Who Should Get a Credit Builder Loan? (3 Ideal Profiles)

Published: 14 August 2023
Updated: 21 February 2024

Author: Noah Gomez

Credit-builders are installment loans designed for borrowers with limited, zero, or damaged credit history. Those with fewer than 5 active loans (open for less than 12 months and have a balance) on their credit report get the best results.

We call this the Ideal Builder Profile (IBP), but any borrower can benefit from credit builder loans.

who should get a credit builder loan

Consumers with clean reports and ≥ 5 active installment accounts benefit less from CBLs for the simple reason that they already have dense credit history.

If an account was opened more than 12 month earlier and doesn't currently have a balance, it is "old" and loses its impact. Credit-builder loans effectively "update" reports with aging accounts.

Ideal CBL borrowers fall into three profile categories, known as credit invisibles, stuck profiles, and recovering profiles. Each profile has specific goals and constraints best treated by one of 3 credit builder loan types.

Credit Scores are Not Relevant

We don't use credit score as a metric for ideal profiles. The reason is that scores can be misleading when based on on files with fewer than 7 accounts (Dave Ramsey thinks so too).

For example, a single credit card can push young consumers above 750 FICO, but a single mistake can bring them under 599. Scores are based on reports, and thin reports are fundamentally untrustworthy.

Any new activity (good or bad) dramatically impacts score, but lenders read the underlying report. This is why consumers with fewer than 3 cards and 4 loans stand to gain so much from credit builder installments.


  • ideal CBL borrowers have 5 or fewer installment accounts
  • Credit invisibles have no credit history
  • Stuck profiles have limited history and aren't able to improve as expected
  • Recovering profiles have damaged history
  • CBLs are not right for consumers who don't consider themselves reliable
  • Three CBL types cater to consumer priorities and cash constraints

Ideal Borrower for Credit Builder Loans

The ideal credit builder borrower is easier understood by what it is not. The ideal borrower does not have a thick profile.

Thick profiles typically have 5 or more installment and 2 - 4 revolving accounts on their report. The installment account balances do not meet or exceed 35% of income (debt-to-income ratio).

Precise figures depend on other factors such as age of accounts and loan duration, but the 5&2-4 breakdown is a useful benchmark.

Any other profiles can benefit from credit builder loans, including those with fewer than 6 installment accounts or damaged credit.

Borrower #1: Credit Invisible

Credit invisibles are consumers with zero credit history. Every American is credit invisible before their first account, and some consumers remain invisible into their 30s¹.

Credit invisibles struggle with the credit building paradox, a situation in which consumers need credit history to get debt, but need debt to establish history.

Credit builder loans help credit invisibles by offering flexible eligibility criteria — including zero credit history.

Example Credit Invisible

Imagine a recent college graduate who never used a credit card and only has student loans. She cannot access affordable car loans and uses Ava credit builder. for 6$ per month.

She pays $21 per month into a secured account for 12 months, then gets it back in a lump sum of $252. Her profile steadily improves until she gets favorable rates.

Borrower #2: Stuck Profile

Stuck profiles are consumers whose profile and score don’t evolve despite consistent payment history, credit mix, and credit limit utilization under 30%.

Profiles can become stuck for a number of reasons, and a proper credit building plan flushes out the issues. Good plans harmonize the use of loans and cards to create best-practice profiles.

Example Stuck Profile

Imagine someone in their late 20s with 5 credit cards but whose score has not improved in 12 months despite on-time payments. He gets a credit builder loan with First Community Bank for $318 in interest on $1,250 over 30 months, and his profile jumps halfway though.

Borrower #3: Recovering Profile

Recovering profiles are consumers whose credit reports contain late payments, charge-offs, and/or collection accounts as a result of mistakes or emergency spending.

These derogatory marks signal risk that borrowers must counterbalance with positive payment history, credit mix, and accounts age with comparable sums.

The recovering profile's issue arises when s/he attempts to obtain an account. Lenders typically refuse blemished reports because they carry more risk, so the borrower must turn to credit builder products for flexible eligibility criteria.

Example Recovering Profile

Imagine a 35 year old mother who wants to purchase a home. She has 2 paid-off collections accounts. She uses AFCU's credit builder loan on $5,000 over 18 months and makes a near-full recovery for $527 in interest.

Who Should Not Get a CBL

Consumers who should NOT get a CBL include those who

  • Won't make the payments. Consumers in a financial bind who have reason to believe you'll miss a payment, a credit builder payment won't help. Missing a payment has long-lasting (7 years) consequences on credit reports. The priority should be getting financially stable first.
  • Expect quick results. Some consumers expect unreasonably quick results and become frustrated during the credit building curve. CBLs are a solution, but they require minimum 6 months of commitment.
  • Already have thick profiles. Thick profiles typically have >4 installment accounts and 4 - 6 revolving accounts. Current (i.e. payable) installment credit should be less than 45% of income.
  • Have unpaid bad debts. Unpaid accounts, whether sent to collections or not, should be paid before getting a credit builder loan (unless they will age off the credit report soon). To be clear, your "total payments" refers to the collection of all due payments.

In addition, consumers who may not be right include those who plan to make a major purchase in ≤ 5 months. Those who plan to purchase, for example, a home or car within the next 5 months and are comfortable with any current loan offers should consider that CBLs can cause short-term drops in credit profile.

If you meet at least 1 of the above criteria, credit builder loans may not be right for you.

Matching Your Profile with Credit-Builder Type

Consumers can choose from three types of CBL based on their needs. Consumers whose primary goal is credit improvement benefit most from payment-secured and fully-secured options, whereas borrowers who want cash benefit most from unsecured CBLs.

Factors such as report thickness, number of delinquencies, and previous loan amounts have decisive impact on how effective credit builders. Good planning considers additional factors such as number of revolving credit lines and aging-off of previous installment credit.

Decision Making Factors

Consumers who meet one of the three borrower profiles and have fewer than 7 accounts can make an informed choice of which credit builder type to use by asking the following questions.

  • Do I have any credit history? Those with zero credit history will likely be restricted to secured CBLs (payment-secured or fully-secured) because unsecured structures usually have a credit history minimum (as low as 300, but not zero).
  • Is credit improvement or access to loan proceeds more important to me? Borrowers who prioritize credit improvement benefit more from secured CBLs because unsecured options generally have higher cost. Those who prioritize cash will prefer an unsecured CBL.
  • How much savings do I have? Borrowers with limited savings, or who struggle to set money aside, will benefit most from a payment-secured CBL.
  • What major purchase(s) do I want to make? The purpose of CBLs is to build credit with low amounts (~$4,000 average) and low interest so borrowers get better rates on large loans such as car, home, and business loans (as well as rewards card interest). However, unsecured CBLs can finance up to $50,000 purchases, whereas secured CBLs cannot finance any purchase.
  • What's the last money mistake I made? If you're prone to missing payments or poor budgeting, secured CBLs are a better choice because they have built-in fail safes to prevent irresponsible spending.
  • How many loans do I have a balance on, and how much? Borrowers with 2—5 existing loans and balances in the short of 35% of income should consider secured CBLs because they demonstrate the ability to acquire personal loans through normal channels.
  • What's my risk tolerance? Consumers with high risk tolerance and strong use cases for loan proceeds should consider unsecured CBLs. All others should consider secured options.
  • Do I ever regret spending money? This question is used to determine borrower self-discipline. Those with low self-discipline should consider secured CBLs.


Determining credit builder loan compatibility can feel overwhelming when borrowers lack financial jargon. These frequently asked questions make the topic more accessible.

Should I get a credit builder loan with no credit?

Yes, borrowers with no credit have the highest potential benefit with credit builder loans. The Consumer Financial Protection Bureau³ and the National Bureau of Economic Research² found that chances of obtaining and improving a score with CBLs are better than alternatives.

Should I get a credit builder loan with bad credit?

Yes, borrowers with bad credit can improve their scores with credit builder loans. Studies²³, consumer testimony, and credit factors all suggest CBLs have a high chance of improving credit profiles.

Should students get credit builder loans?

Credit builders are particularly useful for students with government loans. Students often receive federal educational loans that don't require payments until after graduation. A payment-secured credit builder is a great way to start building credit early, create a pool of savings, and start life after college with a healthy credit profile.

Should 18-year-olds get credit builder loans?

Many young adults have zero credit history, which makes them ideal candidates for payment-secured credit builder loans. In fact, it's even better to start building a credit profile before you're 18 in order to open more opportunities.

Should homeowners get credit builder loans?

Homeowners with mortgages will not benefit from credit builder loans unless they have additional personal loans with delinquencies such as 30+ day late payments. We do not recommend these as a first solution to poor credit because in most cases timely mortgage payments will do more to build credit, and if payments aren't timely the CBL will not help.

Should first-time borrowers get credit builder loans?

Yes, CBLs are a great way for first time borrowers to learn about credit, build savings, and improve their score before taking larger loans.


1. “Data Point: Credit Invisibles the CFPB Office of Research.” 2015. https://files.consumerfinance.gov/f/201505_cfpb_data-point-credit-invisibles.pdf. https://thickcredit.com/studies-and-reports/ncua-serving-the-credit-invisible.

2. Burke, Jeremy, Julian Jamison, Dean Karlan, Kata Mihaly, and Jonathan Zinman. 2019. “Credit Building or Credit Crumbling? A Credit Builder Loan’s Effects on Consumer Behavior, Credit Scores and Their Predictive Power,” July. https://doi.org/10.3386/w26110.2. https://thickcredit.com/studies-and-reports/nber-cbl-effects-on-behavior-scores-predictive-power.

3. “Targeting Credit Builder Loans.” 2020. Consumer Financial Protection Bureau. July 13, 2020. https://www.consumerfinance.gov/data-research/research-reports/targeting-credit-builder-loans/. https://thickcredit.com/studies-and-reports/public-cfpb-targeting-cbls.

CBLs save $1000s in interest

by thickening credit reports.

Find a builder package here.

About the Author

Noah Gomez (founder of Thick Credit) is a transatlantic professional and entrepreneur with 3+ years experience in consumer finance education. He also has 5+ years of experience in corporate finance, including debt financing, M&A, listing preparation, US GAAP and IFRS.

Thick Credit Logo


Privacy Policy
Terms & Conditions
Your Rights: CROA & FCRA

Made with ❤️ in Florida

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.

©2024 Thick Credit, All right reserved.