Best Credit Builder Loans

Credit Karma, Credit Strong, and DCU are our picks for the best credit builder loans

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If you have no savings and a bad credit score, you know how precarious a situation it can be. Yet, 57% of people with no emergency fund also either have bad credit or no credit score at all. But there is a way to address both of those problems at once.

Consider taking out a credit builder loan while you’re on at least semi-solid financial ground. These work differently from regular loans: Instead of getting the loan funds up front, your monthly payments will go into a locked savings or CD account. When you repay the loan, you unlock access to your savings (minus fees and interest) and build your credit, solving two problems at once. 

Best Credit Builder Loans of 2023

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Best for No Interest Charged : Credit Karma (Formerly SeedFi)

Credit Karma Tax App

 Credit Karma Tax App

  • APR Range: N/A
  • Line of Credit Amount: $1,000
  • Loan Terms: No fixed loan term
Pros & Cons
  • Doesn’t charge any fees

  • Helps build revolving credit

  • More flexible loan and payment options

  • Can be confusing to understand

  • Easy to back out before it helps build credit

Why We Chose It

Credit Karma's Credit Builder account (formerly SeedFi) has many advantages because it’s free to use and flexible enough to overcome some of the downsides of traditional credit builder products. However, it will take a bit more work to actively manage. Instead of a loan, it’s actually a line of credit, which helps you build credit in different ways (it may be more useful than the typical credit builder installment loan, in fact). 

When you sign up for Credit Builder, you get two accounts: a line of credit and a savings account. 

You’ll set up recurring monthly withdrawals of $10 to $100 from your line of credit into your savings account, which you can’t access until you’ve saved $500. Then, you’ll set up automatic payments from your Credit Karma Money Spend account (which you’ll also need) to pay off the line of credit. You can pause and reset this anytime, such as if you’re going through a temporary budget crunch. You’ll need to do at least one transaction every three months to keep it active, however. 

You’ll need to keep your credit builder account open for at least six months in order to generate a FICO score, if you don’t already have one. 

Borrower Qualifications
  • Must be at least 18 years old
  • Must have a credit score below 619 (based on TransUnion credit report)
  • Must have a valid, non-P.O.-box U.S. mailing address
  • Must have a valid Social Security number and a Credit Karma Money Spend account

Best for Long Repayment Terms : Credit Strong

Credit Strong

Credit Strong

  • APR Range: 6.99%–15.73%
  • Loan Amounts: $1,000–$25,000
  • Loan Terms: 2–5 years
Pros & Cons
  • Monthly FICO score updates

  • Build up to two types of credit

  • Reports to all three credit bureaus

  • Charges a $15–$25 admin fee

  • Not available in Vermont or Wisconsin

  • Revolving credit plan costs $99 per year

Why We Chose It

When it comes to building credit, longer is better—and Credit Strong offers two of the longest-term credit builder loans around. Instal features loan terms from 24 to 48 months, with monthly payments of $48 to $28, respectively. CS Max loans come with five-year terms and monthly payments of $49 to $449, depending on how much cash you want to save by the end of the loan.

In addition to installment debt (i.e., loans with regular monthly payments), Credit Strong also offers Revolv, a $500 line of credit with a $99 yearly fee and 0% interest. This will add revolving credit to your credit reports, another major player that determines your credit score. You can’t use this line of credit to buy things, but you can set up recurring transfers into a savings account that unlocks after a period of time. If you set up automatic payments from your checking account, it’s a no-hassle way to save and build credit at the same time.  

Borrower Qualifications
  • Must be at least 18 years old
  • Must have a valid bank account or debit card
  • Available in all U.S. states except Vermont and Wisconsin
  • Must have an email address and a mobile phone number or Google Voice account
  • Must be a U.S. citizen or permanent resident and have a valid Social Security number and physical mailing address

Best Credit Union : Digital Federal Credit Union

Digital Federal Credit Union logo

Digital Federal Credit Union

  • APR Range: 5.0%
  • Loan Amounts: $500–$3,000
  • Loan Terms: 1–2 years
Pros & Cons
  • Anyone can be a member

  • No payments for first 60 days

  • Reports to four credit bureaus

  • Can’t use the loan funds until it’s paid off

  • Low interest rate offered on locked funds

  • May be required to join an associated organization

Why We Chose It

Digital Federal Credit Union (or DCU for short) offers traditional-style credit builder loans. They work like this: You open the loan, DCU puts the loan funds into a locked savings account, and you make monthly payments to pay it off over time. The loan funds will earn interest in the savings account, albeit at a very small rate (0.15% as of March 31, 2023), and less than you’ll pay in loan interest. When you pay off the loan, those funds—plus savings interest—are released to you. 

As you can see, this loan isn’t intended for borrowing money for a necessary expense—it’s meant as an easy way to start building credit, and DCU even reports to four credit bureaus, instead of the normal three (Experian, Equifax, TransUnion, and Innovis). 

Borrower Qualifications
  • Must join Digital Federal Credit Union in order to receive the loan
  • Membership is free for people with ties to groups in NH or MA, people who work for certain employers, and people with family ties to existing members. 
  • Membership is also open to people who join certain organizations, such as Reach Out for Schools ($10 membership fee).  

Best for Small Loan Amounts : MoneyLion



  • APR Range: 5.99%–29.99%
  • Loan Amounts: Up to $1,000
  • Loan Terms: 1 year
Pros & Cons
  • No credit check

  • May get access to some funds upfront

  • Reports to all three major credit bureaus

  • Requires a $19.99/month subscription

  • May not get access to full loan until it’s repaid

  • Loan amount depends on your account history

Why We Chose It

If you like using apps to manage your life, MoneyLion may be a good option. In addition to several other financial products like investments and banking services, MoneyLion also offers a Credit Builder Plus membership option, but it will cost you $19.99/month. This lets you apply for a small loan with no credit check—but be warned, your membership fee doesn’t cover any loan payments. Those will be separate.  

Depending on how well you manage your regular checking account (you’ll need to allow MoneyLion access to your account in order to apply for the loan), MoneyLion may split your funds up so that some money is available now, and some is unlocked later. The better you are at handling your checking account, the more you’ll get upfront. 

Borrower Qualifications
  • Must purchase a MoneyLion Credit Builder Plus subscription for $19.99/month
  • Must live in one of the 43 states where MoneyLion offers loans
  • Must have a checking account that has been open for at least 60 days, with regular deposits and withdrawals and a positive balance

Best for Large Loan Amounts : Self

Self logo


  • APR Range: 14.14%–15.58%
  • Loan Amounts: $520–$3,076
  • Loan Terms: 2 years
Pros & Cons
  • Easy standardized loan options

  • Reports to all three credit bureaus

  • Other credit-building options available

  • Charges a $9 admin fee, plus interest

  • Can’t use the loan funds until it’s paid off

Why We Chose It

If you’re looking for an easy-to-understand credit builder loan with fewer gimmicky upsells, then Self might be a good option for you. It offers four credit builder loan plans to choose from, with pre-set monthly payment amounts and interest rates, ready to go. 

Once you’ve made three on-time payments and have a $100 balance built up in your savings account, you’re eligible to open up a Self credit card, which can accelerate your credit-building journey. 

While Self does show one of your credit scores, it’s not the actual credit score that lenders most commonly use (your FICO credit score)—instead, you’ll only get to see your VantageScore. This is usually pretty close to your FICO credit score, so it’s generally a good estimate, but not always. 

Borrower Qualifications
  • Available to residents in all 50 states
  • Must be 18 years old and have a Social Security number
  • Available to U.S. citizens and permanent residents, or people with certain visas
  • Must have a debit card, prepaid card, bank account, valid email address, and phone number

Final Verdict

While not a traditional credit builder loan, we consider Credit Karma to be one of the best credit builder loans available today because it’s free, flexible, and helps you build revolving credit. Credit Strong and Self both offer easier-to-understand credit builder loans with optional revolving lines of credit, which can round out your credit profile. 

Digital Federal Credit Union is relatively accessible to people nationwide, but be sure to check with your local credit unions to see what options, if any, are available for credit builder loans. MoneyLion can be a good option if you may need the loan funds more quickly, but otherwise it’s a relatively expensive product that offers the same thing you can get elsewhere for cheaper. 

Compare the Best Credit Builder Loans

 Loan  APR Range  Loan Amounts  Loan Terms
Credit Karma
Best for No Interest Charged
N/A $1,000 line of credit No fixed loan term
Credit Strong
Best for Long Repayment Terms
6.99%–15.73%  $1,000–$25,000  2–5 years 
Digital Federal Credit Union
Best Credit Union
5.0%  $500–$3,000  1–2 years 
Best for Small Loan Amounts
5.99%–29.99%  Up to $1,000  1 year 
Best for Large Loan Amounts
14.14%–$15.58%  $520–$3,076  2 years 

Guide to Choosing the Best Credit Builder Loans

What Is a Credit Builder Loan?

A credit builder loan is a special type of loan designed to help you build credit, rather than giving you money upfront to make a purchase like with a personal loan. Since they’re designed for people with bad credit or no credit, the requirements to get credit builder loans are easier to meet. You’ll usually just need to demonstrate that you can repay the loan and verify your identity, although each lender may have different requirements. 

When you take out a credit builder loan, your lender will put those funds into a locked savings account or CD instead of paying them out to you directly. Then you will make monthly payments, as you would with a typical loan. Depending on your lender, you might get access to those funds as you pay off your loan, or in a lump sum at the end. 

Your money may earn interest while it’s sitting in the locked account, although it’ll probably be a very small amount and less than the interest you pay on your loan. (Still, anything helps.) By the time you pay off your loan you’ll have a demonstrated record of payments to kick-start your credit on a positive note, and you’ll have a hefty pot of savings to boot—as long as you make all of your payments on time. 

It’s a good idea to set your payments on autopay for any loan, but especially for a credit builder loan. It’ll prevent you from paying any late fees and help ensure that you actually do build good credit. 

Pros and Cons of Credit Builder Loans

It’s important to know that credit builder loans generally do not work like regular loans that give you money when you need it. They’re designed to help you build credit and savings at the same time. Here are some things to think about as you weigh your options:.

  • Helps you build credit and savings at the same time

  • Loan interest rates can be quite low

  • Easier to qualify for than most other loan types

  • Can be confusing

  • Money isn’t usually available until you pay off the loan

  • Statistically more likely to lower your credit score if you have other debt, according to the CFPB (and more likely to increase your score if you have no other debt)

Alternatives to Credit Builder Loans

If you’re looking to grow your credit score, credit builder loans aren’t always the best method. Here are some other good ways to get started:

  • Open a secured credit card
  • Apply for a loan with a trusted and creditworthy co-signer (but only if you actually need the funds, like with a car loan).
  • If you’re going to college, take out a student loan or student credit card.
  • Ask to be added as an authorized user on a trusted friend or family member’s credit card.
  • Use a service like UltraFICO or Experian Boost that gives you credit for other good financial habits, like managing your bank account well or paying other bills on time.

Frequently Asked Questions

  • How Quickly Will a Credit Builder Loan Build Your Credit?

    Most lenders report your payments to the credit bureaus once per month, so it will take at least this long to get started. If you don’t already have any information listed on your credit reports, it’ll take at least six months of payment history before FICO will be able to generate a credit score for you.

    One study of credit builder loans from the Consumer Financial Protection Bureau looked at how successful credit builder loans were in helping people build credit, and the results were mixed. Borrowers who already had debt actually saw a decrease in their credit scores because they were already financially stressed and thus more likely to miss a loan payment. Borrowers with no debt, however, generally saw their credit scores improve by 60 points after their 12-month loans were up. 

  • How Much Can You “Borrow” With a Credit Builder Loan?

    Most credit builder loans range from $300 to $1,000, although it’s also easy to find lenders that offer higher maximum loan amounts. 

  • What Are the Risks of Credit Builder Loans?

    If you’re not able to make your payments on time (for the loan and other debts) it could damage your credit score just as you’re starting to build it, and this happened to about 39% of borrowers in a study done by the Consumer Financial Protection Bureau. 

    Although the loan funds may be put in an interest-bearing account, the interest you earn is usually less than what you can get with a high-yield savings account on your own. But you don’t risk losing your money—generally, you can back out of the loan at any time and get back any installment payments you’ve made.

  • Can You Pay Off Credit Builder Loans Early?

    Yes, you can generally pay off your credit builder loans early. However, unlike other loans, it’s best to continue paying them for their full term because this helps demonstrate a longer record of on-time payments, which is the whole point of the loan. In general, the longer your record of on-time payments, the better it is for your credit.


Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews. To rate credit builder loans, we collected hundreds of data points for the top lenders, including loan amounts, APRs, fees, and repayment terms, to ensure that our reviews help users make informed decisions about their banking needs.

Portrait of a young adult woman paying her credit building loan

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Article Sources
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