Credit-builder loan
A credit-builder loan works backwards: the lender locks a set amount in a savings account, you make fixed monthly payments that report to the bureaus, and at the end you get the locked amount; the interest and any fees you paid on top are not returned.
Why it matters
In a CFPB-funded study the average effect on credit scores was close to zero; it worked better for people with no existing debt, while about 39% of people who opened one made a late payment on it, which can hurt credit.
Example
The lender locks $500 in savings, you pay it off, usually over 6-24 months, with each payment reported, and at the end you get the $500; the interest and any fees are your cost. A late payment on it can hurt your credit, so take one only if you can pay on time every month.
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Educational only — not financial advice. No guarantees.