How Credit Builder Programs Work
Credit is a big part of personal finance in the U.S. Building a credit history and credit score can be challenging for those new to the country as they sometimes don’t have the typical requirements credit card companies and banks request to open accounts or borrow money. But luckily, there are credit building programs for people in those circumstances!
We’ll explain what credit builder programs are, where you can find the best credit builder program, and how Upwardli can help you build that all-important credit history!
Credit builder programs explained
In the U.S., you need a credit history and a healthy credit score to do things like rent an apartment, open a credit card, borrow money, and in some cases, turn on utilities. But for those without a credit history, as is the case for many immigrants new to the country, there is a dilemma. Credit cards and loans are great ways to build credit.
But there is a type of loan that is meant to help build credit, and you don’t need credit to be approved. These loans are known as credit builder programs or credit builder loans.
Credit builder programs work differently than traditional loans. You apply for a conventional loan, and the lender looks at your credit history and score to determine if you qualify for approval and, if so, the interest rate you’ll be charged. The better your credit score, the lower the interest rate. Generally, those with a credit score of 760 and higher will be offered the best interest rates. You are given the money upfront and make a fixed monthly payment, including the principal amount and interest, for the term of the loan.
Banks with credit builder programs don’t provide money upfront. Once approved, you make a fixed monthly payment and get access to the loan amount at the end of the loan term. Your payments are reported to one or more of the three main credit bureaus that compile this kind of consumer financial data into credit histories and credit scores. An easy way to think about credit builder programs is that they’re a kind of “forced” savings plan.
Most credit builder programs offer loans between $300 and $1,000 with terms between six and 24 months.
The best credit builder programs
The most important aspect of a credit builder program is whether or not it reports to all three credit bureaus, Experian, Equifax, and TransUnion. When you apply for a traditional loan or credit card in the future, you don’t know which bureau the lender will pull your credit report from, so you want all three to have a file on you.
SeedFi is an online lender that offers a credit builder program and reports to all three credit bureaus. If you prefer a brick-and-mortar bank, you can search for “banks that help build credit near me” and find a list of requirements for approval and the terms.
Build credit with Upwardli
Upwardli understands how vital credit history is and how difficult it can be for those new to the country to build credit when they have no American credit history and no Social Security number.
That’s why we created our own credit builder plan. You’ll get instant pre-approval with no credit check and no deposit. Each account includes a line of credit designed to help you build credit quickly. We report your progress to the credit bureaus.
Upwardli has also created dozens of helpful resources to help you learn the ins and outs of the U.S. financial system so you can thrive in your new home.
