Need better credit? Consider a home builder loan
If you’re struggling to get a better credit score, a credit builder loan might be a step in the right direction. As a bonus, a credit builder loan can also help you build a little nest egg!
How credit-creating loans work
A credit builder loan is a type of credit designed to help new borrowers and bad borrowers build a positive payment history. In order to build a long-standing credit history, the key is to have the payments reported on your credit reports – and a credit-builder loan gives you that opportunity. Payment history makes up the majority of your credit score: 35%.
Loans to creditors typically start around $ 1,000 or less. The terms of these loans are generally around 24 months. If you were to get a $ 1000 credit builder loan for 24 months, your payment would likely be around $ 42 per month (not including interest). That said, they are generally reasonable and easy for many borrowers to follow.
The loan is usually placed in a savings account. You make payments to the lender until you pay off the loan, then the money is returned to you! Most credit originator loans require that you make all payments on time to get the money back, so it’s important to take out a creditor loan that you can handle – so that you can actually achieve a better credit score.
How to get a homebuilder loan
Loans to creditors are offered by direct lenders, such as credit unions and banks. For the most part, they are available to borrowers with less than perfect credit or those with sparse credit histories. They are generally low risk compared to larger loans for vehicles or homes, so if you can prove that you have income, you might have a good chance of getting the loan.
A good way to increase your chances of qualifying for a home builder loan is to apply to a credit union of which you are a member. These credit institutions are owned by their members and may be willing to work with you when your credit score is worse if you are a long time member. It also increases your chances if your accounts are in good standing.
Loans to credit creators can prepare you for bigger things
Many new and bad credit borrowers may have difficulty obtaining loan approvals, such as auto loans, due to a lower credit score. Often times, traditional lenders have high credit score requirements and even having the income to pay off a loan may not be enough with a low credit score.
However, taking out a credit builder loan before applying for a car loan can add a good repayment history to your credit reports, giving future lenders more confidence in you as a borrower.
Plus, you can keep the money from a home builder loan. And if you’re still new to credit, a lender is likely to require a down payment on a car loan. Subprime lenders, or bad credit auto lenders, typically require a down payment of at least $ 1,000 or 10% of the vehicle’s sale price. A credit builder loan can be a great way to save money for a down payment on a future loan while building your credit score at the same time!
Other credit building resources
There are other ways to improve your credit score as well. Credit reporting services, such as Experian Boost, can give you the option to add your existing bills – like streaming services, water bill, insurance, and even rent payments – to your reports. solvency. By adding already paid bills to your credit reports, you can create a good repayment history that increases your credit score. This proves that you can pay off things without having to add more expenses to your budget. You can visit our resource center for more information on credit reporting services.
If you are in need of a vehicle right now but your credit score has seen better days, a subprime lender could also help. An auto loan can be a great way to build your payment history, as these are usually long term loans.
These lenders help first-time car buyers, borrowers with bad credit, and even borrowers who have gone bankrupt. They are registered with special financial concessions and Express auto loan has developed a national network of these resellers. To be matched with a dealership in your area that helps borrowers with unique credit situations, complete our free auto loan application form.