How to Build Credit without a Credit Card

If you’re looking to build credit and don’t want to get a credit card, there are other methods for you to build and boost your credit score.

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Credit cards aren’t the only way to build your credit score. The key is to look for loans or bills that report to the credit bureaus. Equifax, Experian, and TransUnion are the three main credit bureaus.

Related: The ultimate guide to building credit from scratch

Whether you’re looking to start building or want to rebuild your credit score, the following are ways to build credit without a credit card.

1. Credit builder loan

A credit builder loan is one of the best ways to build credit because most don’t require good credit to get approved. So, regardless of where you currently stand, it’s a great way to boost your score.

The only exception is if you have existing debt. While it can still help, it’s most effective if you don’t have any debt (Source: Consumer Financial Protection Bureau).

To get started, visit a financial institution that offers a credit builder loan. You’ll be required to create an account to set aside the funds, which can range from $200 to $1,000. The amount may vary based on the financial institution.

Related: Is Ally Bank any good?

Then, there will be a hold placed on the funds, and you’ll make monthly payments to the credit builder loan. You may earn or pay interest depending on the terms.

When you make payments, the lender will report them to the credit bureaus. Typically, credit builder loans can extend from 3 to 24 months.

By the end of the loan, you’ll get access to all of your funds. Some financial institutions release a portion back to you every time you make a payment, while others release it all at the end.

Credit builder loans go by different names, such as a share secured loan, CD secured loan, or fresh start loan. They go by different names but refer to the same thing.

Related: What’s a certificate of deposit (CD)?

They’re also more commonly found at local banks and credit unions. However, check with your current financial institution to see if they offer the product.

2. Auto loan

If you’re in the market for a new car, consider getting an auto loan. The payments you make towards an auto loan are reported to credit bureaus. As long as you make your payments on time, it can benefit your score.

Since auto loans are secured by the vehicle, you don’t need excellent credit to get one. The only drawback is that if you don’t have any credit history or have a low score, your interest rate might be high.

Shop around for the lowest APR and make sure the payments aren’t too high. This ensures that you’re able to make your payments throughout the life of the loan.

If you aren’t able to get a low-interest rate and need the car, do so. As your credit score improves, you can refinance your car to get a lower rate.

3. Personal loan

Cars can be expensive, and you may not want such a big loan. That’s where the personal loan comes in.

The loan amounts can range from $500 to $15,000. If there’s a purchase that you’d like to make and don’t want to pay cash for, you can use a personal loan for it.

A personal loan is an installment loan, which means you get a lump sum initially. Then, you make payments towards the loan to pay it off. As for the car loan, the payments are reported to the credit bureaus.

The drawback to getting a personal loan is that it’s unsecured. There’s no tangible object that it’s secured by, such as a car or house. Since it’s unsecured, expect a higher interest rate.

If you’re fine with the interest rate and plan to make your monthly payments on time, a personal loan can help you build your credit score.

4. Rent an apartment

Most apartments and landlords don’t report rent payments to the credit bureaus. However, some do, and you can ask the landlord to.

When you’re looking for a place to rent, ask if your payments will be reported to the credit bureaus. If you’re already going to be paying rent, why not use it to boost your credit?

There are also services that you can use, such as Rent Reporters. You’ll need to provide information about your lease and landlord. They’ll contact your landlord to verify the agreement. Then, your payments will be reported as a tradeline.

Rent reporting services are a great way to build credit regardless of who you’re renting through. However, they usually come with a monthly or one-time fee.

5. Utility and phone bills

Experian Boost is an excellent way to show your phone, utility, and streaming service bills on your credit report. The only drawback is that it’s only reported with Experian and not with the other two major credit bureaus.

Aside from Experian Boost, you can check with your financial institution to see if they have anything similar.

Keep in mind that it may come with a fee. If your goal is to establish or build credit, it may be worth it.

6. Get a co-signer

If you’re not able to get approved for a loan by yourself, see if there’s anyone with good credit that’s willing to co-sign. It can increase the chances of you getting approved for a loan.

If you get a joint loan, make your payments as agreed because the other person’s credit is also being impacted.

A co-signer can help make it possible for you to build or rebuild your credit.

7. Student loans

If you’re going to school and unable to pay tuition with cash, student loans are a way to finance it. Federal student loans don’t require good credit, while most private lenders do.

Student loans are installment loans, which means they affect your credit score. By making your payments on time, you can move your credit score in a positive direction.

Conclusion

A credit card is just one method of building credit. There are many other ways that you can build credit, such as getting a credit builder loan, student loan, car loan, or renting an apartment.

Additional resources:

• What’s a personal line of credit?
• How to build business credit
• Financing vs. leasing a car
• Chime review: Checking, savings, and credit

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