How Can You Build Credit Without a Credit Card?

Establishing credit is essential for living. A credit history offers access to the following financial opportunities:

• Renting an apartment

• Obtaining a lower interest rate on a car loan

• Securing a mortgage to purchase a home

Although many people use credit cards to build credit, there are other options available. The following are a few choices.

Secure a Credit Builder Loan

A credit builder loan might be available if you have no or little credit history:

• Upon approval, the lender moves the loan amount into a savings account or certificate of deposit (CD).

• You make regular payments on the loan.

• Your payments are reported to the credit reporting bureaus, as with an installment loan.

• The lender releases the loan balance to you when the amount is paid in full.

Report Your Rent and Bill Payments

You can pay third-party companies to report your payments for rent, utilities, phone bills, and streaming services to credit bureaus. Making your monthly payments on time shows creditors you are responsible, which helps build your credit history.

Take Out a Secured Loan

A secured loan uses property or physical assets, such as a car or home, as collateral. This loan can be easy to qualify for because the bank can sell the property or asset to cover the loan if you do not make the monthly payments on time. Ensure you can afford the payments and are comfortable with the interest rate before accepting a loan.

Become an Authorized User on a Credit Card

Ask a trusted family member or friend with a good credit score to add you as an authorized user on their credit card:

• You become a secondary account holder with access to spend money.

• You can use the account to build good credit habits.

• The primary account holder can remove you at any time.

Educate Yourself on Proper Credit Use

It might take six months to establish your credit history, and longer to establish a good credit score. Ensure you understand the following about your credit score and credit reports:

• Your credit score can change monthly, depending on your credit use.

• Making timely payments and decreasing your credit utilization can improve your credit score.

• Missing or late payments, as well as failing to pay the minimum amount due, can cause your credit score to drop.

• Regularly monitor your credit score and credit reports from Experian, TransUnion, and Equifax to ensure the information is accurate.

• Dispute any errors on your credit reports. 

*This information is for educational purposes only.

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