Home › Questions › Credit Building › What is a credit builder loan?
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September 8, 2024 at 10:18 pm #988KikoffKeymasterSeptember 8, 2024 at 10:24 pm #998KikoffKeymaster
Credit builder loans are growing in popularity in recent years. They’re an alternative to traditional loans or credit cards that help people with limited or no credit history build their credit.
You don’t necessarily need good credit to get approved for a credit builder loan, but you will need to show that you have the income to make your monthly payments. The lender might also need you to provide proof of employment.
These loans work for people who don’t have a credit score or credit report yet. Sometimes people in this situation might be referred to as “credit-invisible.” Being credit invisible makes it harder to get loans and credit cards, even if you have a job and are responsible with your money.
A credit builder loan could work for you if you have a “thin” credit file as well, meaning there isn’t enough financial info to generate a credit score. Just paying your utility bills might not provide enough information to the three major credit bureaus to calculate a credit score for you, but making payments on a credit builder loan could be enough to get a credit score for the first time.
Credit builder loans aren’t the right choice for everyone, but they are a viable one for people trying to build credit without a credit card.
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