Best Credit-Builder Loans in 2026: Compare Rates, Fees and More
Thanks to no interest or fees and payment flexibility, Credit Karma offers the best credit-builder loans
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- A credit-builder loan is a financial product that can help you create or improve your credit score. Most do not provide cash up front.
- The best credit-builder loans report payments to all three credit bureaus and keep costs low through competitive rates and minimal fees.
- According to Consumer Financial Protection Bureau (CFPB) research, credit-builder loans tend to work best for borrowers with little or no existing debt who make on-time payments.
| Company/Lender | Best for… | APR | Monthly fees |
|---|---|---|---|
 | Credit-builder loans overall | 0% | None |
 | Credit-builder loans from a credit union | 5.00% | None |
 | Getting money up front | 5.99% – 29.99%
Credit-builder loans don’t all have the same costs. Some charge interest, some charge fees and some charge both. MoneyLion charges interest in addition to a monthly fee.
| $19.99 |
 | Simple credit-builder loans | 15.51% – 15.92%
Credit-builder loans don’t all have the same costs. Some charge interest, some charge fees and some charge both. Self’s monthly administrative fee is included in its annual percentage rate (APR), not charged separately.
| None |
Best for: Credit-builder loans overall – Intuit CreditKarma
- Rate
- 0%
Intuit Credit Karma’s credit-builder loan does not have a minimum credit score requirement, but you may need a score of 619 or lower to be offered a loan.
- No fees or interest charges
- Doesn’t require monthly payments
- Can contribute as little as $10 per paycheck
- Unlock access to cash with every $500 you save
- Won’t earn interest like you usually do with a bank or credit union
- Since payments are so flexible, making meaningful monthly payments can take discipline
Intuit Credit Karma’s credit-builder loan tops our list because of its flexibility and lack of interest/fees.
This credit-builder loan works a little differently than most. Credit Karma opens a Credit Builder savings account and line of credit in your name. Instead of making a set monthly payment, you choose how much to contribute.
Your deposits go toward your line of credit, are reported to the credit bureaus as payments and are then transferred to a locked savings account. Once you’ve saved $500, Credit Karma transfers the money to your savings account, where you can withdraw it or keep saving.
However, Credit Karma’s credit-builder loan can require extra discipline. Since you don’t have a fixed monthly payment, it’s up to you to make regular payments. The fewer on-time payments reported to the credit bureaus, the more slowly your credit score may improve.
Note that you are required to make a payment once every three months to keep your account active.
Best for: Credit-builder loans from a credit union – DCU
- APR
- Starting at 5.00%
- Low rates
- Loan is stored in a DCU savings account, where it will earn interest
- Members also get a free checking account with no minimum balance requirements
- Must join the credit union (but everyone is eligible)
Digital Federal Credit Union (DCU) offers credit-builder loans with competitive rates. As you make payments, your loan will earn interest in a DCU savings account.
Although you have to become a member to get a loan, anyone can join. If you don’t work for a participating employer or live in a membership-eligible area, you can make a one-time donation (as low as $10) to one of DCU’s partner organizations.
Once you’re a member, you can enjoy all of DCU’s benefits, including a free checking account, a 0.50% discount on future loans and more.
Best for: Getting money up front – MoneyLion
- APR
- 5.99% to 29.99%
MoneyLion does not charge an origination fee on its credit-builder loan, but you must pay a monthly membership fee of $19.99.
- May get some money up front
- Can earn cash back through activities, which can help you pay for membership
- Loan earns interest as you make payments
- Pricey monthly fee ($19.99) on top of interest
- Some cash back activities require a MoneyLion debit card
- Only one loan term ( 12 months)
You normally don’t receive any money up front when you get a credit-builder loan. Instead, the lender puts the loan in an account, and you make monthly payments to unlock it. That’s not always the case with MoneyLion. Depending on your creditworthiness, you could get some of your loan funds when you’re approved.
MoneyLion is expensive, though. To get access to a credit-builder loan, you have to become a Credit Builder Plus member, which costs $19.99 a month. The loan itself also has an annual percentage rate (APR) of 5.99% – 29.99%.
However, MoneyLion offers tasks that could help you earn up to $19.99 a month in cash back, covering your membership fee. Some of them are easier and promote good habits, like checking your credit score. Others require making purchases with a MoneyLion-branded debit card.
Best for: Simple credit-builder loans – Self
- APR
- 15.51% to 15.92%
- Straightforward pricing structure
- Doesn’t charge an extra monthly fee, just interest
- May qualify for a secured Self-branded credit card after three months of loan payments
- Only one loan term (24 months)
One of the biggest hurdles to building credit is simply getting started. Self helps makes it easier with its straightforward structure.
It offers four credit-builder plans (small, medium, large and extra-large), with standardized pricing. For instance, a $600 loan costs $25 a month under its “small” plan. It also doesn’t charge an extra monthly fee like some online credit-builder loan companies.
A Self credit-builder loan could also be a step toward a secured credit card. After three months of on-time payments, you could qualify for a Self-branded secured Visa card that uses your loan payments as collateral. Having an installment loan (the credit-builder loan) and a revolving line of credit (the secured card) helps diversify your credit mix, which can also boost your credit.
Read more about how we chose the best credit-builder loans.
What is a credit-builder loan?
A credit-builder loan is designed to help you build credit from scratch or improve your credit score by establishing a positive payment history.
In most cases, you don’t receive the loan funds up front. Instead, the lender holds them in a locked account — sometimes in one that earns interest, like a certificate of deposit (CD). You’ll make equal monthly payments until the loan is paid off. Once it is, the lender releases the funds to you, plus any interest you’ve earned and minus any fees you owe.
Credit-builder loans aren’t very common, but you can find them with banks, credit unions and online fintech companies.
How does a credit-builder loan work?
Payment history is the single biggest factor in a FICO Score, accounting for about 35% of your score. But it can be hard to qualify for credit until you’ve established a payment history, and you can’t establish a payment history until you qualify for credit. It’s a catch-22. That’s where credit-builder loans can help.
Credit-builder loans are easier to qualify for since they were created with no- and low-credit borrowers in mind. The lender reports payments to the credit bureaus as the borrower makes payments. On-time payments can help build a positive payment history, but missed payments can hurt, too.
How to qualify for a credit-builder loan
Approval isn’t guaranteed, but credit-builder loans usually don’t require a hard credit pull or have a minimum credit score requirement. The lender or company will likely run a soft credit check and review other factors to determine your eligibility, like your:
- Age (must be 18+, generally)
- Bank account history
- Current debts
- Income amount and consistency
- Residency status
- Membership status (if required)
How to compare credit-builder loans
It’s important to be cautious whenever considering a loan, especially one designed for borrowers with challenged credit. Most credit-builder lenders are legitimate, but some charge high fees or make unrealistic promises. When researching credit-builder loans, pay attention to:
- Credit reporting: Make sure that the company you choose reports to at least one of the three credit bureaus (Equifax, Experian and TransUnion) to get the most impact out of your credit-builder loan.
- APR: Annual percentage rate (APR) measures the total cost of a loan over a year’s time, including interest and fees. Credit-builder loans typically have fixed APRs that stay the same for the life of the loan.
- Fees: Fees can be common on credit-builder loans. Monthly fees, especially, are something to look out for. Make sure whatever benefit you could be getting out of the loan is worth the overall price.
- Loan terms: Your loan term is the length of time you have to pay off the loan. With credit-builder loans, longer terms can be better than shorter ones, as a longer term creates a longer payment history. However, the longer the term, the more total interest you’ll pay.
- Monthly payments: Late and missed payments on a credit-builder loan can damage your credit score. Make sure that you can fit a monthly payment comfortably into your budget.
- Possible interest earnings: The lender may store your loan in a CD or savings account while you make monthly payments, allowing it to earn interest. Consider how much interest each account earns. While it probably won’t offset the total cost of the loan, it can reduce some of the expense.
- Access to funds: Most lenders won’t release your loan funds until you’ve paid your credit-builder loan off in full, with some exceptions. With Credit Karma, you can access funds with every $500 you pay. MoneyLion may give you some of your loan immediately. Access to funds shouldn’t be your first priority with a credit-builder loan, but some consider it a nice perk.
Do credit-builder loans work?
Yes, but they’re most effective for borrowers with little or no existing debt who consistently make on-time payments. If you already have credit card or loan debt, you may want to look into other ways to improve your credit score. According to a study conducted by the CFPB, credit-builder loans tend to work best for people who are debt-free.
Borrowers with no debt saw their credit scores increase by about 60 points after using a credit-builder loan. For some borrowers who already had debt, scores actually dropped slightly, by about 3 points.
Still, no company can guarantee results when it comes to credit-builder loans. Consider it a red flag if a company makes a concrete promise that your credit score will go up.
Whether your credit score improves after a credit-builder loan depends on your payment habits (including whether you pay your other bills on time), how long you keep your loan open, what your score was to start with and more.
Is a credit-builder loan right for you?
Everyone’s path to a good credit score looks a little different, and a credit-builder loan might not be the best choice for you. Generally, a credit-builder loan is best if you don’t have debt, don’t have cash to make a security deposit and can comfortably afford the monthly payment. Otherwise, check out the alternatives below.
Secured credit card
Best if you can make a security deposit of $200 to $300
- Key benefit: Only borrow and make payments as you spend
- Key drawback: Requires a security deposit
A secured credit card is a type of credit card with a security deposit that acts as your credit limit. Secured credit cards often have a minimum deposit requirement of $200 or more, so these will only be an option if you have cash on hand. After a time of responsible use, you may qualify to “graduate” to a traditional credit card. At that point, you’ll get your deposit back.
Becoming an authorized user
Best if a trusted family member or friend is willing to add you to their credit card
- Key benefit: Free and doesn’t require you to borrow money
- Key drawback: Your credit is negatively affected if the cardholder makes late payments
Becoming an authorized user on a friend or family member’s credit card lets you take advantage of their payment history on that card. This is also called credit piggybacking. On-time payments can help you, but late payments and overspending can also hurt.
Experian Boost
Best for small credit score improvements
- Key benefit: Free
- Key drawback: May only see a small increase
Experian Boost is a free service that helps you get credit for payments that don’t typically affect your credit score, like rent and utility payments. Experian Boost and other rent reporting services are best used in tandem with a secured card, credit-builder loan or other strategy.
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How we chose the best credit-builder loans
To choose the top four credit-builder loans available to consumers across the United States, we systematically reviewed and evaluated the top credit-builder loans currently on the market. We rated lenders across 15 data points in three categories.
Based on our comprehensive rating system, the best credit-builder loans come from Intuit Credit Karma, Digital Federal Credit Union (DCU), MoneyLion and Self. Read more about our editorial guidelines and standards.
We gave lenders points for making their loans available to consumers nationwide, for not requiring membership to get a loan and for skipping a hard credit pull when evaluating loan eligibility.
To receive top marks, lenders must offer competitive interest rates, low fees and flexible repayment terms.
We used trusted third-party sources to assess the customer experience with each lender, awarding points to lenders who refund interest and put funds into an account that earns dividends.
Why trust LendingTree’s methodology?
Our writers and editors dig through the facts, contact lenders directly and even go through the application process ourselves if it helps better explain what you can expect. As a Certified Financial Education Instructor℠, I’m committed to breaking down complex financial details so people can make confident, informed decisions with their money.
Jessica’s experience in editing and financial education helps shape LendingTree articles that are clear, accurate and truly useful to readers. Her certification means our recommendations are built on a foundation of consumer-first financial knowledge — not just numbers.
Frequently asked questions
Yes, it’s possible to get denied for a credit-builder loan. Although a hard credit check isn’t required most of the time, lenders still make sure that you can afford the loan by reviewing other factors, like your income, current levels of debt and bank account activity.
It takes at least six months to generate a FICO Score. You could have a VantageScore in as soon as one month. Most lenders use FICO Scores.
Yes, you can pay a credit-builder loan off early, but that defeats the purpose of a credit-builder loan. Credit-builder loans help you generate or improve your credit score by establishing a positive payment history. The longer the loan, the longer the payment history you’re creating (but the more interest you may potentially pay).
Most do, but make sure by reading the company’s terms and conditions before taking out the loan.