Credit-builder loans explained

A loan where you pay first and get the money at the end. How it builds credit and what to watch for.

How it works

The lender puts the loan amount in a locked savings account or certificate. You make monthly payments, and when the loan is paid off, you get the money.

Why it helps

Each on-time payment is reported to the credit bureaus, which builds payment history. It also adds an installment loan to your credit mix.

Where to find one

Credit unions and community banks often offer them, as do some online lenders. Ask which bureaus they report to and what fees or interest apply.

Watch out

A missed payment is reported too and can hurt your credit. Choose a payment you can comfortably make every month.