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Best Credit Builder Loans in Canada in 2023

Karen Stevens

Apr 26, 2023 9 min read

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Best credit builder loan Canada

Building up your credit score can be challenging, especially if you have a short credit history or have had some negative financial incidents in the past. Fortunately, that’s where credit builder loans come in. Credit builder loans can be a valuable tool to help you establish or improve your credit score. Read on to learn about Canada's best credit builder loans in 2023, including their benefits, drawbacks, and alternatives.


Borrowell offers a credit-builder loan with three different options; “Starter,” Plus,” and “Pro.” The monthly payments range from $10-$50 per month. After the 36-month term, you’ll get $240-$1,440 back in your account, depending on the monthly payment amount you choose.

No matter which option you choose, the loan works the same way. You make your monthly payment of your desired amount, and Borrowell reports your on-time payments to Equifax Canada (the largest consumer credit bureau in Canada). If you make consistent payments and ensure that you are financially responsible with any other credit you may have outside of this loan, your credit score should improve with time.

In fact, Borrowell Credit Builder users see an average credit score increase of 41 points within the first five months of using the program¹.

  • Interest rate: N/A

  • Loan Term: 36 months

  • Maximum loan amount: $1,440

  • Eligibility: There are a few criteria for applicants:

    • Must be a Canadian citizen or permanent resident

    • Must be at or above the age of majority

    • Must have at least six months of credit history

    • Must have at least two credit products (such as a loan, line of credit, credit card, etc.) on file with Equifax

    • Must live in Canada, outside of Quebec, Saskatchewan, or New Brunswick


This program is straightforward to use, and the different payment levels mean you can pick the amount you know you can pay back. Missed payments are a significant reason your credit score might be low, so knowing that you’ll never miss a payment is very helpful.


Currently, this program is unavailable in Quebec, Saskatchewan, or New Brunswick, so you’ll have to consider other options if you live in one of these provinces.

Credit Builder Program

Koho Credit Building

This credit-building tool is a line of credit that might help you improve your credit score in as little as six months. To sign up, you need to have an existing KOHO account. From there, you pay $5-$10 a month for the service. KOHO handles the loan part; all you have to do is ensure you have enough to cover the monthly payment account in your account at all times.

  • Interest rate: N/A

  • Loan Term: 6 months

  • Maximum loan amount: N/A

  • Eligibility: No application – guaranteed approval


The most significant benefit to this program is that you can build up your credit score for a relatively low cost. You can quit at any time. If you feel like your credit has improved, or you’re unable to make the monthly payments and don’t want to risk damage to your credit score, you can cancel without obligation. Then, when you’re ready to pick up again, you can do so when it's convenient. At most, this product will cost you $60 over six months, so it’s not a huge investment for most people.


You have to have a KOHO account. If you weren’t planning on becoming a KOHO customer, you’d have to look elsewhere for a credit-building product. Unfortunately, it also doesn’t help you with your ongoing financial issues. You may have poor credit because you overspend and don’t know how to budget. If you don't seek financial advice or make a long-term plan, you may find yourself with a low credit score again after using this product.

Credit building

Refresh Financial

Refresh Financial offers a multi-tiered credit builder loan at a slightly higher monthly payment than some of the other options on this list. If you can afford it, taking out and paying back a larger loan over a longer period may have more of a positive impact on your credit score.

Payments are $21.37 or $42.74 for 36 months or $60.97 or $121.94 for 60 months. The money is held in an account for you (minus any fees), and at the end of the term, you’ll get $1,250-$10,000 back in savings, depending on which option you choose.

  • Interest rate: 19.99%

  • Loan Term: 36-60 months

  • Maximum loan amount: $10,000

  • Eligibility: Guaranteed approval


This program will benefit anyone considering approving their credit score over the long term. As mentioned above, if you can cover the monthly payments (and you make sure you are practicing good credit habits in general), you should see an improvement in your credit score.


Once again, Quebeckers cannot take advantage of this particular credit-building product. Also, if you can only swing $10 a month toward a credit-building loan, it’s better to go with a different product rather than risk missing payments.

Credit Unions

If you want to shop around and check out various lenders, looking at what different credit unions can offer you is a good idea. Typically, you must become a credit union member, and then they will provide the loan details based on your situation and the credit union’s policies. A good place to start looking for a credit-building loan from a credit union is Loans Canada and LoansConnect, two platforms that allow you to research and compare loans from various lenders.

  • Interest rate: Varies

  • Loan Term: Varies

  • Maximum loan amount: Varies

  • Eligibility: Varies


You may be able to find a credit union that offers payments and terms that work well with your budget and timeline.


You’ll have to become a member of that credit union. If you want to bank elsewhere, you may have to consider other options or open multiple accounts, giving you more financial products to keep track of.

Credit repair

Why Would Someone Need a Credit Builder Loan?

There are a few reasons why someone might need a credit builder loan. Maybe they’re a newcomer to Canada, a student, or someone who has never taken out a loan before and they don’t have a long enough credit history. Or maybe they have a low credit score because of a history of missed or late payments. Whatever the reason, a credit builder loan helps establish or rebuild your credit by reporting your payments to a credit bureau.

What is a Credit Builder Loan?

A credit builder loan is designed to help you build or improve your credit score. Unlike traditional loans, you don’t get the money upfront. Instead, the money is held in a savings account or certificate of deposit (CD) while you make payments on the loan. Once you have completed all the payments, the funds are released to you, sometimes along with any interest that has accrued.

How Does a Credit Building Program Work?

Credit-building programs work by helping you establish or improve your credit history. These programs usually involve taking out a credit builder loan, making on-time payments, and monitoring your credit score. Some programs also offer credit counselling and financial education to help you manage your finances more effectively in the future, but if your program doesn’t, it might be worth seeking out that help elsewhere.

How to Apply for a Credit Builder Loan

To apply for a credit builder loan, you typically need to provide proof of income, a valid ID, and a Social Insurance Number (SIN). You may also be required to provide additional documentation, such as bank statements or proof of employment. Some lenders may also require a deposit, which will be held in a savings account or CD until you have made all the payments on the loan.

How Long Does it Take to Improve My Credit Score with a Credit Builder Loan?

The length of time it takes to improve your credit score with a credit builder loan depends on several factors, including your current credit score, the amount of the loan, and the length of the repayment term. However, very generally, it can take six to 12 months to see a significant improvement in your credit score.

Healthy credit score

When is it a Good Idea to Get a Credit Builder Loan?

If you have a limited credit history or a low credit score, you should consider getting a credit builder loan well before you want to apply for a traditional loan since it can take a minimum of six to 12 months to see a change in your credit score. A credit builder loan can help you qualify for better rates and terms if you plan to apply for a mortgage, car loan, or another type of loan.

What are the Drawbacks of Obtaining a Credit Builder Loan?

Credit builder loans are helpful tools, but they do have some drawbacks you should be aware of. One disadvantage of obtaining a credit builder loan is that you will not have access to the funds until you have made all the payments. Additionally, some credit builder loans may come with high interest rates or fees, making them more expensive than other types of loans. Finally, if you miss a payment or default on the loan, it can negatively impact your credit score.

Are There Any Other Options for Improving My Credit Score?

While credit builder loans can be a useful tool for improving your credit score, there are other options to consider. One option is to get a secured credit card. With a secured credit card, you make a deposit upfront that acts as collateral for any purchases you make with your card. You then use the card and make regular payments, which are reported to the credit bureaus, and this can help you establish a positive payment history.

Another option is to become an authorized user on someone else's credit card. This can allow you to benefit from their positive payment history and improve your credit score. Whatever you choose, make sure you make on-time payments and keep your debt-to-credit ratio low.

What is a Good Credit Score in Canada?

In Canada, credit scores range from 300 to 900. While lenders might have different requirements, most consider a good credit score to be 660 or higher. This score demonstrates that you have a positive credit history and are a low-risk borrower, making getting loans and credit products easier.

What Credit Score is Needed to Obtain a Mortgage?

The credit score you need to obtain a mortgage will vary depending on the lender and the type of mortgage you are applying for. In general, however, most lenders will want to see a credit score of at least 650. If your credit score is lower than this, you may still be able to qualify for a mortgage, but that might mean you need to pay a higher interest rate or provide a larger down payment.

What Credit Score is Needed for a Car Loan or Car Lease?

The credit score needed to obtain a car loan or lease depends on the lender. However, as with mortgages, most lenders prefer a credit score of at least 680. If your credit score is lower than this, you may still be able to obtain a car loan or lease, but you may need to pay a higher interest rate or provide a larger down payment.

The Bottom Line

If you want to improve your credit score, you have several options, including credit builder loans. These loans can be a valuable tool for establishing a positive payment history and improving your credit score over time. However, they are not the only option. You can also consider secured credit cards, becoming an authorized user, and other credit-building strategies.

Managing your credit responsibly and making on-time payments allows you to improve your credit score and access better financial products and terms in the future.

Karen Stevens
Karen Stevens
Personal Finance Writer

Karen Stevens is a personal finance and business writer with experience across industries from travel to tech. She believes personal finance should be accessible to everyone, and is always on the hunt for that next money-saving hack.

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¹ Based on Credit Builder members with an Equifax Canada ERS 2.0 credit score below 600 who signed up for a Credit Builder account after May 2022 and made on-time payments on their Credit Builder account. Individual results may vary. Other credit score factors, including late payments and activity with your other tradelines can impact your credit score.