How to Get a Credit Builder Loan

A credit builder loan can be used by an individual who has a short credit history or no credit history at all. The purpose of the loan is not just to finance a purchase but to begin establishing the borrower's credit history.

Many banks and lenders offer loan programs called "credit builder loans" while others do not specifically name the product. Any time you are taking a loan to build up your credit, you are taking a credit builder loan.

Instructions

1

Check your credit score. AnnualCreditReport.com, a website supported by the major credit bureaus, allows you to check your credit rating once a year for free.

2

Inspect your expanded credit report. Your credit report will list your score, but it will also have a section that explains how the score was arrived at. For example, missed or late payments will be listed. If your report is free of these issues, you may see a negative comment noting your credit score is low because your credit history is too short. This puts you in an ideal position to benefit from a credit builder loan.

3

Contact a lender that offers credit builder loans. Remember, not all lenders will call the loan by this name. Ask the lender if it offers loans for individuals with a short credit history.

4

Provide verification of your permanent address and income. A permanent address is necessary so the lender can find you in case of missed payments. Income is critically important for any borrower without credit. Your income shows the lender you will be able to afford your payments. Proof of income can be provided by a paycheck stub, verification from your employer or a bank statement showing your average monthly account balance.

5

Provide collateral as necessary. Without credit, you may have to put up collateral in order to get a loan. You can use any asset as collateral, including a car, savings account, home or stock certificate.

6

Make your payments on time until the loan is paid off. Because the purpose of this loan is primarily to build credit, don't refinance, consolidate or prepay it. If you do so, you will lose the benefits to your credit rating.