Despite the economic recovery, 56% of American consumers have subprime credit scores, according to a 2015 study by the Corporation for Enterprise Development — meaning they need to improve their credit in order to obtain loans and avoid high interest rates. For those who want to boost their scores in anticipation of a home or car purchase, or to bounce back after a bankruptcy, some lenders offer a specialty product called a credit-builder loan.
About one in five credit unions offer these products, according to the Credit Union National Association. They are specifically designed to provide consumers with poor or no credit histories a way to build or improve credit. The Consumer Financial Protection Bureau identified 45 million Americans as having either no scores or credit records so scanty as to be unscorable by the three major U.S. credit reporting companies, Equifax, Experian and TransUnion.