6 Ways to Build Credit Without a Credit Card
Building credit can be a challenge for young adults, people without credit, immigrants or anyone with a poor credit history. You need access to credit to build credit, but lenders can be hesitant to approve people who’ve had problems with it in the past. In this post, we highlight a few ways you can build credit even if you can’t get your hands on a traditional credit card.
6 ways to build credit without a credit card
Though credit cards are a common way to build credit, they’re hardly the only way. Here a few other credit-building strategies to consider:
Sign up for a secured credit card
Secured credit cards are like regular credit cards with training wheels. Secured cards require an upfront deposit that acts as security for the card issuer in case you don’t make payments. Minimum deposits can range from $49 to $500. After you build up several months of positive payment history, the credit card issuer may return the deposit and offer you an unsecured card (a card that requires good to excellent credit and gives you access to a line of credit).
Take out a credit builder loan
A credit builder loan works kind of like a secured credit card but in an installment loan form. After applying for a credit builder loan, the money goes into a savings account or certificate of deposit (CD), and the funds are given to you only after you’ve made all your payments. Meanwhile, those payments are reported to the credit bureaus, which helps you build credit. Check with your bank or credit union to see if there’s a credit builder product available.
Become an authorized user
Many credit card issuers allow their customers to designate an authorized user, which is someone who has access to the account but isn’t responsible for making payments. By becoming an authorized user, you can essentially “piggyback” on someone else’s account, which can be a great way to build credit. Have the main account holder speak with their credit card issuer first to make sure the account will be added to your credit history. And be sure the account holder has good payment habits and little to no balance, or the plan could backfire.
Stay current on your student loans
Student loans show up as installment loans on your credit report. Staying current contributes to the payment history portion of your credit score, which is the most influential factor. If you can’t make payments on your student loans, make sure you contact the servicer immediately to discuss options like income-based payment, deferment or forbearance. Late payments can wreak havoc on your credit.
Use personal loans and auto loans
Credit cards aren’t the only type of account that matters. Pay attention to other loans you may already have on your report. Part of the FICO Score calculation is your credit mix — a review of the different types of credit that you’re able to manage. Showing you can manage a mix of accounts, including various installment loans like personal loans and auto loans, can help you build credit.
Use rent payments
Asking your landlord or property management company to report payments to the credit bureaus is another way to build credit. If the person you rent from can’t report payments, an alternative is using a third party. RentTrack and PayYourRent are examples of companies that will report to all three credit bureaus for a fee.
If you can’t get access to an unsecured credit card, don’t fret. Credit cards are just one way to build credit. Give some of the other alternatives above a try. No matter what type of credit or loan for which you get approved, using it responsibly and paying your bills on time can help increase your credit rating over time.