Best Credit Builder Programs

Best Credit Builder Program

What is good credit? Score-wise, the experts say it is 670 and above. This makes for a great goal, but how do you get there?

Ideally, to achieve a good credit profile and score, a balance of 3 revolving credit accounts (i.e. credit cards) and 1 installment account (personal loan, auto loan, etc.) is the best mix.

Making timely payments, and keeping your utilization low (around 10%) is also critical. These things combined can put you on the path to a perfect 850 FICO credit score. 

But if you are just starting out, carrying a lot of debt, or trying to rebuild your credit, trying to hit the 670 mark, let alone 800+, can seem nearly impossible.

The good news is there are credit builder programs and products out there that can help you, even if you have bad credit.

The Best Credit Builder Programs

Compare Credit Builder Programs

Type

Score Increase

Cost

Link

Credit Strong

Credit builder loan

Big

$15/month

Learn More

Self

Credit builder loan

Big

$25/month

Learn More

Secured Credit Cards

Credit card

Big

$300+

N/A

Authorized Users

Credit card

Big

Free

N/A

Experian Boost

Bill reporting

Small

Free

Learn More

What Is the Best Credit Builder Program?                

Credit building programs are designed to help you improve your credit report and increase your credit score. There are a variety of different credit builder programs out there, and the one that is best for you will depend on your individual needs.

If you are young and can’t obtain credit on your own, then your only option might be to become an authorized user on someone else’s credit card.

For those looking to get their first credit card, but struggling to get a financial institution to take them on, opening a secured credit card might be the best option.

If you are trying to build your credit from the ground up or trying to rebuild poor credit, then looking into a credit builder loan (secured loan) like those offered by Credit Strong and Self could be your ticket to a better credit score.

Or, if you just need that final push to get your score high enough to qualify for a better interest rate on a loan, then maybe you can visit the purple cow (and John Cena) at Experian Boost.         

Credit Strong Credit Builder Loan        

Credit Strong offers a variety of credit builder loan amounts and plans that can help you accomplish your goals.

Each of their loan plans locks away the funds for your selected loan amount in a savings account. Once you finish the loan term, you get the full value of the loan returned to you (minus any fees).

Credit Strong did a study of their customer base and found that, on average, their customers see a 25-point increase within three months of signing up. Within 12 months, customers see an average 70-point increase.

And if you’re new to credit? Customers with no credit score saw their score go up to about 640 after 12 months of on-time payments.

That’s quite the success rate!

If you are just looking to add an installment loan to your credit report to build a better credit score, then their Subscribe loan with its low loan values ($1000 or $2500) and a customizable loan term (up to 10 years) might be a good fit for you.

You can do a monthly payment for as little as $15 per month, and cancel anytime for free.

The Build and Save plan is similar to the Subscribe plan, but with a shorter repayment time (up to 24 months), you get your funds faster ($1000 or $2000) and lose less money to interest fees.         

For those wanting to build a good credit history ahead of launching a business, Credit Strong offers their Magnum plan (not to be confused with the ice cream bar).

This is a high-dollar credit builder loan that can demonstrate to a prospective lender that you can handle serious commitments.

Credit Strong also provides resources to help you learn more about credit and other finance topics.

Try Credit Strong

 

Self Credit Builder Loan        

The credit builder loan offered by Self Financial (formerly called Self Lender) is similar to Credit Strong’s Build and Save Plan in that it works like a savings account. You can customize the value of your loan using the dollar value of the monthly payment you would like.

For example, a $25 monthly loan payment would get you a $600 loan, while a $150/month payment would get you a loan for $1800.

The repayment terms on these loans are 12 or 24 months. They don’t have the option to have loans with terms up to 120 months, like Credit Strong.         

And, if your credit needs work beyond just obtaining a loan, Self offers a Visa credit card that is backed by your credit builder loan. As you make regular payments on the loan, your loan funds are used to secure your credit card.

So you can leverage your credit builder account to get your first credit card. This can boost your low credit score twice as fast!

Try Self

Secured Credit Cards         

Another option for building your credit is to open a secured credit card.

A secured credit card uses a cash deposit (that you put down) as insurance to the lender in case you don’t pay your balance. Even though you put a cash deposit down, all the charges you make are still using the credit line the bank or credit union gave you on the card.

When your statement cuts, you then make payments just as you would a regular credit card. This means that a secured credit card will report to the credit bureaus just like a regular credit card would.

When shopping around for a secured credit card, there are a few features you want to watch out for. Some secured credit cards have annual fees. And many of them have a high interest rate that could cost you a sizable chunk of change if you carry a balance.

A secured card that offers you the option to upgrade to an unsecured product later on is the best since it allows you to get your deposit back by converting your card into an unsecured credit card.

Become an Authorized User on Someone Else’s Credit Card        

One option for building credit history is to become an authorized user on someone else’s card, usually a family member.

This is an especially appealing option for young people, including college students (under 21) who find it difficult to qualify for their own credit card.

While becoming an authorized user can help your credit, being an authorized user is not weighted the same as having an account in your own name. So credit score changes are not as good as they are for owning your own card.

Also, using this method to help build your credit only works if the primary account holder (the person who holds the account you became an authorized user on) pays the bill on time and keeps a small balance. Otherwise, their bad habits could damage your fledgling score.

If you have a responsible parent, spouse, or sibling willing to let you on their account as an authorized user, it can be a fast and easy way to boost your credit.          

Experian Boost

The Experian Boost program, well known for its commercials featuring John Cena riding a purple cow, lets you quickly boost your credit score.

The way it works is that you link your bank and/or credit union accounts and Experian evaluates bills like utilities and subscriptions that don’t normally appear on your credit history unless you are delinquent.

Using this information; how much you pay, how regularly you pay, and how long you’ve been paying can give you a boost to your FICO credit score.

The downside is, this information is only added to your Experian report, and the boost amount is not very much. According to their own website, the average increase is only 12 points. If you pay your bills using a credit card instead of a debit card, you might not see a boost at all.

The reason that we included this on the list is that it is quick, easy, and free. If you pay utility bills or watch Netflix or Hulu+, it’s a painless and risk-free way to score a few extra points.

Try Experian Boost

 

FAQs

How Do I Get a Loan to Build My Credit?

There are several companies that offer credit building loans, and their requirements vary.

Lenders like Self and Credit Strong offer loans that anyone can get, no credit check required. All you have to do is apply for the loan. No minimum credit score needed.

You can also check with your local bank or credit union to see if they offer a credit building loan. Most banks and credit unions don’t offer them, but it’s worth checking.

Whichever route you go, make sure the loan that you are applying for is a credit builder loan. These loans are designed for people with poor credit (or no credit) to help them build their credit in a secure fashion.

Other loans could come with extremely high fees, or be impossible to get without good credit. And a loan rejection will only hurt your credit rating.    

How Much Time Does a Credit Builder Loan Take to Work?   

The contents of your individual credit profile will have a bearing on how quickly a credit builder loan is able to build your credit and increase your credit score.

As mentioned earlier, Credit Strong did a study of their own customers to see how much their credit builder loans could increase credit scores and how quickly the changes occurred.

Within a 3-month time frame, the average customer’s credit score increased by more than 25 points.

Looking a bit further out, at the 9-month mark, the average customer had a 40 point score improvement and at 12 months, the average credit score increase was 70 points.

So even with a 24-month repayment term, your credit score will start improving long before your final payment.

How Much Can a Credit Builder Loan Help Me? 

For those just getting started with credit, who previously had zero credit and no score, per Credit Strong’s study of their own customers, these individuals averaged a score between 630 and 650 at the 12-month mark.

While this score is only in the “fair” territory, it will likely open doors to other credit products like unsecured credit cards and traditional loans.

In that study, they found that the average customer trying to rebuild credit had an average starting score of 560. With the average increase at 12 months being 70 points, that puts the expected score at 630.

This only works if you make on-time monthly payments. Those who make late payments could actually see the credit builder loan hurt their credit and decrease their score.

So, if you are starting with a poor score or no score, a credit builder loan could drastically improve your credit. While if you have a fair or good credit score, the benefits to your credit report and score will be more modest.          

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