Best $500 Credit Builder Loans
By Noah Gomez
Published: 18 July 2024
If you have minor blemishes on your credit report, or just don't have any loan history at all, a small credit builder loan is probably one of the best options available to you.
That said, you don't want to choose an option so small that the positive history doesn't have lasting impact. A $500 option will do the trick for most people.
Word of warning, if you have negative marks (lates, collections, or charge-offs) in excess of $1,000 then we don't recommend a credit-builder with principal under the same amount. You can find our top credit-builder picks for virtually every case here.
Comparative Summary of 7 Offers
#1 Pick
KeyPoint Credit Union
Best for 0% Interest (AZ, CA, OR, TX)
Est. APR (%):
Avg. Principal ($): 500
Avg. Duration (mnths): 18
Credit Check: No Credit Check
Almost no list of CBLs is complete without mentioning KeyPoint Credit Union for the simple reason that it's a true 0% interest offer, no strings attached.
The downside is that it's only available in Arizona, California, Oregon, and Texas. If you're based outside these areas, check out offers available in your state here or keep reading.
#2 Pick
Cheese
Best Online Option for $500
Est. APR (%): 10.5
Avg. Principal: 1250
Avg. Duration (mnths): 12
Credit Check: No Credit Check
For a national offer available in almost every state, we think Cheese credit builder is a highly competitive $500 option. Principal amounts range as high as $2,000 with an average of $1,250, which provides additional flexibility in case you're unsure.
Most importantly, at 10.50% APR, it's slightly higher than the national 7.78% average but only comes out to a few hundred dollars over a 12 month period.
If you have zero credit history or a few small negative marks, you won't have to worry about approval because Cheese does not run a credit check.
#3 Pick
Self-Help Federal Credit Union
Best $500 with Soft Inquiry
Est. APR (%): 4
Avg. Principal ($):
Avg. Duration (mnths): 15
Credit Check: Soft Inquiry
We think Self-Help credit union makes a strong $500 offer. It's primary territories includes California, Illinois, and Wisconsin, but the credit union has an uncommonly easy membership channel: simply pay a one-time $5 membership fee.
Many credit unions offer membership through affiliation with nationwide charitable organizations as a means to support non-profits and open their services to the country, but the only one we know that allows a simple membership fee is Self-Help FCU.
Plus, with an APR of just 4%, it's far below the national average (7.78%) and is available for terms ranging 6 — 24 months, which is less common and provides additional flexibility for you.
#4 Pick
Self
Best for Availability in Every State
Est. APR (%): 15.85
Avg. Principal ($): 1798
Avg. Duration (mnths): 24
Credit Check: Soft Inquiry
Self.inc is one of the more well-known credit builder loans because they were early to market and have strong marketing.
Though they are not the most competitive from a cost perspective (15.85% APR on average), the offer is very clean. Many people are attracted to the ease with which Self handles customer service and with which they present costs to the consumer (you can see it in the image below).
For an easy option with a soft pull (that doesn't hurt your score), Self.inc is a strong contender.
#5 Pick
Milford Federal Bank
Best in Massachusetts & Rhode Island
Est. APR (%): 3
Avg. Principal ($): 1250
Avg. Duration (mnths): 18
Credit Check: Hard Inquiry
Milford Federal Bank is one of few banks to offer a credit builder, and it is unfortunately tucked away in Massachusetts & Rhode Island. But it makes a strong offer with only 3% APR — something very few credit builders can do.
With durations ranging from 12 to 18 months and a principal range from $500 to $2,000, anyone looking for some flexibility on a small credit-builder living in these northeastern states have a strong option in Milford Federal Bank.
#6 Pick
Build (aka "GetBuild")
Best $500 via App
Est. APR (%): 15.81
Avg. Principal ($): 1092
Avg. Duration (mnths): 18
Credit Check: No Credit Check
Build (aka getbuild) offers $520 and $539 credit builders through a very straightforward app. The pricing is very transparent. You'll only pay $46 — $89, and the interface is easy to use. For anyone interested in a quick and accessible option at (about) $500.
#7 Pick
BankPlus
Best Unsecured $500 (Mississippi, Lousiana & Alabama)
Est. APR (%): 5.07
Avg. Principal ($): 750
Avg. Duration (mnths): 18
Credit Check: Hard Inquiry
BankPlus offers a special program called CreditPlus that includes subsequent $500 and $1,000 credit builder loans + a mandatory financial literacy seminar.
We like BankPlus because doubling installment accounts is a very smart (though advanced) credit building technique. They believe enough in the literacy training to make half of the $1,000 loan unsecured. That means you'll get the money up front, and BankPlus trusts you to manage it well despite damaged credit.
The catch here is that if your credit score is below 500 (or non-existent), you will need to start with a separate credit builder loan to access the program — the $1,000 loan requires a 600 minimum score that you'll work to with the $500 loan.
Evaluation Criteria
We base our selection on quantitative information collected and stored in a proprietary database, which represents the largest aggregation of credit builder loans in the world.
To
accommodate the largest number of consumers, we assume an optimal loan
duration as any term between 6 and 24 months.
Additionally, we focus first on loans with $500 in loan principal mentioned explicitly in the offer. We then expand the search to all offers with $500 in their range, with special consideration for offers with other exceptional terms such as national availability, user experience, and of course cost.
For most consumers, interest cost is the most important decisional factor. This list has no conflicts
between low loan APR and ideal $500 principal and healthy duration ranges. Several offers are limited to small geographical areas because their terms are legitimately above the average offer nationwide.
Counterintuitively, many so-called local
credit unions are available nationwide through a system of non-profit
affiliation or belief alignment. It's important to keep this in mind as you examine the options whose names may suggest geographical restriction.
What is a credit builder loan?
Credit builders are personal loans that help consumers with little or no credit improve
their score by applying a combination of flexible eligibility criteria
and deferred principal distribution. Lenders include banks, credit
unions, and online lenders at an average principal of $3,283 and APR of 7.78%.
Read more here.
Are credit builder loans worth it?
If you're looking for a credit-builder product, chances are CBLs are a good choice. They do everything you need with damaged or limited credit history: create payment history, anchor installment debt on your report, and add to a healthy mix of debt types.
Put differently, they are worth it if you struggle to get normal personal loans, you have
damaged or zero credit history, or you simply have no installment
credit on your report.
Critiques sometimes call them "gimicky," but
the reality is that they get around a common misconception: that your
credit depends on the amount you borrow. It does not.
A small principal
loan, even with above-average interest, costs pennies compared to the
benefits you gain from having positive installment history on your
report.
Thick Credit is not a credit repair organization, a credit conseling agency, or a debtor education providor. It does not act on your behalf to communicate with credit reporting agencies or provide pre-bankruptcy credit counseling and pre-discharge debtor education for bankruptcy.
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