How to Build Credit Without a Credit Card

People have different reasons for wanting to know how to build credit without having a credit card. Maybe you're not yet eligible for a credit card due to your age or length of credit history. Or you might prefer to not carry around a physical card or have one uploaded to your smartphone wallet for security reasons. The good news is that achieving a solid credit score doesn't require you to have a credit card. Keep reading for more options to grow the kind of creditworthiness that will help you have healthy choices and reach your financial goals.

What is a credit score?

A credit score is a number that represents a person’s creditworthiness, with scores typically ranging from 300 to 850 in the United States. The number is calculated using factors like payment history, amounts owed, length of credit history, new credit accounts and types of credit in use.

Lenders, landlords, insurance companies and even potential employers often use credit scores to assess the risk associated with extending credit, renting an apartment, setting insurance premiums or making hiring decisions.

A higher credit score indicates lower risk for a lender and typically results in better terms and interest rates for loans and financial products. A lower score may limit a consumer’s access to credit or lead to higher costs. Regular monitoring and responsible financial behavior are good habits for growing and maintaining a healthy credit score.

Building your credit score without a credit card

While disciplined credit card use is one of the better ways of improving your credit, plenty of people have found ways to build credit without a credit card. Below are 7 ways you could do just that. But first, here are a few rules to keep in mind about getting, using and managing debt.

• Make your payments on time. More than a third of your credit score is based on your payment history.¹ There’s simply no substitute for diligently making full payments on time for all of your personal loans and other current debts.
• Don’t max out the credit you do have. Thirty percent of your credit score is based on how much you’re using the credit you have available.² The less you use of your available credit, the better your score. Maxing out your credit alerts credit reporting agencies that you may be having financial difficulties. Learn more about how credit utilization works.
• Be patient. That may be easier said than done, depending on your circumstances, but there are no magic tricks that can instantly transform your credit score.

Applying one or more of the suggestions below could be a great way to start building your credit without a credit card.

1. Repay any existing loans you have

The best way to show credit reporting agencies you’re a trustworthy borrower is to make your loan payments on time every month. Another benefit of paying them off is that paid loans can have a positive effect on your credit score for up to 10 years. This strategy applies to student loans, too. So keep making on-time payments on all of your loans!

2. Get a secured credit card

Even though we’re talking about building your credit score without a credit card, a secured credit card is different enough from a traditional credit card that you may want to consider getting one. A secured card requires you to deposit a certain amount of money into a savings account; that amount becomes the limit you can charge on the secured card. There is also an annual percentage rate (APR) associated with the secured card. You’re technically pre-paying your usage, which all but eliminates the risk for the lender. It also teaches you the discipline of not spending money you don’t have, while building your credit score in the process. Win-win!

3. Get a credit builder loan

Not unlike a secured credit card, a credit builder loan puts approved funds in a savings account or certificate of deposit (CD). A CD is a savings account that holds your money for a set time at a competitive interest rate, but you are subject to a penalty if you take the money out early.² That’s where your funds will stay until you’ve repaid the loan, at which point the funds are yours to use. The credit reporting agencies will see your payment history for credit builder loans, so make regular payments on time with no defaults. Once your loan is paid off, you may have possibly improved your credit score and could have learned disciplined payment habits in the process.

4. Become an authorized user on someone else’s card

Here’s another tactic for building your credit score “without a credit card” that actually involves someone else’s card. Become an authorized user on your friend’s or family member’s existing account — without having to apply for a credit card. You’ll get your own card and your activity is reported to credit reporting agencies.

This route really depends on the relationship you have with the cardholder, and both of you should enter into this setup with eyes wide open. Why? Because both of your behaviors can affect the other person’s credit score down the road. Their late payments can adversely affect you, and likewise if you miss or make late payments. Used correctly, though, becoming an authorized user on an existing credit card account could be a great way for you to prove to credit bureaus that you are worthy of an ever-improving credit score.

5. Take out a personal loan

Taking out even a small loan can be a great way to build credit without a credit card. There may be a slightly higher interest rate, and the loan may include a small processing fee, but you might determine those costs are worth it to improve your credit score. Ideally, you can set a goal to pay off your personal loan quickly, ahead of schedule — an accomplishment that will reflect positively on you with the credit agencies and may help improve your score.

It’s quick and easy to apply for a personal loan from OneMain Financial.

6. Take out a car loan

Even if you’ve saved money to buy a car in cash, consider applying for a car loan. The advantage is that with the car as collateral (to “secure” the loan), lenders may approve loans for people who might not otherwise qualify. If you do have cash saved up, use it to make a bigger down payment and/or pay off the loan earlier by making bigger payments each month. If you can’t make larger payments, make sure your regular payments are on time. When the loan is paid off, you’ll have a great payment history with the credit bureaus and maybe an improved credit score, too.

7. Report your rent (and other) payments

Asking your property manager or landlord to report your timely rent payments to credit agencies has become an effective strategy for some people trying to build credit without a credit card. Credit-reporting agencies now include rent payments, when they’re reported, in consumers’ credit files.³ The catch is that you can’t report your own rent payment: your property manager or landlord needs to report it directly to a credit agency. If yours won’t do that for you, you can sign up with a third-party rent reporting company — Rental Karma, RentReporters, RentTrack, ClearNow and PayYourRent are among the most popular.

Just like with your rent, check to see if your utility company will report your timely payments to the credit agencies. If they can report your payments, make sure the account you’re paying is in your name. If it’s not or can’t be in your name, ask your utility company for a letter of reference documenting your regular, on-time payments. Do the same with your cable provider, your mobile phone carrier and others.

Credit score without a credit card: Good credit habits go a long way

While credit cards are a common tool for building credit, they are not the only option. Through careful planning and utilization of alternative methods such as secured loans, credit builder loans, rent reporting services and authorized user arrangements on credit cards, you may be able to establish and strengthen your creditworthiness.

By taking proactive steps and maintaining responsible financial habits, anyone can make progress toward a healthier credit profile, opening doors to future financial opportunities and stability, even without a traditional credit card.

1. https://www.myfico.com/credit-education/whats-in-your-credit-score
2. https://www.investopedia.com/terms/c/certificateofdeposit.asp

This was first updated in 2020.