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How to Build Credit Without a Credit Card

How to Build Credit Without a Credit Card

By Jeff Rasmussen • June 29, 2020

There are different reasons for wanting to know how to build credit without a credit card. Maybe you don’t qualify for a credit card outright. Maybe you’d rather not have to deal with managing a revolving credit account that can rack up debt each month. Do you need a credit card to build credit? Absolutely not. 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 can 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 your diligence in making full payments on time for all of your personal loans and other current debts.

  • Don’t max out the credit you do have. Another 30% of your credit score is based on how much you’re using of the credit you have available.2 The less you use of your approved credit, the better your score. Maxing out your credit alerts credit rating 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 potions that can instantly transform your credit score. Applying one or more of the suggestions below is a great way to start building your credit without a credit card.

Applying one or more of the suggestions below is 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 rating 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 later. 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 that you deposit a certain amount of money into your account, which becomes the limit you can charge on 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 CD. That’s where they’ll stay until you’ve repaid the loan, at which point the funds are yours to use. The credit rating 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’ll have likely improved your credit score and 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 own monthly statement, plus your activity is reported to credit rating 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 is 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 rate, and may include a small fee, but you might determine those costs are worth it to improve your credit score. Ideally, you can 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.

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 “insure” the loan), lenders may approve loans for people they might not otherwise. If you do have cash saved up, use it to pay down the loan, making bigger payments than required. If you can’t make larger lump-sum 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 likely 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 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: 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 will report your timely payments to the credit agencies. If they can report your payments, make sure the account you’re paying on is in your name. If it’s not or can’t be in your name, ask your utility for a letter of reference documenting your regular, on-time payments. Do the same with your cable company, your mobile phone carrier and others.

Good credit habits go a long way

There’s simply no substitute for being conscientious with all the financial commitments you have — it’s the best way to build credit, even without a credit card.


1 https://www.myfico.com/credit-education/whats-in-your-credit-score
2 https://njaes.rutgers.edu/money/pdfs/lesson-plans/DoE-Lesson-Plan-3-Credit-and-Debt-Management.pdf
3 https://www.hud.gov/press/pressreleasesmediaadvisories/HUDNo20030


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