What if I told you that you could build credit AND save money at the same time?
That's exactly what a credit builder loan does. It's one of the smartest strategies for people with no credit or bad credit—and in 2026, there are more options than ever.
I've researched and compared all the major credit builder loan providers. Here's everything you need to know.
What is a Credit Builder Loan?
A credit builder loan works backward from a regular loan.
With a regular loan:
- You borrow money
- You spend the money
- You pay it back over time
With a credit builder loan:
- You "borrow" money BUT the lender holds it in a savings account
- You can't touch the money during the loan term
- You make monthly payments
- Your payments are reported to the credit bureaus (this builds your credit!)
- At the end, you get the money back (minus interest and fees)
Example:
You sign up for a $1,000 credit builder loan with a 12-month term.
- The $1,000 goes into a locked savings account
- You pay approximately $88/month for 12 months
- Each payment is reported to Equifax, Experian, and TransUnion
- After 12 months, you receive $1,000 back
- Your total cost: about $56 in interest (the real cost of building credit)
Result: 12 months of positive payment history, a credit score boost of 60-100+ points, and you get most of your money back!
Why Credit Builder Loans Work
1. Guaranteed Approval (Mostly)
Unlike credit cards, most credit builder loans don't require a credit check. If you can afford the monthly payment, you're approved.
2. Forced Savings
You're essentially paying yourself back. At the end of the loan, you have savings + improved credit.
3. Diversifies Your Credit Mix
If you only have credit cards, adding an installment loan (credit builder loan) helps your credit score because it shows you can handle different types of credit.
4. No Risk of Debt Spiral
Since the money is locked up, you can't overspend or get into debt. You're building credit safely.
The 5 Best Credit Builder Loans for 2026
I've ranked these based on:
- APR (lower is better)
- Fees (fewer is better)
- Loan amounts and terms (more flexibility is better)
- Credit reporting (all three bureaus is a must)
- User reviews and customer service
1. Self Credit Builder Account ⭐ Best Overall
Loan amounts: $25-$150/month (builds up over time)
Terms: 12 or 24 months
APR: 15.97% (as of 2026)
Fees: $9 one-time admin fee
Credit reporting: All three bureaus (Equifax, Experian, TransUnion)
Minimum credit required: None
How it works:
- Choose a monthly payment you can afford ($25-150)
- Payments go into a Certificate of Deposit (CD)
- After the term ends, you get the money back
- Optional: Self also offers a secured credit card (extra credit boost!)
Pros:
✅ Super low monthly payment options ($25/month)
✅ No hard credit check to sign up
✅ Reports to all three bureaus
✅ Can add a secured credit card for double credit building
✅ Mobile app is easy to use
✅ Strong customer reviews
Cons:
❌ APR is on the higher side (but still reasonable for a credit builder loan)
❌ $9 admin fee
Average credit score increase: 60-100 points after 12 months (according to Self's data)
Best for: Most people—especially those who want flexibility in payment amounts.
My take: Self is the most popular credit builder loan for a reason. It's straightforward, affordable, and actually works. The ability to add a secured credit card is a nice bonus.
Link: Self.inc
2. Credit Karma Credit Builder (Through MVB Bank)
Loan amounts: $1,000
Terms: 12 months
APR: 0% (No interest!)
Fees: $0
Credit reporting: All three bureaus
Minimum credit required: None
How it works:
- Apply through Credit Karma's app
- $1,000 loan is placed in a locked savings account
- You make monthly payments of approximately $83
- After 12 months, you get $1,000 back
- No interest, no fees!
Pros:
✅ 0% APR (this is HUGE—you pay nothing in interest!)
✅ No fees whatsoever
✅ Fixed $1,000 amount makes budgeting easy
✅ Managed through Credit Karma's app
✅ Reports to all three bureaus
Cons:
❌ Only available to Credit Karma members (free to join, though)
❌ Limited availability (not everyone gets approved)
❌ No flexibility in loan amount (it's $1,000, period)
❌ Must have $83/month available
Average credit score increase: Similar to other builder loans (60-100 points)
Best for: Credit Karma users who can afford $83/month and want zero interest.
My take: If you can get approved, this is a no-brainer. 0% APR means you're literally paying nothing to build credit. The only cost is the opportunity cost of having $1,000 locked up for a year.
How to apply: Through the Credit Karma app (check eligibility first)
3. Credit Strong
Loan amounts: $520-$3,000 (you choose based on your monthly payment)
Terms: 12 months
APR: Varies (roughly 15-16%)
Fees: Varies by plan
Credit reporting: All three bureaus
Minimum credit required: None
How it works:
- Choose from different "plans" (Platinum, Gold, Silver, etc.)
- Make monthly payments ($15-$95 depending on plan)
- Funds are held in a savings account
- Get the money back at the end
Pros:
✅ Very low starting payment option ($15/month!)
✅ Reports to all three bureaus
✅ Can increase credit score even faster with higher-tier plans
✅ Simple application process
Cons:
❌ More expensive than other options when you factor in total cost
❌ Some plans have setup fees
❌ Website and app aren't as polished as Self
Average credit score increase: 70+ points (according to Credit Strong)
Best for: People who want the absolute lowest monthly payment ($15).
My take: Credit Strong works, but Self offers better value for most people. Only choose Credit Strong if you absolutely need the $15/month option.
Link: CreditStrong.com
4. MoneyLion Credit Builder Plus
Loan amount: $1,000
Term: 12 months
APR: 5.99% APR
Fees: $19.99/month membership fee
Credit reporting: All three bureaus
Minimum credit required: None
How it works:
- Sign up for MoneyLion membership ($19.99/month)
- Get access to a $1,000 credit builder loan
- Make payments, build credit
- ALSO get access to cash advances, fee-free checking, and investment accounts
Pros:
✅ Low APR (5.99%)
✅ Comes with other financial tools (checking, cash advances, investing)
✅ Reports to all three bureaus
✅ Good mobile app
Cons:
❌ $19.99/month membership fee is expensive ($240/year!)
❌ Only worth it if you'll use the other features
❌ More complex than a pure credit builder loan
Best for: People who want an all-in-one financial app AND credit building.
My take: MoneyLion is more than just a credit builder loan—it's a full financial platform. If you'll use the other features (cash advances, investing, etc.), it's worth it. If you ONLY want to build credit, choose Self or Credit Karma instead.
Link: MoneyLion.com
5. Local Credit Unions (Best Rates)
Loan amounts: Varies ($300-$3,000 typically)
Terms: 6-24 months
APR: 3-10% (often lower than online lenders!)
Fees: Minimal
Credit reporting: Varies (ask first!)
Minimum credit required: None (usually)
How it works:
- Visit a local credit union
- Ask if they offer "credit builder loans" or "share-secured loans"
- Apply in person or online
- Make payments, build credit
Pros:
✅ Often the LOWEST APRs (some as low as 3%)
✅ Personalized service
✅ May offer other financial education
✅ Supporting local institutions
Cons:
❌ Must research which credit unions offer this in your area
❌ Application process is less convenient (may need to visit in person)
❌ Must confirm they report to all three bureaus (not all do!)
Best for: People who want the lowest possible cost and don't mind doing research.
My take: If you have a good credit union near you, call and ask about credit builder loans. You might get a much better rate than online lenders. Just make sure they report to all three bureaus!
How to find: Google "credit unions near me" + "credit builder loans"
Side-by-Side Comparison
| Lender | Monthly Payment | APR | Fees | Term | Credit Bureaus |
|---|---|---|---|---|---|
| Self | $25-$150 | 15.97% | $9 admin | 12-24 mo | All 3 |
| Credit Karma | ~$83 | 0% | $0 | 12 mo | All 3 |
| Credit Strong | $15-$95 | ~15-16% | Varies | 12 mo | All 3 |
| MoneyLion | ~$83 + membership | 5.99% | $19.99/mo | 12 mo | All 3 |
| Credit Union | Varies | 3-10% | Minimal | 6-24 mo | Check first! |
How to Choose the Right Credit Builder Loan
Choose Credit Karma if:
- You can afford $83/month
- You want 0% interest (best deal if you qualify!)
Choose Self if:
- You want flexibility ($25-150/month)
- You want a user-friendly app
- You might want to add a secured credit card later
Choose Credit Strong if:
- You can only afford $15/month
- You need the absolute lowest payment
Choose MoneyLion if:
- You want an all-in-one financial app
- You'll use cash advances and investing features
- You don't mind paying $19.99/month for extra services
Choose a Local Credit Union if:
- You want the lowest APR
- You prefer in-person service
- You have time to research options
What to Look For in a Credit Builder Loan
Before you sign up, make sure the loan has these features:
✅ Reports to all three credit bureaus (Equifax, Experian, TransUnion)
If it doesn't report to all three, you're missing out on maximum credit building.
✅ No hard credit check to apply
The whole point is to build credit from scratch—hard inquiries shouldn't be required.
✅ Transparent fees
Know exactly what you're paying (APR, admin fees, monthly fees).
✅ Flexible payment options
Choose a monthly payment you can ACTUALLY afford. Missing payments defeats the purpose!
✅ Good customer reviews
Check Trustpilot, Google Reviews, or the Better Business Bureau.
How Much Will Your Credit Score Increase?
Results vary, but here's what's typical:
Starting point: No credit (no score)
After 6 months: 620-660
After 12 months: 660-700
Starting point: Poor credit (500-580)
After 6 months: 550-620
After 12 months: 600-670
Starting point: Fair credit (580-669)
After 6 months: 630-680
After 12 months: 660-720
Factors that affect your increase:
- Payment history (pay on time EVERY time)
- Other credit accounts (having a credit card too helps)
- Starting credit utilization (if you have credit cards, keep them low)
- Credit report errors (dispute any mistakes)
Combining Credit Builder Loans with Other Strategies
The Power Combo for Maximum Results:
Month 1:
- Open a credit builder loan
- Get a secured credit card
- Become an authorized user (if possible)
Month 2-12:
- Pay credit builder loan on time
- Use secured card for small purchases, pay in full
- Authorized user account builds history
Month 12:
- Credit builder loan pays out (you get your money back!)
- Secured card may upgrade to unsecured
- Your credit score is now 700+
Result: You've built excellent credit in 12 months by combining strategies.
Common Mistakes to Avoid
Mistake 1: Missing a Payment
Impact: Defeats the entire purpose! One late payment can drop your score by 50-100 points.
Solution: Set up autopay from day one.
Mistake 2: Choosing Too High of a Payment
Problem: You overestimate what you can afford, then struggle to make payments.
Solution: Choose the lowest payment you qualify for. It's better to pay $25/month consistently than to struggle with $100/month.
Mistake 3: Not Verifying Credit Reporting
Problem: Some lenders only report to one or two bureaus.
Solution: Before signing up, confirm they report to ALL THREE bureaus.
Mistake 4: Expecting Instant Results
Problem: Credit building takes time.
Reality: You won't see a score boost for 3-6 months. Be patient!
Frequently Asked Questions
Can I pay off a credit builder loan early?
Yes, but there's usually no benefit. Some lenders charge a penalty for early payoff. Check your terms. In most cases, it's better to stick to the payment schedule.
Will a credit builder loan hurt my credit?
Only if you miss payments. Otherwise, it helps by adding positive payment history and diversifying your credit mix.
Can I get my money back if I miss a payment?
It depends on the lender. Some will still give you the remaining balance minus the missed payments. Others may forfeit some of your funds. Read the fine print!
Do I need a bank account?
Yes, most credit builder loans require a checking or savings account for automatic payments.
Can I have multiple credit builder loans at once?
Technically yes, but it's overkill. One credit builder loan + a secured credit card is more than enough.
Your Action Plan
This Week:
- Decide which credit builder loan fits your budget
- Check if you qualify for Credit Karma's 0% option
- If not, sign up for Self or check local credit unions
- Set up autopay immediately
This Month:
- Make your first payment on time
- Consider adding a secured credit card for extra credit building
- Set a reminder to check your credit score in 6 months
In 12 Months:
- Celebrate receiving your money back!
- Check your credit score (it should be significantly higher)
- Decide whether to reinvest in another credit builder loan or move to unsecured credit
Keep Building Your Credit
- The Complete Guide to Building Credit in America ← Full strategy
- How to Get Your First Credit Card ← Pair with a secured card
- Best Credit Monitoring Apps ← Track your progress
Have you used a credit builder loan? Share your experience in the comments!
Last Updated: January 2026
Post a Comment