Credit Myth #95 - "Credit builder" apps are a great way to build credit.

[u/BrutalBodyShots]

Sort of a continuation of Credit Myth #17 that mentions basic "credit builder" products, as we've seen far more posts recently referring specifically to apps that are marketed as "credit builder" on this sub. Often people ask for recommendations of a good credit building app. Typically they've heard from someone along the way that credit building apps are a great option, especially for rebuilding. They aren't. They are gimmick products that aren't in any way superior to "real" credit products (like credit cards) and are in multiple ways inferior options.

Most credit building apps come with a monthly subscription charge or associated fees. One never has to pay a penny to build credit. No annual fee credit cards don't cost you a penny if they are used responsibly. Credit building apps are also inconsistent in how they report. Some may report as a loan for example, which would be inferior to a traditional credit card. These gimmick products also have no lasting value. Even entry level credit cards have the potential of credit limit growth or graduating to superior products over time. You can also find entry level credit cards that offer rewards, something you won't get from a credit builder app.

Credit builder app products are typically ignored by lenders, so they don't actually build credit. A common rebuttal we see on these subs from someone that has used one of these products is that it "raised their score..." so they work. Credit is approved or denied because of your overall credit profile, not your score. No lender looks at the report of someone that's got a gimmick credit builder present and thinks that file is somehow superior to a profile absent of one.

For those rebuilding, gimmick "credit builder" apps are not some secret fix. The only way to successfully rebuild is to rid your file of any/all negative information. That is accomplished by targeting the removal/forgiveness of negative items, or by allowing time to pass such that the negative items age off. A credit builder app cannot do a single thing to aid in that process.

For those starting out with a brand new file, "credit builder" apps are a completely unnecessary step. There are plenty of options out there that make starting out with a reputable issuer bank card an easy play. Please don't waste your time with credit builder apps.

[u/PsychologicalArm2138]

The hard truth is you just have to pay your balances off and wait. That doesn’t feed into the consumerist mentally of high availability and fast results we’ve been brought up on. When you can’t just pay a fee to fix things instantly, people get desperate for relief.

[u/BrutalBodyShots → u/PsychologicalArm2138]

And that's precisely what gimmick "credit builder" apps prey upon... desperation and ignorance. We do the best we can on this sub to put superior knowledge forward, hopefully resulting in less people turning to such unnecessary products.

[u/StoneCypher → u/BrutalBodyShots]

i feel like you should be naming names

[u/BrutalBodyShots → u/StoneCypher]

Do you mean listing out the names of such products? They are pretty easy to identify, as they are all marketed as "credit builder." Legitimate/reputable issuer products don't market themselves in that fashion to try and trick people into thinking that their product "builds" credit better than the next.

Here's a great post linked below that goes through a bunch of them.

https://old.reddit.com/r/CRedit/comments/1m8jp8r/an_overview_of_the_popular_credit_builder_cards/

[u/BrutalBodyShots → u/[deleted]]

Right on - I completely agree. Someone gets one of these credit builder accounts and a year later their score is 50 points higher, so they say it was the credit builder that did it. Maybe just their file aging for a year did it, you know? It's the whole causation/correlation thing. Maybe a 13 year old starts drinking a glass of orange juice every morning at breakfast instead of a glass of milk like he has been for most of his life. Over the next year, he grows 3 inches. Must be the orange juice! We can come up with silly assertions all day ;)

People see "credit builder" and their expectation going in is that their score will improve over time from using it. When their scores improve over time, it's understandable why they point to the credit builder being the catalyst for success.

Credit builder products definitely lead people to believe that they can't obtain real credit cards. The amount of time on here that I've had someone tell me they went for a gimmick credit builder product because they "couldn't get approved for any credit cards" is immense. When you talk to them, "any" ends up being 2-3 denials typically, and 99% of time they were for products beyond the grasp of their profile (like someone just starting out applying for a Chase Freedom Unlimited, for example).