CFPB: CFPB Report Explores Credit Builder Loan Outcomes

July 30, 2020

The Bureau recently released a report, “Targeting credit builder loans: Insights from a credit builder loan evaluation,” and an accompanying practitioner guide.  The report explores how a consumer loan offered by a credit union affected borrowers’ likelihood of having a credit score, their actual credit scores, and their savings balances.

You can access the report and practitioner guide here.

Financial institutions and nonprofit organizations across the country offer products and services to help consumers enter the credit market and build positive credit histories.  Credit Builder Loans (CBLs) have a unique design aimed at helping a borrower establish a credit score or improve an existing score.  CBLs also give borrowers an opportunity to build savings as they make payments on their loan.

The Bureau studied a CBL offered by a Midwestern credit union.  Our research found that consumers without existing debt tended to benefit more from the CBL than people with existing debt.  The findings raise important issues around which consumers may benefit most from CBLs, and who may need additional support or benefit from a different credit building product or service.

The CBL evaluation complements a landmark 2015 CFPB report on credit invisibility, which found that about 1 in 10 adults has no credit history.  The Bureau has released subsequent reports exploring the geography of credit invisibility and the ways people first establish a credit record.

The CFPB has other resources to help consumers build and protect their credit, including during the COVID pandemic: