransUnion credit report, and some customers have complained that they don’t consistently show up on the other two either.
SeedFi
SeedFi credit builder loans follow the standard format but at a smaller scale. As usual, the lender sets aside the principal in a savings account, and the borrower pays off the balance in regular installments, then the savings account is unlocked.
However, SeedFi only allows customers to report a small loan of $500, and repayment plans can be as short as seven months. With such low numbers, these accounts probably won’t increase your score as much as the others.
It’s affordable, though, with only a $1 monthly fee and an APR between 4.03% and 5.26%.
More Options for Building and Rebuilding Credit
Credit builder loans are a powerful tool for building a positive credit history when you have none, but other options might appeal more to you. For example, you could also:
- Get a secured credit card: A secured credit card is one of the most common tools people with bad credit or no credit history use to improve their credit score. If you have the money for a deposit, you can use your funds to secure the credit card and increase your odds of qualifying. The cash you put up becomes your credit limit, keeping the card issuer safe.
- Become an authorized user: An authorized user is someone who has the right to make purchases using a credit line. If your family member or close friend has good credit and is willing to add you to their account as a user, it could help your credit (if payments are made timely).
- Finance your car purchase: Car loans are readily available even to people with less than perfect credit. If you have a lower score than you’d like and plan to buy a car, consider financing the purchase. Just make sure the interest rate is affordable because auto loan rates can be steep.
How Does a Credit Builder Loan Work?
A credit builder loan is an installment loan specifically intended to help consumers increase their credit scores. They usually don’t require a credit check, so they’re readily accessible to people with a low credit score or no credit history.
Because they’re usually for riskier borrowers, lenders need some form of assurance. Usually, that means using some cash as a deposit, similar to a secured personal loan.
The borrower can bring cash to the table (like a share secured loan), or the lender can use the loan proceeds as collateral. Either way, the lender will lock the cash away in a savings account until the end of the loan term.
During the life of the loan, the borrower will make regular payments that the lender will report to at least one credit bureau, so they show up on the borrower’s credit report.
Creating a positive payment history will help them build credit. Of course, the best lenders report to all three bureaus: Experian, Equifax, and TransUnion.
Because payment history is 35% of your FICO scores, timely payments on a credit builder loan can raise your score significantly and quickly.
At the end of the loan term, the lender will remove the lock from the savings account and provide the loan funds to the borrower, who will hopefully have built both credit and savings. They can then use the cash for anything, just like the proceeds of an unsecured personal loan.
The unique structure lets a financial institution feel comfortable lending to a borrower with a poor credit score, and because they usually use loan proceeds as the collateral, it feels like an unsecured loan to the borrower.
Whichever option you decide to use, make sure that you pay on time every month to improve your score. These accounts are all just opportunities for you to demonstrate your creditworthiness, so make the most of them!
Resources
1. https://www.experian.com/blogs/ask-experian/consumer-credit-review/
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Nick Gallo is a Certified Public Accountant and content marketer for the financial industry. He has been an auditor of international companies and a tax strategist for real estate investors. He now writes articles on personal and corporate finance, accounting and tax matters, and entrepreneurship.