How To Build Credit Without A Credit Card

Credit cards are typically the quickest way to build your credit and improve your financial standing. However, if you don’t have a credit score that allows you to apply for a credit card what do you do?

We’re looking at how to build credit without a credit card, so you can increase your credit score. 

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Apart from applying for a credit card, opting to take out a loan is the next best way to improve your credit score. There are many different types of loans available, so you’ll need to decide which one is the most appropriate for you. 

Credit Builder Loan

If you may experience difficulty in getting a personal loan then a credit builder loan is a great way to build your credit

The amount that you can borrow on a credit builder loan is usually small between $300-$1,000, but it is not about the amount of money you can get but how you manage the payments. 

A credit builder loan works by you making regular payments against the amount that you have borrowed, but before you actually receive the funds.

You continue to make the payments until the entire loan amount has been paid off. Only then do you receive the money minus any applicable fees.

This is a great way to increase your credit score and financial standing without getting into any more debt. All of your payments are reported to the major credit bureaus, so you will build your credit and boost your score. 

Personal Loan

If you are able to take out a personal loan this is a good way of building your credit. However, if you have a limited credit history or have a record of defaulting on loan payments then the APR will be higher than on a credit builder loan. 

The other difference with a personal loan is that you get the money up front and then have to make repayments.

With a credit builder loan the motivation is to make regular payments to improve your credit score and to get the money at the end of the payments. 

When you get the loan amount first the motivation to make regular repayments is slightly less as you already have the money in your account.

Before taking out a personal loan make sure you have the means to make regular payments and that you are motivated to do so. 

Car Loan

To build credit with a car loan look for one that has a low to medium APR. Make sure that the amount you are borrowing along with the interest rate is something that you can afford to repay. 

As with any loan the important thing is to be consistent with your repayments and not to miss any.

If your intention is to build your credit then making regular repayments is essential. Any defaulting on payments will have the opposite effect to what you want 

Car loan repayments count toward a good credit score as long as you make them consistently and on time.

They are installment accounts that are reported to the credit bureaus and so have a direct impact on your financial standing and credit worthiness. 

If you want to build your credit then don’t be tempted to pay cash for a car even if it seems like a good deal as this will do nothing to improve your credit score. 

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Become An Authorized User

Many credit card companies allow the addition of authorized users on another person’s credit card. This means that you will be issued with a credit card in your name and have access to another person’s line of credit. 

This is all done without a credit check on you. The benefit is that you can buy and pay for things with this card and will have card activity that is reported to the credit bureaus

However, as the line of credit is in the main cardholder’s name, if they fail to make regular repayments or go above their credit limit then this will affect your credit score too. 

Utility Payments & Rent

Although utility payments are not typically reported to credit agencies there are ways to use these to help build your credit. By making your payments on time every month you can build up a picture of financial stability. 

Not only that but you can also ask your landlord to report your data to Experian’s RentBureau. This allows the credit bureaus to see that you are making consistent payments towards your rent each month.

As rent is one of the most common monthly outlays this is a great way to demonstrate your secure financial standing. 

Another great service from Experian is Experian Boost. This service allows you to let credit agencies see how you are managing your monthly expenses such as phone bills, Netflix account or similar. 

They will verify that you have made regular payments over the previous two years and any qualifying payments will be added to your credit file. 

Phone Plan

Not only paying your phone bill on time can help to build your credit. Having a phone plan in your name will also help to improve your credit score. Your payment history will be accessible to the credit bureaus.

When you apply for a phone plan you will be subject to a hard inquiry or credit check which will be visible on your credit report.

Before applying for one make sure you can afford to pay for your phone plan as a rejected application will negatively impact your credit score. 

Final Thoughts

There are several ways that you can build your credit without a credit card. Just because it is one of the quickest ways doesn’t mean it is the only way to improve your credit score and financial standing. 

We hope this guide will help you in your quest to build your credit and remember the best way to keep your credit score high is to make regular timely payments. 

Andre Flowers
Andre Flowers

Hello, my name is Andre Flowers and I have been a Licensed Real Estate Professional for over 24 years. I also carry several certifications, including: Certified Distressed Property Expert, Certified Global Business Professional, Certified Credit Repair Specialist.

As a current Mortgage Underwriter with 15 years of experience, I have seen my fair share of money-related issues. Whether that be high levels of debt, not enough credit, or simply a lack of funds - I’ve had clients who fit into these categories.

Here I will share tips, tricks, and experiences on how you can get yourself back in control of your finances.

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