The importance of credit in our lives cannot be over-emphasized.  Do you dream about possessing the latest SUV in the market, a degree from the best university or a home conveniently located near your work and with all amenities that would make your life easier? Do you realize that it is very difficult to purchase any expensive asset as mentioned above without the help of a loan?

As credit is important to us, so is a credit score. Credit score is nothing but a numerical representation of your past credit behavior. Credit score is assigned by the Credit Information Services or Credit Bureaus as they are popularly known as. A Credit score is in the range of 300-900 with higher score representing better level of creditworthiness, which in-turn translates to lower risk involved for the lenders in lending to such borrowers.

Additional Reading: All you should know about Credit Bureaus and Credit Scores in India

While you understand the importance of a good credit score, there might be some of you who possess a bad credit score. This could either be due to some mistakes made by you either due to oversight or due to some emergency situations. It might make availing any credit product a difficult task for you, which may be frustrating and distressing. But one thing good about a credit score is that it doesn't remain constant.


Your credit score is a dynamic number which changes according to your credit actions.


Just as some actions of yours have ended up getting your credit score down, in the same way, you can take some actions which can boost your credit score and take it to the level where you will be easily eligible for a loan again.

What are the Different Ways of Increasing Your Credit Score?

Your credit score is all about your credit actions. Right and responsible behavior towards your credit will see your credit score going up soon. Some of the common recommended actions for improving your credit score are:

  • Being regular with repayments on your existing credit products

  • Repaying any outstanding loan balances

  • Concentrate on keeping your credit utilization ratio low

  • Get a good mix of secured and unsecured loans

  • Do not abruptly close your old credit accounts

  • Limit your applications to credit

If you notice, most of these options work with an individual who has been approved for some kind of a credit product already. But what can those individuals who are finding it difficult to get any credit product approved due to a low credit score? How can they improve their credit score?

We have answers for that question too. As your credit coach, CreditMantri likes to guide you in the right way to achieve a perfect credit score. Hence, we present to you one of the options that an individual with a low credit score can try to start building their credit score.

What is a Credit Builder Loan?

A credit builder loan is a specialized loan that is designed to cater to the need of anyone who is looking at improving their low credit score or build up a credit profile (new to credit).

How does a Credit Builder Loan Work?

An individual with a low or no credit score often finds it difficult to make himself eligible for any credit product. And like a chicken and egg situation, without an access to a credit product, there is no way you can build or open your credit score. There are other options like a loan against a Fixed Deposit or a Secured Credit Card. However, many times, the applicant may not have an asset against which he can draw a loan.

In those situations, a credit builder loan proves quite useful.


The main idea behind a credit builder loan is to lend a small amount which the individual can easily pay back in a short duration of time and establish his/her creditworthiness.


Taking into account the situation of the individuals, Credit Builder Loans are designed by many banks or financial institutions. You can avail these loans quite easily following the steps as given below.

  • Approach a lender who offers credit builder loans

  • As you do not have a credit profile or have a bad one, the lender will look for other data points like your social media profile, bank transactions, etc to build your credit profile, which can help them make the lending decision

  • At times, banks may insist on lending only to those who have an account with them to reduce risk

  • These loans work like normal personal loans, but the amount that can be availed as a loan is quite small

  • The tenure of these loans is also shorter than normal personal loans, often ranging between 6 months to a year

  • Once the loan is disbursed, you start making regular EMIs like a normal loan

  • When there are regular EMIs being paid, the same is reported to the credit bureaus and will see an improvement in your credit score too.

What are the Types of Credit Builder Loans Available?

The kind of loan being made available may vary among lenders and a single lender may not even have all these kind of loans.

Pure Credit Builder Loan

In this kind of a loan, the amount availed as the loan is kept away in a locked savings account to which the borrower has no access to. However, the amount is repaid as EMIs over the pre-decided tenure and interest. At the end of the loan period, the entire amount along with interest is paid back to the lender. The bank may, however, charge a small fee for making the entire arrangement and reporting your prompt repayment.

Secured Credit Builder Loan

Under this arrangement, the amount in your existing savings account is secured against the loan availed. This remains locked until you pay back the loan. The rate of interest is lower here, but you should bear in mind that the amount in your savings account cannot be used till the repayment of the loan.

Unsecured Credit Builder Loan

This is the common version of the loan that is generally available. Here, the loan amount is made available to the borrower as usual and he makes the repayment as per the schedule. However, this loan carries a higher rate of interest than normal loan.

What are the Features of Special Credit Builder Loan Available on CreditMantri?

We are completely in sync with the credit needs of our clients and hence, we have a first of its kind Credit Builder Loan available in association with multiple lenders. The loan can be availed here and has added advantages of faster disbursal and minimum documentation.

A credit builder loan helps you build your credit score. However, do not forget that you will need to maintain responsible behavior towards credit even after you have repaid your credit builder loan, or your credit score may go down again.