How a credit-builder loan works
With a credit-builder loan, the lender places a small amount — typically $300 to $1,000 — into a locked savings account. You make fixed monthly payments (a promissory note) for 6 to 24 months, and each payment is reported to the credit bureaus. When the loan is paid off, the funds are released to you, minus a small amount of interest or fees.
Why it helps your score
- Payment history (35% of your score): every on-time payment adds positive history.
- Credit mix (10%): an installment loan alongside a revolving card shows you can handle both types.
- No credit check risk: many builder loans use only a soft pull or none at all.
What to look for
- Reports to all three bureaus — TransUnion, Equifax, and Experian.
- Low fees and a reasonable APR (many charge 5–15%).
- The ability to cancel early without a penalty.
- FDIC-insured holding of your funds.
Pair it with a secured card
A secured card covers revolving credit; a builder loan covers installment credit. Together they address 45% of your score formula (payment history + credit mix) while your disputes address the negative items.
Rebuilding is a two-front strategy: add positive history with builder accounts while removing inaccurate negatives. The Credit Rush handles the second front for you.