How To Build Credit Without A Credit Card

There are many effective credit-building tools available that do not require getting credit cards. Here are some of the best strategies.

Traditionally when people think of credit, the first thing that comes to mind is credit cards. A credit card can be very useful and is a great way to build credit, but if you don’t have the discipline to manage it effectively, it can also get you into serious trouble.

If you don’t want to take the risk of holding a credit card, or if you’ve had bad experiences with credit cards, you can still build credit without one. There are credit-building options that don’t require credit cards at all!

Authorized User Status

Being an authorized user lets you put a revolving credit account on your record without the risks of holding a credit card. That’s important because it will help you diversify your credit mix.

The process is simple. You ask a friend or relative with a good credit record to add you as an authorized user on one of their cards. You can have your copy of the card sent to the card owner, so you’ll never have to hold the card or be tempted to use it.

Be sure the card issuer reports authorized users to the credit bureaus. Most major issuers do, but it’s still a good idea to check first.

The credit history and current activity on the card will appear on your credit record. If the primary cardholder makes on-time payments and keeps the card’s credit utilization low, your credit score will rise!

Credit Builder Loans

Credit builder loans were designed specifically to help people who are new to credit or have bad credit add to their credit file and improve their credit score.

These loans are nothing like traditional loans. You don’t get the money upfront and then pay it back. The bank deposits the money you borrow in a locked account, then releases it to you when the loan is paid off.

This allows the lender to give you a loan without a credit check and at no risk to the bank, so it doesn’t matter if you have no credit score or even a bad one. The lender still reports the installment loan payments monthly to the three major credit bureaus. That will help to build your credit history.

Most Credit Builder Loans will range from $500 to $3,000 with short payment terms of 12 or 24 months. The smaller loans usually cost under $20 to start and with payments as low as $25 a month. Learn what determines the price of a credit builder loan and see cost examples of some popular options here.

And remember, you get the majority of that money back after making the last payment, even with a small amount of interest.

These loans can be found at local banks and credit unions, but most people get them online because of the convenience. Check out our top picks for the best credit builder loans you can get online.

👉 A recent MetLife Foundation-funded study found that Credit Builder Loans, “increased their score an average gain of 47 points. If those borrowers who saw a credit score increase applied for an auto loan from their lender, they would save $3,200 on average in interest as a result of the credit score change.”

Credit builder loans are a great option if you are looking to build credit without a credit card.

Rent Reporting

Did you know that most landlords and property managers DO NOT report your rental or lease payments to the big three credit agencies?

👉 In an extensive study of rent reporting effects on credit by the Office of the New York City Comptroller, they found, “31 percent of consumers gained a new score, averaging 674. Of individuals with (existing) credit scores, 61 percent saw improvements to their scores.”

There are multiple Rent Reporting Services to choose from to help you have your rent reported.

⚠️ Not all rent reporting companies have the same effect on your credit score because some of them only report to one credit agency. Not all credit scoring models consider rent reporting.

When you choose a reporting company you will want to choose one that reports to all three major credit bureaus: Experian, TransUnion, and Equifax. To get your Experian rent reported you can click here and sign up for Experian BOOST™.

You will also be offered the opportunity to have your previous 24 months of rent payments back reported. If you have a good rent payment record don’t miss out on this opportunity to fill your credit file full of 24 months of previous payment history.

💡 Paying for past reporting of those 24 months of back payments will be the single highest credit score gain you will get from rent reporting.

Remember to pay your rent on time so you can continue to build credit without a credit card.

Credit Repair

Building credit matters, but you also need to pay attention to what’s already on your credit report. If you have negative records dragging your credit down there may be something you can do about it.

Let’s be honest about this: you cannot force a credit bureau to remove accurate, verifiable reports from your credit record. Anyone telling you otherwise is not being honest, and they’re probably trying to sell you something.

It’s still worth checking your credit report to see if there are errors or accounts that have incorrect information. If you have records that are inaccurate or you think the creditor might not have the information needed to verify the account, disputing those records can give your score a solid boost.

Our DIY Credit Repair Kit will walk you through the process, and it’s completely free.

If your credit report is a hot mess, you have a large number of negative records, and you don’t know where to begin, consider a credit repair company. It’s a business that has earned a shady reputation, but there are legitimate credit repair companies out there. They won’t be free, but there are times when it’s worth paying for a service!