KOHO Credit Building could help you build a better credit score. It’s hard to live without access to some kind of credit. You might need a credit card to book a hotel or make online purchases. Overdraft protection on your bank account could be handy to cover expenses if you run short of income. Alternatively, you might need a loan to buy a car or want a line of credit available in case of a major expense.

Financial products have evolved significantly in recent years. Some companies now offer the option to build your credit without a credit card. KOHO is a Canadian company that provides a prepaid, credit-building line of credit. Here's how it works:

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Who is KOHO?

KOHO is a Canadian fintech company based in Toronto, Ontario. The company is not a bank but is backed by the People’s Trust. The account they offer is essentially a prepaid Mastercard. You deposit the funds to your card by eTransfer, load money through an existing Visa debit, or by direct deposit.

You can use the funds for purchases, daily expenses, and bills. Two of the three accounts KOHO offers do not have monthly service charges or fees. Depending on your account, you could also be eligible for various perks, like cash back on purchases and premium interest rates.

KOHO works with Google Pay and Apple Pay, so you can easily access your funds. The prepaid Mastercard can be used anywhere Mastercard is accepted and at ATM machines. KOHO provides a convenient, accessible service for people who want to keep their finances simple and reduce fees.

Who could benefit from KOHO Credit Builder?

People starting out, new to Canada, or needing to rebuild a bad credit score will find it more difficult to borrow than someone with a good credit score and an established credit history. Unfortunately, it’s sometimes true that you can’t get credit without a credit history, but you can’t build a credit history without credit.

KOHO’s credit building feature

The credit building feature KOHO offers is a relative newcomer to their product offerings. First introduced in 2021, the idea behind the product was to give users a simple and affordable way to build their credit.

koho credit building

How it works

KOHO’s credit building feature is an inexpensive, simple way to build your credit. First, you subscribe to the product, and KOHO sets up the product as a line of credit. Then, you make a $7 payment each month for six months. These payments are reported to the credit bureaus, either TransUnion or Equifax, and will work to build your credit rating. The product will auto-renew every six months if you don’t cancel it.

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How to qualify

Well, there’s really not much to it, which is why it’s a great product for many people. First, you need a KOHO account that’s been thoroughly verified, and you need enough money in the account to cover the $7 subscription fee. Then, KOHO will do a soft credit check on your credit report. A soft credit check means there is no impact on your credit score.

How it helps

Your $7 subscription fee is reported to the credit bureau as a credit payment. The credit bureau will update your credit report each month to show that you have made consistent, regular payments. On-time payments will either generate a credit score for you or boost an existing credit score.

Once you have completed the cycle of six months, you can decide if you want to continue using the product or not. One factor influencing a credit score is the length of time an account has been open.

For some people, it could be helpful to continue to use KOHOs credit building feature to develop a better score. Others will find that they will have gotten the maximum benefit out of it after six months, and there is no need to renew.

What are the pros?

Actually, there are lots. It’s true that it’s a simple product, but it comes with several benefits and can be a great choice depending on your situation. It’s easy to set up and cost-efficient compared to many other credit-building products.

Easy to qualify

As we have seen, all you need is a fully verified KOHO account and enough funds available to cover the $7 transaction fee. You don’t need to complete a lengthy application either online or at a branch, provide all sorts of documentation, and wait for approval.

No impact on your credit report

Applying for credit at a traditional lender usually means that they will do a hard credit check on your credit report. The hard credit check will show on your credit report and potentially drag down your score. This is not ideal if you are trying to build a credit rating or improve an existing one. KOHO will do a soft credit check before setting up the product. A soft credit check does not impact your credit score.

It’s easy to use

All you need to do is keep at least $7 in your account for the monthly fee. KOHO debits the fee monthly and reports it as a payment to the credit bureau. The charge will show in your account as CB SUBSCRIPTION FEE in-app. So, you don’t need to worry about making payments yourself.

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It’s pretty cheap

You only pay $7 a month. However, many credit cards come with much higher annual fees. In addition, credit cards charge interest if you don’t pay the balance in full by the due date. So, for six months, you will pay $42 to build or improve your credit report. While it’s not free, it’s certainly not a bad deal.

Monitor your credit

How do you know if it’s working? Well, you can monitor your credit score. Your payments are reported to the credit bureau monthly. You’ll be able to see if you are making progress and how much your credit score has increased by using KOHOs credit building feature.

Improve your score

Your score can improve over six months. You’ll be able to see how much it increased by monitoring it. A higher credit score will help you when you want to apply for a credit card, loan, line of credit, or mortgage. An added benefit of a good credit score is that you might qualify for a better interest rate than if your score is low.

What are the cons?

There are some things potential users of this product need to be aware of as well. While it has many benefits, it might not be the best solution for everyone looking to build their credit rating. You need to make your payments on time, there is a fee, and if your credit rating is really poor, it might not generate the results you want.

No late payments

Payments made on time with the Koho Credit Building Feature are reported to the credit bureau, but so are late or missed payments. Late or missed payments will negatively impact your credit score, so you must be diligent in making your payments on the due date if you want your score to improve.

There is a fee

Yes, it’s only $7 monthly for six months or longer if you renew the service. Nevertheless, you are still paying for a service and not getting anything tangible. You could get a no-fee credit card  or a secured credit card and use it to make small purchases. Making your credit card payments on time will build your score, and you will have something to show for your money.

You can’t use it 

Unlike a credit card, the KOHO Credit Building Feature has no accessibility. If you want a product you can use like a credit card but don’t qualify for one, a better option might be a prepaid credit card. Prepaid credit cards don’t improve your credit score, but they can still be beneficial depending on what you want.

You load your money onto the card and can use the funds like a credit card. Prepaid cards don’t require a credit check since you use your own funds, and they can be used like credit cards in-store, online, or for travel. Many also come with security features to protect you from fraud or loss.

You might not get the desired results

If you want to build a credit rating because you don’t have a credit history, the KOHO Credit Building Feature could be a great way to do that. However, if your credit history is poor due to late payments, collections, repossession, or bankruptcy, you may find this product will not do enough to raise your credit rating. In a case like this, you might want to consider alternative options.

Read more about The Truth Behind Alternative Lending Myths.

Is the KOHO Credit Building feature right for you?

The answer to this depends on what you want to accomplish. This feature from KOHO offers a simple and inexpensive way to build or rebuild your credit with virtually no effort. In addition, you can monitor your credit score monthly to see improvements and cancel after six months if you no longer need the service.

While there are some drawbacks, it still allows users to put themselves in a better position financially by improving their credit rating. However, if your credit score is very low, you may want to explore other, more effective ways to improve it.


Does KOHO help me build my credit?

KOHO’s credit building feature will help to build a credit score for you.KOHO charges $7 monthly for this service and reports the monthly payment to the credit bureau. Payments made on time will help improve your score.

How does KOHO credit building work?

KOHO charges you $7 monthly, coded as a CB SUBSCRIPTION FEE. It is reported to the credit bureau as a credit payment. Each payment made will have an impact on your credit score. Payments made on time will improve your score, while late payments will decrease your score. The program lasts for six months and will auto-renew if you don’t cancel it.

Is KOHO credit building service legit?

KOHO’s credit building service is legit. It reports payments to Transunion, which will impact your credit rating in a short amount of time. It’s a great way to build or rebuild your credit rating without opening a new credit account.

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