A credit builder card is a specialist credit card that is designed for people with a low credit score or little to no credit history. Having a limited or poor credit score may prevent you from getting a standard credit card, so a credit builder card could be an option if you need to access credit.
There's no option to transfer to an unsecured card. Once you've built your credit score to the point where you no longer need a secured credit card, you can just close the account. Or you could use it as a functioning debit card since there are no fees or interest rates.
They're similar to traditional cards (they extend credit, charge interest and may offer rewards) but require you to make a deposit (typically $200) in order to access a credit limit. Whatever amount of money you deposit becomes your credit limit. If you want a higher credit limit, you'll need to deposit more money.
Credit-builder loans can be a good option for people who have a few hundred dollars they're willing to temporarily part with in order to build their credit. Though you won't get all of your money back, considering that you'll have to pay interest, the improvement in your credit is worth more.
Using Cards with a Built In Path to Higher Credit
In addition to establishing good credit habits like paying your bill on time each month and keeping your credit utilization ratio low, credit-building incentives can potentially help you build credit even faster.
It will take about six months of credit activity to establish enough history for a FICO credit score, which is used in 90% of lending decisions. 1 FICO credit scores range from 300 to 850, and a score of over 700 is considered a good credit score. Scores over 800 are considered excellent.
A credit-builder loan is exactly what it sounds like — its sole purpose is to help people build credit. Typically, the money you borrow is held by the lender in an account and not released to you until the loan is repaid. It's a forced savings program of sorts, and your payments are reported to credit bureaus.
Even the Consumer Financial Protection Bureau (CFPB) agrees that credit builder loans can be a boon for consumers who need to build credit. According to a CFPB report, those who applied for one without an existing loan increased their likelihood of a good credit score by 24%.
How Much Will A Credit Builder Loan Raise My Credit Score? According to a Consumer Financial Protection Bureau (CFPB) study on credit builder loans, study participants without existing debt saw their credit scores increase by 60 points more than participants with existing debt.
You also have the option to pay your bill manually—with money from your Chime Checking Account or another bank account. To manually make a Credit Builder payment, select Settings → Credit Builder → Safer Credit Building → and then tap on “Make a payment now.”
An Academy Bank Credit Builder Secured Visa® Credit Card is perfect for those looking to improve their credit score. With automatic reporting to the three major credit bureaus, Academy Bank is here to help you build a better credit history.
Can you withdraw cash from the Chime Credit Builder Card? Yes! Just like your Chime Debit Card, you can withdraw cash using your Credit Builder Card. Get cash fee-free² at 60,000+ ATMs found in stores you love like Walgreens, 7-eleven, CVS, and more!
Chime offers the Chime Credit Builder Visa® Credit Card, a secured credit card issued by Stride Bank. It works differently from other secured cards because you can adjust your credit limit by adding more money to your card, much like a prepaid debit card.
Chime's Credit Builder Secured Visa Credit Card* is a secured credit card with no annual fee or interest that allows you to build your credit. Chime reports payments to major credit bureaus, so everyday purchases like gas, groceries, bills, and subscriptions can all count toward your credit score.
A credit-builder loan can hurt your credit score because some lenders perform a hard inquiry into your credit history when you apply, which can drop your score by about 5 to 10 points. Lenders will also report negative information to credit bureaus if you miss a credit-builder loan payment or make a late payment.
Because they don't require good credit for approval, credit builder loans are an effective option for anyone looking to improve their credit history. You may have to satisfy some additional requirements, however, and these may vary slightly from lender to lender.
You don't need to borrow a lot of money to build credit. Many credit builder loans are typically for $500 to $3,000. The lender reports your account to the credit bureaus.
With credit-builder loans, money you borrow is set aside for you in a secured savings account or certificate of deposit (CD) while you pay off the loan. Once you make all of the monthly payments—with interest—then you receive the funds.
If you're forced to pay off a credit-builder loan early, the good news is that there likely will be no financial penalty for doing so. It's theoretically possible for a credit-builder loan to have a prepayment penalty—a charge you must pay if you pay the loan off ahead of schedule—but most credit-builder loans do not.
Depending on where you're starting from, It can take several years or more to build an 800 credit score. You need to have a few years of only positive payment history and a good mix of credit accounts showing you have experience managing different types of credit cards and loans.
A FICO score of 650 is considered fair—better than poor, but less than good. It falls below the national average FICO® Score of 710, and solidly within the fair score range of 580 to 669.