How To Build Credit Without a Credit Card: 5 Easy Ways

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A positive credit history and a good credit score are important when applying for a bank loan, credit card, job or insurance coverage. If you have poor credit — or no credit at all — you’ll have fewer or no loan choices, have difficulty opening credit cards and pay higher interest rates. Additionally, employers might question how responsible you are if you have poor credit.

One of the main ways to build credit is by opening a credit card and then paying your credit card bills on time. However, if you do not want to open a credit card, there are still other ways to build credit. Keep reading to find out how to build credit without a credit card.

Can You Have a Credit Score Without a Credit Card?

The good news is that you can have a credit score without having a credit card. But you need to use other types of credit or financial products like loans, bill pay or someone else’s card. 

The key is to build credit and prove financial responsibility. Credit bureaus consider the following factors when determining scores:

• Payment history: If you make on-time payments for loans or credit cards, you can increase your score. 
• Amount owed: The amount you owe impacts your score. If you owe less than your limit, it can help your score. 
• Length of credit history: It’s helpful to have a long history of loans, credit cards, utilities and other payments. 
• New credit: Opening new loan or credit card accounts might temporarily decrease your score, so it’s smart to be mindful of accounts. 
• Credit mix: Your credit type — loans, mortgages, credit cards — impacts your score. Having a mixture is helpful, but you only need one type to have a score.  

How To Build Credit Without a Credit Card: 5 Simple Ways

You can build credit in many different ways and don’t need a credit card to make it happen. Here’s how to build credit without a credit card.

Take Out a Credit-Builder Loan

You can take out a “credit builder loan,” designed specifically for building credit. These loans are actually more like small savings accounts offered by some banks and credit unions for people looking to establish or fix credit. 

The loan is backed by your savings account and paid in monthly installments. Once you open an account and pay off your loan, the lender reports this to the credit reporting agencies, which can help you build credit and improve your credit score. 

Making loan payments in a timely manner and keeping the amount owed low will help build your credit.

Use a Secured Loan or Passbook Loan

You can also use a secured loan to build credit. Secured loans have an object as collateral, so if you default, the lender can take the object as a form of repayment. For example, your car is collateral when you have an auto loan. 

Passbook loans are another type of secured loan in which your savings account or a certificate of deposit is the collateral. They can be an effective way to build credit when you have some savings. 

Become an Authorized User on Someone Else’s Credit Card

You can become an authorized user on someone else’s credit card to build credit. Once you’re an authorized user, the bank reports the activity on the card for both you and the primary account holder.  

Because the account activity impacts both people, it’s important to only become an authorized user for someone you trust. The person also needs to have solid money habits. If they miss a payment or pay late, it could negatively impact your score. 

Pay Rent and Utilities Through Credit-Reporting Services

The three big credit reporting companies — TransUnion, Equifax and Experian — determine your credit score. Most landlords don’t automatically report on-time payments to the credit bureaus. But you can sign up for services that do it for you. 

You can also use tools like Experian Boost and RentTrack to ensure that your rent payments and other bills help build your credit score. All you need to do is create an account and select the bills you want to use.

Take Out a Small Personal Loan

If you’re wondering how to improve your credit score, one of the best ways is by taking out a loan. Taking out a loan from a bank or credit union — student loan, personal loan, mortgage or another type — counts toward your credit history and credit score.

Small loans can make it easier to keep up with payments and make sure you always pay on time. If you don’t, it could offset the credit-building benefits and become expensive due to late fees and interest charges. Because of that, you must make sure you can afford the payments and stick to the repayment schedule. 

How To Grow Your Credit Score Without a Credit Card

Once you establish a credit score, it’s time to consider how you can grow it. Here are simple steps you can take to increase your score. 

Always Pay Bills on Time

Your credit report includes some utility bills. If you have utility bills in your name, this can help you build credit. Making payments on time is one good way to build credit fast.

Payment history is the most important credit factor, accounting for 35% of your FICO score. Consider setting up auto-pay or reminders to avoid missed payments and boost your score faster.

Keep Debt Low

Keeping debt low can help you increase your score — the amount you owe accounts for 30% of your credit score. Make sure you avoid unnecessary loans that could lead to excessive debt. 

Instead, consider your budget and make sure you can afford the loans before applying. As you pay off loans, ask yourself if you can avoid applying for new ones unless necessary. As a bonus, less of your budget will go toward loan repayment. 

Gabrielle Olya contributed to the reporting for this article.

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