 TITLE: How Do Credit-Builder Loans Work? CONTENT: What Is a Credit-Builder Loan and How Does It Help Build Credit?\n----------------------------------------------------------------\nCredit-builder loans are typically for small amounts of $1,000 or less. These loan usually have a repayment term of six to 24 months, so it's a short-term loan borrowers primarily use to boost credit.\nWith 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. While you make payments, the lender reports your payment activity to the three major credit bureaus (Experian, TransUnion and Equifax).\nThe idea is that you can show off your ability to make regular, on-time payments over a period of time. That's important because payment history typically accounts for 35% of your credit scores. In the end, you not only improve your credit history but also save money you might not have otherwise.\nOnce you increase your scores, you can start qualifying for other forms of credit, such as personal loans or credit cards, which can further improve your credit (provided you keep making payments on time). END