If you are having a hard time building up credit or simply raising your credit score if your credit score is low there is an option that few people are aware of to boost their credit ratings. You can obtain a small loan from a non profit lender. Statistics from Experian have shown that borrowers who have gone through a non profit lender that is associated with the Credit Builders Alliance that their credit scores improved remarkably. The Credit Builders Alliance is a not for profit that helps nonprofits report loan data to the credit bureaus.
Over a period of two years those who borrowed from nonprofit lenders saw their Vantage and Fico scores increase. Borrowers in 20% of these cases improved their scores enough to move up to a new credit risk tier. For example subprime borrowers who borrowed from non profit lenders ended up being classified as “nonprime” borrowers. While the term “nonprime” borrowers might sound bad it is actually much better to a lender then being in the subprime category. People who went this route who had been nonprime borrowers moved up to the prime borrowers category and saw significant gains as far as APRs offered on loans and credit cards. According to Experian the total number of borrowers who jumped to the prime category was 5% of those who applied for loans through the nonprofits.
The key to utilizing these loans is to go for a loan that is custom tailored to your unique credit situation and your ability to repay the loan. You need to make the payments small enough that you will never be late let alone miss a payment. The process takes time and the best route to take is to do several small loans over the course of 2 to 3 years. When you make the payments it is reported to the credit reporting agencies and your score raises over time.
You might be asking yourself why bother going through a nonprofit. Good non profit lenders will offer you a much better interest rate and they are also more likely to approve smaller loans, loans that banks and larger financial institutions view as not worth their time. These non profits cater to those with either poor or non existent credit so you are also unlikely to be turned down for a loan. This route to building credit is also much better than turning to lenders that prey upon those with sub-prime credit such as payday lenders or auto title lenders.
Many of these non profits are also providing free credit counseling services to those they lend to, which helps those who have never had credit or have struggled with managing their credit. Every year more of these non profit lending agencies form, which has been helping to combat the proliferation of predatory lenders who prey on those with no credit or poor credit.
Sadly at the moment there is no data bases of these lenders so finding one in your area might pose a challenge for you if you opt to make use of their services. There is also the matter of finding a good one. You can find these lenders by going to the creditbuildersalliance.org website and entering in your zip code into the Find a member” search tool, although this website does not list them all.