How to Build Credit Without a Credit Card

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The Best Methods to Improve Your Score Without Extra Debt

When you’re looking for ways to build your credit, the most prevalent advice you’ll find is to open new credit cards. Opening a new revolving credit line often boosts your credit score but for many people, it can also be a doorway to debt. 

It’s possible to build credit without credit cards. It takes a bit more effort, but these little-known methods can help you improve your credit score in no time.

Remember the proven formula for building credit: get 3 revolving credit accounts, 1 installment loan, make all payments on time, and keep your credit utilization at 10% or below. 

With that, let’s dive in! 

1. Use a Debit Card that Builds Credit

A common misconception is that choosing the credit option when making a purchase on your debit card builds credit. While that is a credit myth, it may have inspired the creation of a recent financial product that allows you to build credit history with a debit card. 

However, there are several debit cards that build credit and each one integrates with your existing checking accounts. These card issuers connect to your bank account and issue a card with a spending limit similar to a credit card. 

This tracks your payment activity which the company uses to report to the credit bureaus. Several companies offer this service with monthly pricing that likely costs less than one of your streaming services. The two prominent ones include Extra and Zoro.

Some of these cards even give you rewards for making purchases at certain places. So you get the benefit of an increased credit score plus the possibility of cash back or redeemable rewards points. 

2. Get a Credit Builder Loan

A credit builder loan is an excellent way to build credit without accumulating credit card debt. They allow you to save money and build credit at the same time. If you’re not familiar with these financial tools, here’s how they work. 

Credit builder loans are installment loans (similar to personal loans) that don’t give you the loan amount right away. Instead, they put the funds in a secured savings account while you make regular monthly payments on the loan. 

At the end of your secured loan term, the funds are released to you. Assuming that you made all of your loan payments on time, your credit score should see an increase since the on-time payments are reported to major credit bureaus. 

This way, you build your savings and your credit at the same time!

At Digital Honey, we’d recommend getting a credit builder loan from CreditStrong. There are plenty of options to choose from that include Self or MoneyLion. However, CreditStrong offers the security of working with a five-star rated bank. 

CreditStrong reports your monthly payments to all three credit reporting agencies, not just one or two. On average, their customers saw an increase of about 70 points within 12 months of on-time payments. Plus instead of going into debt, they’re helping you build savings. 

CreditStrong has three options:

  1. Their normal credit builder loan, Instal. It’s an installment loan with the lowest monthly payment (only $15/month.)
  2. Their mega credit builder loan, MAGNUM. It’s for business owners and people who want to qualify for high limit credit cards. (Also an installment loan.)
  3. Their newest product, Revolv. It’s a revolving credit account. 

Credit builder loans are a great place to start if you have bad credit, also check out our article, How to Build Credit with Bad Credit, for more information.

3. Report Rent Payments to the Credit Bureaus

Have you ever wondered why your monthly rent payments don’t automatically contribute to your credit score? You’re not the only one. For most people, rent comprises about 30% – 50% of their monthly income, which is a big payment obligation to not get credit for.

If you’re making your monthly rent payments, there are services that report your rent payments to credit reporting agencies. This helps you establish your credit history as you make monthly rent payments.

Alternative credit building services such as BoomPay report your rental payment history to all three credit bureaus for a small monthly fee. BoomPay costs a meager $2 per month with a $25 fee for reporting the previous 24 months of rental history. 

BoomPay reports credit score changes of about 5 to 100 points for their customers. 

If you’re looking to get credit for the rent payments you’re already making, then these are wonderful options to choose from. 

4. Report Bill Payments to the Credit Bureaus

Many people are under the impression that bill payments on their cell phones, utilities, rent, or other bills help them raise their credit score. This isn’t inherently true unless you’re using an alternative credit-building service.

Even though your cell phone company and utilities run a credit check to qualify you for their services, they don’t report your monthly payments to the credit bureaus. The only time they do is when your account is delinquent. 

Instead, you’ll have to use options such as StellarFi, Experian BOOST and Grow Credit to have those monthly payments count towards your credit score. Experian BOOST is completely free and integrates with your bank account to see which bills you’ve paid over the past two years. 

They use that information to assess your payment history and apply a boost to your FICO credit score. On average, users saw a score increase of about 13 points without any rental data. Experian BOOST works with a wide range of companies and accepts monthly payments such as: 

  • Streaming service subscriptions
  • Gas and electric
  • Internet and cable
  • Water
  • Solar
  • Trash

Grow Credit also has a free plan, but you’ll get the best value with their Accelerate membership at $7.99 per month. They help you build your credit score by issuing a card that you use to pay a monthly bill. Then it reports those monthly payments to the major credit bureaus. 

With Grow Credit, you can start building credit history with smaller timely payments on things like your Netflix or Amazon Prime subscriptions. Since they don’t pull your credit, you can use Grow Credit even if you have bad credit. 

As of March 2021, Grow Credit reports an average score increase of about 51 points across their customers. 

5. Get an Auto Loan

Getting an auto loan in your name means you’ll have an installment loan on your credit profile. This shows potential lenders and credit bureaus that you’re capable of meeting long-term payment obligations when your monthly payments are on time for the length of the loan. 

You might be thinking that you wouldn’t need to improve your credit if you could qualify for an auto loan, but you might be pleasantly surprised. Your credit doesn’t have to be perfect to get approved. 

Since an auto loan is a secured loan backed by the value of the car, it’s less risky for the lender to approve someone with a less-than-great credit rating. Many dealerships also have programs for recent graduates to qualify for car loans. 

If you’re going to get a car loan with poor credit, you should expect to see higher interest rates or even a larger down payment requirement. To lessen that effect, consider finding a cosigner with good credit to help you qualify for the loan. Just be sure not to make any late payments.

If you decide to apply for the loan on your own, be sure to come with a strong income and a hefty downpayment to get the best terms. 

6. Student Loans Build Credit

College graduates typically see their student loans as a burden, but if you were already planning to use them to pay for college, they can help you build credit. 

When student loans are in your name and you keep up with timely payments, it shows as a healthy installment loan on your credit history.

Federal student loans don’t require good credit history for you to be approved either. For private student loans, you’ll just need a parent or guardian with good credit to be a cosigner for you if you don’t have an established credit history yet. 

Once your student loans are out of deferment or forbearance, you should start making on-time monthly payments to start building your credit history. 

Consecutive lengths of on-time payments help you build positive credit history and establish you as a responsible borrower to future lenders. 

7. Don’t Get a Secured Credit Card

If this isn’t the first article you’ve read on how to build credit, then you might be surprised to see this advice. While it’s suggested as a “good” method to build your credit history, there are a few pitfalls with getting a secured credit card. 

First of all, secured credit cards often start with a tiny credit limit. Typically anywhere from $200 to $300. Such a small credit limit doesn’t allow too many purchases without increasing your credit utilization. 

Let’s say you get a secured credit card with a $300 limit and you only use it for your phone bill each month which is $125. Plus there’s still the matter of interest charges and annual fees associated with these types of credit cards.

Even if you pay off your secured credit card each month after paying your phone bill, you’ll see a credit utilization ratio of about 41%. That’s a bit higher than the suggested 30% credit utilization ratio. Having a high utilization puts you further away from the good credit score you’re after. 

The reality is that most people with poor credit or limited credit history tend to max out secured credit cards. This drives utilization rates through the roof and leaves them in the same credit situation. It defeats the purpose of getting a secured card. 

Instead, use CreditStrong’s Revolv account to improve your credit mix without going into debt with credit cards. CreditStrong’s Revolv account appears on your credit report just like a credit card would. There are a few differences that make it better than a secured credit card. 

  • You can’t go into debt with Revolv 
  • Your monthly payments go into a secured savings account
  • There’s no hard inquiry
  • There’s no interest 
  • Your utilization is optimized
  • You start with a $500 credit limit on your tradeline

Plus you can adjust the payments based on what fits your budget. Get started building your credit by adding Revolv to your credit profile without the stress of credit card debt. If you are a contractor, also check out our Best Credit Card for Contractors article.


Can You Build Credit Just by Paying Your Bills?

You can build credit by paying bills, but it depends on which bills you’re paying. Monthly bills like your auto loan, credit cards, or mortgage will automatically build your credit when you make monthly payments on time because these accounts report to each credit reporting agency. 

In comparison, monthly bills such as utilities, rent, or insurance don’t automatically report your payment history unless you’ve employed alternative credit reporting tools (like Experian BOOST or Grow Credit) or have become delinquent on your account(s). 

What Is the Fastest Way to Build Credit?

The fastest way to build credit is by employing several strategies including:

• Making all bill payments on time
• Disputing inaccurate information on your credit report
• Paying down revolving debt
• Using credit reporting alternatives (Extra, BoomPay, Experian BOOST)
• Improving your credit mix by having installment and revolving credit accounts
• Have a trusted friend or family member add you as an authorized user to one of their credit cards.

By staying focused on your goals and taking a full-picture approach to your credit situation, you’ll have the fastest and best results in order to build credit. 

Can You Build Credit Without Getting Into Debt?

Yes, you can build credit without going into debt with credit cards, but it does take some planning, such as: 

• Use alternative credit reporting companies
• Get a credit builder loan
• Get a debit card that builds credit
• Use a service that reports your rent payments to the credit bureaus 

These methods work in conjunction with healthy credit habits such as paying your bills on time, disputing inaccurate information, and keeping the balances on your credit cards low.

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

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