Credit builder loans, otherwise known as “fresh start loans” or “starting over loans” are not widely advertised. Therefore, few people know what they are and whether or not they work.
So do credit builder loans actually improve your credit? Read on to find out!
Everything You Need to Know About Credit Builder Loans
What is a Credit Builder Loan?
When you take out a loan, lenders will take a look at your credit score to determine whether or not you qualify for the loan. In addition, if you do qualify for a loan, your credit score will also affect your interest rate. That goes to say, the lower your credit score, the harder it is to take out a loan and qualify for low-interest rates.
Credit builder loans are significantly different than a traditional loan. Credit builder loans are typically offered by smaller financial institutions, such as credit unions, Community Development Financial Institutions, online lenders, or lending circles. Your credit score does not affect your eligibility for a credit builder loan. Instead, lenders may have strict policies to ensure that you repay the loan. For example, you may have to meet an income threshold.
Do Credit Builder Loans Improve Your Score?
The payments you make on your credit cards and loans have the most significant impact on your credit score—making up 35% of your credit score!
Moreover, the payments you make on your credit builder loans are reported to the three major credit bureaus. Therefore, when you make payments on time, you can boost your score significantly over time.
That’s often why these types of loans are called “credit builder loans.” Anyone can take one out as long as they have the necessary income to make payments, and it allows you to build your credit score when you aren’t able to take out other loans.
The Danger of Credit Builder Loans
As mentioned, when you make payments on time, you can raise your score. However, this isn’t guaranteed.
While a credit builder loan is a great option if you are determined to make every payment on time, it won’t be of any help if you end up missing even one payment.
Additionally, you will want to be careful who you borrow money from. There can be many risks involved with no credit check loans.
Keep in mind too that you don’t have to take out a loan to increase your score. If you use your credit card the right way, you can improve your score over time. Additionally, you can try to remove negative items on your report.
Do You Need to Repair Your Credit?
If you need to repair your credit, partnering with a credit repair agency can help!
Go Clean Credit is a leading credit repair agency that is passionate about helping individuals achieve their financial dreams. They are a team of consumer advocates who are focused on your goals as an individual. That being said, they will work closely with you to repair your credit quickly and efficiently.
Go Clean Credit can help with a number of issues, including mortgage derogatories, mortgage correction, collections, late payments, bankruptcies, tax liens, student loans, identity theft, and more!
To learn more about how Go Clean Credit can help you, contact them today or give them a call at 1-866-991-4885 for a free consultation!