Credit building tools.

The first steps to great credit, and some tools to help you sustain a strong credit score.

A Credit Builder Loan: Turning small actions into a big result.

Credit Builder Loans combine a secured loan with a savings account for the express purpose of establishing credit. It’s a fantastic tool to help you go from no credit to a prime score.

It starts with a small dollar loan (typically $200-$500) from a group like Self-Help Federal Credit Union or Self, Inc. Unlike normal loans, you don’t take the money upfront. Instead, it’s deposited into a locked savings account where it stays until you’ve paid off the loan in full, usually over the course of six months to a year. Each payment is reported to the credit bureaus, and that information helps you build a strong credit score. If you have no score when you open a Credit Builder Loan, you’ll likely have a prime (over 660) score within six months (assuming you don’t have any negative information, like a new collection reported to the credit bureau during that time).

As soon as you pay off the loan, the lender sends you a check for the loan amount. You saved that amount and built credit at the same time. The Credit Builder Loan is a powerful tool that helps you establish or improve your credit in a manageable way.

Secured credit cards as credit building tools.

The key to credit building is to have at least one loan or credit card that reports to the credit bureaus at all times. Credit cards are perhaps the best vehicle for credit building, as they can be used indefinitely and can boost your credit score more than an installment loan, if you manage them well.

If you apply for a credit card and get turned down, it’s worth it to ask for a secured credit card. Unlike a regular credit card, a secured credit card requires you to make a deposit for all or part of the credit limit on the card. That deposit lowers the risk to the credit card company, but gets you the card you need to build the score you want. If you manage the card well, making on-time payments of at least the minimum amount due and keeping your balances low (try to use no more than 30% of the limit on the card), the bank will return your deposit and graduate you to a regular card, usually within 18 months. It’s a simple way to further build your credit score.