Skip to main content

What is a Credit Builder Loan?

A Credit Builder Loan is a type of loan designed to help individuals with little or no credit history establish or improve their credit score. The loan is typically offered by a financial institution such as a credit union or community bank.

The way it works is that the borrower applies for the loan and is approved for a small amount, usually between $300 to $1,000. 

The loan proceeds are then deposited into a savings account, which the borrower cannot access until the loan is paid in full. 

The borrower then makes regular payments on the loan, typically over a period of 12 to 24 months. As the borrower makes payments on time, the lender reports the borrower's payment history to the credit bureaus, helping to establish or improve the borrower's credit score.

Credit Builder Loans to Establish Credit
Credit builder loans can be an effective way to establish or improve credit score, especially for people who have no credit or bad credit history.

It's important to review the terms and conditions of the loan and to make sure you can afford the payments, as with any other loan.

Credit Builder Loans are for Your Benefit
These loans are not a profit center for the Credit Union or Organization that makes the loan.  You will pay more in payments than you will get back.  The only benefit from these loans is for You to develop your Credit and perhaps start saving.

Make Your Payment on Time
It is very important that you make the payments on time.  If you miss a payment it will be reported to the credit bureau and have a significant negative effect on your credit.  Even though you do not have access to the money until the loan is paid off.

Cancel the Loan
If you are unable to make a payment on time, call your lender and cancel the loan or extend the time before your payment is late.   
Labels:

Comments

Post a Comment

Popular posts from this blog

New Account Notification

I have four different Free ways to be notified of a new account being opened in my name on my Social Security number.  This is the critical notification that your Identity is being stolen if you did not just open a new credit line. My Discover card, Credit Karma, Chase Bank, and Credit Sesame accounts all notify me if there has been a new account opened in my name with my Social Security number.   New Credit Account I recently opened a new Home Depot* credit card.  You know those Black Friday tool sales sucked me in again.  I do it almost every year.   Anyway right on time the next day and the day after I opened a new account I was notified by Credit Karma, Discover, Chase Bank, and Credit Sessame. Why This is Important Any time your credit is checked you need to be notified.  If you did not apply for new credit it is likely to mean someone is attempting to STEAL Your Identity.   The first step in Identity Theft is for the thief to apply...
Post a Comment
Read more

What Caused My Credit Score to Drop?

The most common reasons for a credit score drop is a missed payment, a new line of credit, a credit card removed, or an increased use of your credit.    A missed payment will have a significant and lasting effect on your credit score.  I had an 810 credit score and I missed a payment on my Lowes card.  I did not realize I had a bill with them.  The bill was under $50. I realized I had not made the payment when it showed up as a negative on my Credit Karma credit score.  It dropped my well aged with over 800 credit score by over 90 points.  Check this article on how I was able to get the Lowes negative removed.???** A new line of credit like a new credit card will lower your credit score.  Depending on how much credit history you have, a new line of credit will lower your score by ten to thirty points.  Increasing your debt with a major purchase on your credit card or a new car loan, will also lower your credit score.  A friend of mine ...
Post a Comment
Read more

Bank Fees and How to Avoid Them

I hate to pay fees. Little fees, big fees, they all irritate me. In the old days of checking accounts where local companies all accepted checks, banks used to charge $15 to $25 on bounced checks. In my area of Montana they made enough in Bad Check fees to pay all of their full time tellers.  A friend who was a banker told me this. Fees are a huge revenue source for banks. I try to avoid most bank fees. My checking account is does not have a monthly fee. My savings account does not have a yearly fee.   I do have an annual fee on my lines of credit, HELOCs, but I have not been able to talk my banker out of those fees. Debit Cards Fees will grow quickly if you don't pay attention. Debit card fees can vary depending on the bank or financial institution you use, as well as the type of account and the transaction type. Here are some common fees associated with debit card usage: ATM withdrawal fees : When you use an ATM that is not owned by your bank or financial institutio...
Post a Comment
Read more