How to build your credit without a credit card |
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How to build your credit without a credit card

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From auto loans and mortgages to reporting services, you can boost your score without plastic.

Credit cards can be tricky. Of course, they also seem to be necessary if you’re trying to build or rebuild your credit. This can make things difficult if you’re someone who doesn’t like credit cards or trust yourself to use them wisely. With that said, it’s actually a popular misunderstanding that credit cards are the only way to build credit. We explore some of the other ways you can boost your score without plastic.

Can I build a credit score without a credit card?

Yes. While secured credit cards are a good way to build or rebuild your credit with responsible spending, they’re not the only way.

Other types of credit contribute to a solid credit history or even flesh out a limited one, including personal loans and financing you might pick up at the counter of your local furniture store.

Building your credit is like putting together a home-cooked meal: You could use any of a hundred or more ingredients, and still end up with a good dinner in the end.

8 ways to build credit without a credit card

Typically, any financing product that reports to the credit bureaus can help you establish credit. Without solid creditworthiness, however, you might want to focus on unsecured options.

No matter the type of credit or financing you take on, commit to paying your bills on time. Late payments can quickly undo your hard work.

1. Auto loans

In most cities, you need a car to get around. And many of us don’t have the cash sitting around to buy one outright.

Auto loans are among the most popular types of financing, and they’re a great way to build credit. Because most loans treat the car you’re buying as collateral, you’ll typically get a competitive rate over other borrowing options.

2. Personal loans

Personal loans can be used for just about any legitimate purpose. But many use them to refinance or consolidate other debts, making them a popular tool when you’re building stronger finances.

If you aren’t able to get a loan on your own, look for lenders willing to accept cosigners to help you land a more competitive rate.

3. Authorized user on a credit card

If you can’t qualify for a card yourself or simply prefer not to take on the full responsibility, you might be able to piggyback on somebody else’s plastic.

A trusting loved one may be willing to add you to their credit card account as an authorized user. You won’t even have to use the card to reap the rewards. Instead, arrange payments based on whatever you and the cardholder agree upon.

However, not all card providers report spending and payments for authorized users, and the cardholder’s activity could end up on your credit report too. Only pursue this method with somebody you trust.

4. Credit-builder accounts

Many banks and credit unions offer products to help you build your credit, such as secured loans of $1,000 or less. The bank secures the loan by placing the money you qualify to borrow into a certificate of deposit (CD) or savings account. You make payments to settle the loan and, after it’s paid off, you get access to the full amount of the loan.

Some banks also offer passbook or CD loans. These loans are based on the balance of your CD or savings account, locking your account until you finish repaying the loan.

Because they’re designed to build or rebuild credit, these tools are typically accessible to those with weak scores.

5. Student loans

Paying back your student loans can be stressful. But if you’re in a position where you need to finance your education, there’s a silver lining: These loans can do a lot of good for your credit score.

Like with other borrowing, the key is to repay your loans on time to contribute to a positive credit history and increase your score over time.

6. Rent-reporting services

Some services allow you to report your responsible rent payments to credit bureaus, building up your credit history. In some cases, your landlord might already report your payments.

Otherwise, look into services that let you pay your rent online. Companies like RentTrack allow tenants to schedule rent payments that it processes through your bank account, reporting the transactions to the credit bureaus and ultimately boosting your credit score.

7. Mortgages

If you own a home, your mortgage may already be strengthening your credit. The significant debt you take on when buying a home could decrease your score, but a consistent history of on-time payments can improve it over time.

8. Peer-to-peer loans

Peer-to-peer (P2P) loans are ways to avoid dealing with big lenders, like banks. With a P2P loan, you’ll borrow directly from an individual “investor.” These investors impose varying credit requirements, making it easier for people with poor or no credit to qualify.

While P2P loans aren’t processed through financial institutions, they’re often backed by reputable services designed to support these legitimate loans.

Check your credit report for errors that could damage your score.

Everybody makes mistakes — including the people who report your credit.

Details can get mixed up or the wrong name put on a document, and suddenly your report includes a line that isn’t yours or isn’t true, negatively affecting your score.

Luckily, you can dispute an error on your credit report directly with the credit bureaus. After you issue an official complaint, the bureau generally has 30 days to investigate the error. When the bureau has completed its investigation, it has five more days to report the results to you. Overall, you’ll wait up to 45 days for a response.

You can request a copy of your report every year from each of the three credit bureaus. This means that with planning, you can review your credit report for errors every four months. That way, you can catch most issues before they become a problem.

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Bottom line

You don’t have to rely on credit cards to build or rebuild your credit. If you aren’t able to qualify or don’t trust yourself to use them wisely, consider other financing options that report your responsible spending to the credit bureaus.

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