Your credit score can impact many aspects of your financial life, from getting approved for a loan or credit card to securing a rental agreement or even a job. A poor credit score can limit your options and make it difficult to achieve your financial goals. Fortunately, there are multiple ways to help improve your credit scores and build a positive credit history; a credit builder loan,  is one of them. 

In this article, We'll share the top five credit builder loans available, as well as tips for using them effectively. Whether you're trying to establish your credit history or repair a damaged one, this guide will help you take the first steps towards achieving your financial dreams. So, let's dive in!

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What are credit builder loans and how do they work? 

Credit builder loans are a specific type of installment loan designed to help people with no credit or poor credit establish a positive credit history. Unlike traditional loans, credit builder loans are geared towards helping borrowers improve their credit scores instead of providing immediate access to funds. The loan amount is held in a secured account by the lender until the borrower has completed their scheduled payments. Once the loan is fully repaid, the borrower receives the funds, minus any interest and fees.

These loans work by allowing borrowers to make small, manageable payments over time, which are then reported to the major credit bureaus: Equifax, Experian, and TransUnion. This helps establish a positive payment history and can ultimately lead to a higher credit score. Credit builder loans are often offered by credit unions and community banks, as well as some online lenders.

The main purpose of a credit builder loan is to help individuals build credit history by demonstrating their ability to make timely payments. Making payments on time is the most important factor in determining credit scores, so a credit builder loan can be a great tool for establishing a positive credit history. 

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The 4 Best Credit Builder Loans of 2023

After learning how credit builder loans can help build your credit, you might wonder what are the choices if you are considering having one. Many banks, credit unions, and online lenders provide credit builder loans, each with their own terms and conditions. Among these, we select the 4 best credit builder loans in terms of their interest rate, loan amount, repayment period, and any fees associated with the loan. 

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Cheese Credit Builder: Best For No Redundant Fees

Cheese Credit Builder offers the simplest way for everyone to build credit. Meanwhile, it helps customers to save money and build up emergency funds too. Pay monthly to a deposit account that Cheese offers, and then Cheese will report these on-time payments to all three credit bureaus: TransUnion, Equifax, and Experian. 

At the end of the loan term, you get your money back, minus the interest. There’s only an APR charged, with no other fees; no admin fees, no membership fees, no late fees, and no upfront deposit. No credit check is required. A simple way to build your credit. 

Cheese Credit Builder also has the most flexible repayment plans compared to other credit builder loans in this article. You can choose from $500, $1,000, and $2,000 for the loan amount, and 12 or 24 months for the loan term. If interested, you can easily sign up here to start right away.

Cheese Credit Builder Loan Plans

Cheese Credit Builder Pros & Cons

Self: Most Available Credit Builder Loan 

Self is an innovative financial services company that provides credit builder loans and to individuals who are looking to establish or improve their credit score. With Self's credit builder loans, customers can make regular payments that are reported to credit bureaus, helping them build a positive credit history. 

After you open a Self Credit Builder Account, you may get access to the Self Visa Credit card. It’s a secured Visa® Credit Card, which can further help you build credit. No hard pull. 

Self is available in all 50 states.

Self Credit Builder Loan Plans

Self Credit Builder Loan Pros & Cons

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MoneyLion: Best For Add-on Features

MoneyLion is a financial app that helps people manage their money better. With their Credit Builder App, MoneyLion offers a comprehensive set of credit building tools, financial tracking features, and personalized recommendations designed to empower users to achieve a stronger financial future. 

Unlike other credit builder loans, MoneyLion gives you a portion of loan funds in the beginning. 

Membership fee: $19.99 per month. To become a member of MoneyLion and get a credit builder loan and other features, customers need to pay $19.99 each month.

Loan plan: Their credit builder loan has up to $1,000 loan amount, while the loan term is 12 months. Customers receive a portion of their loan funds right away, disbursed into an account of their choosing.

Cash advances: Customers’ membership includes access to Instacash advances of up to $300 per period. The cash advances are 0% APR. 

MoneyLion Pros & Cons

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Credit Strong: Best For Large Loan Amounts

Credit Strong offers a diverse range of credit-building products tailored to accommodate customers' unique needs. With options for both installment and revolving accounts, Credit Strong can help you enhance your credit score. The installment accounts (credit builder loans) are more suitable for people who are looking for larger loan amounts. 

Credit Strong Credit Builder Loan Plans

Install: The Install product provides credit builder loans with a 15.61% APR and a one-time $15 administration fee.

Plan 1: $48/month for 24 months; receive $1,000 at the end of the loan term

Plan 2: $38/month for 36 months; receive $1,100 at the end of the loan term

Plan 3: $28/month for 48 months; receive $1,010 at the end of the loan term

CS Max: The CS Max product also offers credit builder loans but in larger amounts. It has a 6.99% APR and a one-time $25 administration fee.

Plan 1: $49/month for 60 months; receive $2,500 at the end of the loan term

Plan 2: $99/month for 60 months; receive $5,000 at the end of the loan term

Plan 3: $199/month for 60 months; receive $10,000 at the end of the loan term

Plan 4: $449/month for 60 months; receive $25,000 at the end of the loan term

Credit Strong Pros & Cons

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Will credit builder loans raise my credit score?

There is no sure answer to this question, because a credit score is impacted by different factors and everyone differs. 

However, the purpose of a credit builder loan is to help individuals establish or improve their credit history, and timely payments on a credit builder loan can have a positive impact on your credit scores. 

• Payment history is the most important factor in determining credit scores, accounting for 35% of the total score in FICO models. By making timely payments on a credit builder loan, you can demonstrate to lenders that you are a responsible borrower, which can help boost your credit scores. 
• In addition, a credit builder loan can diversify customers’ credit mix, especially when you only have credit cards (revolving credit), as it adds a personal loan (installment credit) to your credit profile. 

However, it's important to keep in mind that credit builder loans are not a quick fix for bad credit. It takes time and consistent payments to see a significant improvement in your credit scores.

​​Additionally, if you miss payments or default on a credit builder loan, it may have a negative impact on your credit scores. Therefore, it's important to make sure you can afford the payments before taking out a credit builder loan and to make all payments on time to maximize the potential benefits to your credit scores. 

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Things To Pay Attention When Considering Credit Builder Loans

When looking for a credit builder loan, consider these factors during your search:

• A credit builder loan is different from a traditional loan. You won’t get the funds before you pay it in full at the end of the loan terms. Only a few lenders may give you access to a portion of the funds in the beginning. 
• Carefully consider if you are able to make on-time payments consistently. A credit builder loan only helps your credit if you make timely payments. Late payments may be reported to credit bureaus and could damage your credit. 

Compare different lenders’ pricing. Some lenders charge a pretty high interest, which is not ideal. It could end up costing you a large amount of money. Some lenders also charge membership fees, administrative fees, or late fees. Pay attention to these specific terms before you invest your money in the programs.

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Build Credit With Cheese Credit Builder

Take control of your financial future with Cheese Credit Builder! By signing up, you'll be on the path to building your credit and opening up new possibilities for your financial life. Don't let a low credit score hold you back – click here to join the Cheese Credit Builder program and start building your credit with confidence today!