How to Build Credit Without a Credit Card

We all know the importance of building a good credit score. It creates opportunities to borrow money, buy houses, and finance cars.

Building credit without a credit card may seem impossible. How do you build a solid credit history if you don’t qualify for it?

First, take a breath. There are many ways to build credit and boost your credit score without a credit card.“How to Build Credit at 18” is a good place to start if you’re young and looking to create a credit file.

Establish a Clear Credit Identity

Consistency is key when trying to build credit without a credit card. This not only applies to making payments but also to writing your personal details.

Write your name and address the same way whenever you sign up for any credit accounts or loan applications. Decide on the way you want to write your name and stick with it.

If you have a middle name, will you write it in full or just use your initial? Always use the same format no matter which choice you make.

The same applies to your address. Think about the way you’ll write your street name. Write it the same way every time.

Also read: The Best Credit Building Apps

Will you use abbreviations (St.) or write the whole word (Street)? You may or may not want to include the suite number if you live in an apartment block.

Use the address of someone like your parents if you travel a lot or are still in college. Your address must be consistent across all your credit records.

Loan and credit applications use automatic computer systems to check your identity. It can damage your credit score and prevent you from getting loans if there is a discrepancy in your identity.

A consistent identity is also important for a credit bureau to accurately store your credit reports.

You want them to find you instantly when applying for credit accounts or loans. They might deny your application if they can’t find out who you are or see your entire credit history. Keep your name and address the same for bank records, driver’s licenses, and credit reports.

Get Credit Accounts

There are two kinds of credit. These are revolving and installment loan accounts.

Revolving accounts give you a fixed amount you can spend. You can use the credit as you need it and generally must make monthly payments. A credit card is an example of a revolving account.

You may become eligible for a credit limit increase, which is good for building a strong credit score.

Installment accounts are traditional loans. You get one amount upfront and must make fixed payments until you pay it off. A home loan is an example of an installment account.

More than 90% of banks and lenders use the FICO credit score system.

The three areas fundamental to your FICO score are your credit history (15%), amounts owed (30%), and payment history (35%).

To get a high credit score, you must:

  1. Build and maintain a credit history.
  2. Owe a reasonable amount of debt, but not so much that you can’t make it back.
  3. Keep a mix of different types of credit.
  4. Always review your credit score and history to make changes if necessary.
  5. Avoid applying for too much credit.

Establishing credit accounts is crucial for building credit without a secured credit card.

Let’s look at the different accounts you can get to build credit without a credit card.

1. Report Your Rent to the Credit Bureaus

Until recently, the only way to build credit was through banks and lenders. Loan and credit card repayment data are sent straight to the credit bureaus.

You couldn’t use rent payment and security deposit records towards your credit report back in the day. Today, you can use your rent payment history to boost your credit score.

LevelCredit and Rental Kharma are applications that help you or your landlord track and send monthly payment data to major credit bureaus.

According to Rental Kharma, around 30% of an average person’s income goes to rent. Reporting your rental payments will help you build good credit and boost your credit score.

2. Use Experian Boost to Report Bill Payments to the Credit Bureaus

Experian Boost does more than report your rent to credit bureaus.

You can use it to track any account, from Netflix to utility bills, that you pay every month. That data is sent to credit bureaus and improves your credit score.

Utility companies will check a new client’s credit score, but they usually don’t add these monthly payments to your credit report. Experian Boost lets you do that.

You may want to rush out and open accounts everywhere so you can add them to your Experian Boost profile. It’s better to have fewer accounts that reflect consistent payments than any accounts with poor payment history.

Building a good credit score will happen faster and more effectively with consistent payments on fewer accounts.

Try Experian Boost


3. Use Credit Builder Loans, Like Credit Strong

You need revolving and installment accounts to build good credit. Credit builder loans are installment accounts that work like personal loans. They significantly boost your credit score.

Credit builder loans are one of the best ways to build good credit without a credit card. They are a must if you’re planning to buy a house one day.

Another bonus is that you can walk away with savings after paying off the whole loan. It can take between six and 24 months.

Credit builder loan companies, like Credit Strong, report your monthly installments to credit bureaus and take a small fee for themselves.

The remainder of the installment is put into a savings account that you can access once you’ve paid the loan in full. Credit Strong offers good interest rates, too.

A credit builder loan is a unique way to build a good credit score without getting into massive debt. You can use secured loans as an alternative but most have the collateral to back it up.

Stay away from loans that have advance fees. These lenders will guarantee loan approval only if you make an upfront payment. Legitimate financial lenders, like Credit Strong, will never make you pay an advance fee.

Avoid using payday loans. These aren’t reported to credit bureaus and can negatively influence your credit score. Your account is sent to collections if you miss a payment and get reported to a credit union.

4. Get a Car Loan to Build Credit

A car loan is another good way to build credit without a credit card. You could try to get a personal loan, but you usually need a credit score to qualify.

Getting a secured auto loan without a credit history can be difficult, but a steady income and fair down payment could do the trick. Sometimes you can get a car loan if you have a reliable co-signer.

Making a loan payment can diversify your credit portfolio. It’s crucial to have a mix of both revolving and installment credit accounts.

Car loans are another example of an installment credit account. They can boost your credit score and give you a strong payment history.

5. Become an Authorized User on Somebody Else’s Credit Card

Maybe getting into debt causes you anxiety, so you don’t want to get a credit card account with a credit card company. The idea of having a bad credit score is overwhelming.

You can always get someone to authorize you as a user on their credit card. The primary cardholder’s activity will appear on your credit report without you needing to get a copy of the card.

In fact, avoid it if it’s an unsecured credit card that will be too tempting to use irresponsibly. As a rule of thumb, only use a credit card if you have the money to pay it back.

If you can’t find someone to authorize you on their card, many retailers offer store credit cards. Typically, you don’t need to have a credit history to get one.

The data from these card issuers are reported to credit bureaus and helps boost your credit score without a credit card. Of course, you must make timely payments.

According to Investopedia, Home Depot and Staples offer many credit building products that you can get without a credit history.

It’s sometimes possible to get a student credit card without a credit history.

Make on-Time Monthly Payments

Always pay your monthly bills on time to build a strong payment history and boost your credit score.

Your payment history makes up 35% of your FICO credit score. It has the most profound influence on your credit eligibility. Financial institutions will check that data first.

You can build a good credit rating without a credit card simply by paying all your monthly bills on time and reporting that data to major credit bureaus.

After establishing a good credit history, it’s a good idea to check your credit score every so often to monitor your improvements. It will motivate you to maintain your efforts.

You will increase your eligibility for bigger loans, credit cards, and other financial products. A good credit score can also make it easier to sign leases and utility bills. It can also improve employment opportunities.

Pay off Your Loans and Keep Using Your Credit Accounts

Let’s say you get a credit builder and car loan. These are great for building a good credit score but mean nothing if the payments aren’t on time.

After you’ve paid off these loans in full, make sure to replace them with other credit-building accounts. You must maintain your credit score once you’ve established it.

You can get home loans or lines of credit using the above methods of building a positive credit score.  Each new account will continue to grow your credit profile.

Remember to keep credit accounts that are in good standing open. They can generate a positive credit history even if you aren’t actively using them. 

Frequently Asked Questions:

How can I build credit starting from scratch?

The reality is that the best way to build credit from scratch is with a secured credit card. Student credit cards are ideal because you manage your own limit.

Student and prepaid credit cards have lower fees. You can use them to increase your credit score. A credit card company is more likely to issue these kinds of credit cards even if you don’t have a credit history.

Credit builder loans are equally as effective. Credit Strong said that around 10% of their customers had no credit score when they opened their credit-builder account.

How can I build my credit fast?

Start with everything on this list immediately. You should see a boost in your credit score after just three months of making on-time, monthly payments.

Credit Strong’s study found that customers saw a 25-point increase within three months of making consistent payments on their credit builder loans. They saw a 70-point credit score increase in customers who made consistent payments for 12 months. That’s significant.

Do student loans help build credit?

Yes. A Federal student loan is obtainable without a credit history. You will need Someone with a good credit score to be your cosigner. You can start building your credit once you secure the student loan and start making monthly installments.

Start making on-time, monthly payments as soon as you can. It will lengthen your credit and payment history, which in turn will boost your credit score.

Can you build credit with a debit card?

Unfortunately, not. Debit cards don’t allow you to borrow money and then pay it back.

Debit cards use the money you already have in your bank account. You can’t build a credit history without lending money from somewhere.

Also Read: Debit Cards That Build Credit

Building Credit Without a Credit Card Is Possible

You can build a credit profile without a credit card.

Apply for credit builder loans from companies like Credit Strong. Get credit accounts with retailers. Report your rent and other bills to credit bureaus using applications like Experian Boost and Rental Kharma.

Get authorized on someone else’s credit card to piggyback off their credit history and score. Use your car or student loan repayments to boost your credit score.

Make sure you always pay off all bills on time. Your consistent payment history counts the most when building a solid credit score. Maintain good credit accounts to increase your credit history.

Following these simple guidelines will help you build a lasting and sustainable credit report.

To continue learning about credit, see the following articles in the series:

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