How Can You Build Credit Without Going into Debt?

Taking out a loan to buy a car, home, or another large expense requires credit. Increasing your credit score helps you rent an apartment, receive a lower interest rate on a mortgage, and receive more favorable loan terms. However, not everyone wants to take out a loan to build their credit.

Fortunately, you can build your credit without taking out a loan. The following strategies can help you build credit without going into debt.

Become an Authorized Credit Card User

Ask a trusted family member or friend if you may be added as an authorized user of their credit card. Create an agreement to reimburse them for the charges, as they are responsible for the balance.

Credit card activity will be reported to the credit bureaus. Positive activity can build your credit and increase your credit score.

Get a Secured Credit Card

A secured credit card works a bit differently from an unsecured credit card:

• A secured credit card can help you establish or build credit.

• You provide the lender with a cash security deposit, typically $300 to $500, as collateral to open the account.

• A deposit is less risky to the lender, increasing the odds of approval.

• The loan received is your credit limit.

• If the lender does not charge activity, inactive account, or other fees, you might be able to avoid using the credit card and still increase your credit score.

Have Your Rent Payments Reported to the Credit Bureaus

When you apply to lease an apartment, the landlord can look at your credit history to help determine the likelihood of receiving timely rent payments. Therefore, consider using a credit reporting service such as Experian RentBureau, Rental Kharma, or Rent Reporters to report your rent payments to the three credit bureaus. There might be a sign-up or monthly fee, but you can get credit for something you already pay for.

Correct Any Errors on Your Credit Report

Regularly check your credit reports from Experian, TransUnion, and Equifax at AnnualCreditReport.com. Report any errors, such as an open account that was reported closed, or on-time payments reported as late.

Lenders look at your credit report when deciding whether to extend a loan. Accurate information shows responsible credit use, which impacts your interest rate, loan terms, and approval odds.

*This information is for educational purposes only.

Do you have additional tips for building your credit? Let me know in the comments!