How to build your credit score without a credit card

how to build credit score without credit card

Some ways consumers can build their credit score without credit card include but are not limited to: making due payments on time, limiting frequent credit inquiries, focusing on paying off existing debts, and diversifying their credit mix.  

Credit scores are important because they can help you achieve significant milestones in life. According to Lexington Law, the average credit score is increasing over time! In the past ten years, the average credit score has risen from 693 to 714.1 Lack of a credit score can make it difficult for you to make large purchases, find housing, and save money on various expenses. If you just turned eighteen, you may want to know how to build credit without a credit card. Keep reading to learn about your financial options!

What Are Credit Reporting Agencies?

A credit reporting agency, or credit bureau, is a company that collects and stores information about a consumer’s financial activity. The credit bureaus use that data to build credit reports, which are statements that display your credit history. The three major credit bureaus in the United States are TransUnion, Equifax, and Experian. 

Credit bureaus make money by selling your credit reports and credit scores to financial institutions and creditors. However, only businesses with a legitimate purpose can access your private information. The Fair Credit Reporting Act (FCRA) limits who can access and view your credit reports. Limitations keep your personal information protected. 

Borrowers receive one free credit report from each credit reporting agency annually. You can request any credit report online through the bureau’s website. By requesting a credit report every four months, you can monitor your credit throughout the year.

How Can I Build Credit History Without a Credit Card?

Credit cards are one of the best ways to build credit, but what if you don’t qualify? Many credit card companies will deny applicants with no credit history. But not to worry! There are plenty of ways for consumers to build a credit score without a credit card. 

Use Credit Builder Loans

A credit builder loan helps consumers build credit history to get good credit. Anyone can qualify for a credit builder loan as long as they have a reliable source of income to make monthly payments. 

The loan amounts for credit builder loans are typically up to a thousand dollars. Unlike traditional loans, borrowers do not receive a lump sum. Instead, the lender secures the money in a bank account or certificate of deposit (CD). Borrowers make monthly payments, and once they pay off the credit builder loan, the lender releases the money. 

If you want to build an emergency fund, use a credit builder loan instead of a savings account! This type of loan works similarly to a savings plan, except borrowers can establish a credit score while they make deposits. 

Become an Authorized User

If you want to build a credit score without a loan or credit card, you can become an authorized user on credit accounts. Existing credit card borrowers can add anyone as an authorized user to their account. Authorized users get a credit card to make transactions, but they are not responsible for paying the bill. 

Being an authorized user helps build credit because lenders use the primary cardholder’s activity. Suppose the primary cardholder manages their debt wisely and pays on time. In that case, the authorized user can start building credit quickly without applying for a credit card. 

Make Rent Payments 

You can build credit without a credit card by making rental payments on time! Some landlords report tenant payments to at least one of the main three credit bureaus. If you live on your own and pay rent, ask your landlord if they participate in rent-reporting services. If your landlord does not report payments, you can sign up for a rent-reporting service on your own. Paying your monthly bills on time can help you build a high credit score! 

Make Utility Payments

Making on-time payments to utility companies can help you build credit over time! Some utility companies report payment history to credit bureaus, but not all. Speak to a customer service representative and ask if they report accounts. You can work on getting good credit by simply living your life and paying your house bills. 

Apply for a Secured Credit Card

A secured credit card works similarly to a traditional credit card, except borrowers must provide a security deposit. The security deposit is equal to the credit limit on credit accounts. For example, if you provide $500, you can spend up to that amount. The minimum required for a deposit depends on the credit card company. 

You can use your secured credit card for various purchases. At the end of the billing cycle, you will receive a credit card statement which you must pay on time. Your on-time payments can help you build a credit score and credit history since creditors report to credit bureaus. 

Apply for an Installment Loan

An installment loan helps eligible borrowers obtain a lump sum payment quickly. The loan is repaid through small installments over a few months or years. If you plan on making a large purchase, it may be a good idea to take out a small loan to build credit

Suppose you want an iPad that costs $429, but you only have $300 until your next pay period. You can use a personal loan to afford the purchase and build a credit score! However, this may only be a good option if you know you can repay the personal loan on time. Do not overextend your finances to build a payment history. If you can pay the loan off early to save on interest fees, do so after verifying there are no prepayment penalty fees.

Apply for a Federal Student Loan

A federal student loan could help with building credit if you plan on furthering your education! The government reports federal student loan payments to credit reporting agencies. 

Your positive payment history can help you get a good credit score if you make timely payments. Best of all, students have the option to defer payments until after they graduate! Payment options give you ample time to find a job and focus on your studies. When repayment begins, you can choose from various payment options. Many graduates opt for an income-based repayment plan, so they are not paying more than they can spare each month. 

A Breakdown of Building Credit Without Credit Cards

MethodHow it WorksBenefitsConsiderations
Rent Reporting ServicesServices that report your rent payments to credit reporting agencies. – Use your regular rent payments to build credit. – Can retroactively credit past payments. – Not all landlords participate. – There might be a fee. 
Utility Bill ReportingSome utility providers report payment histories to bureaus. – Regular on-time payments can boost credit. – Utilizes existing monthly bills. – Not all utility providers report to bureaus. – Late payments can negatively impact scores. 
Mobile Phone ContractsConsistent payments on postpaid mobile phone contracts can be reported.– Regular payments can build credit history. – No additional financial product needed. – Early termination can result in fees and negative credit reporting.
Become an Authorized UserBeing added to someone else’s credit card account and benefiting from their credit habits. – Can build credit without being responsible for payments. – Benefits from primary cardholder’s good habits. – Relies on primary cardholder’s credit habits. – Negative habits impact your score too. 
Rental History Services Third-party services that track and report your rental payment history to credit reporting agencies. – Turn existing rental payments into credit-building opportunities. – Can include past rental history. – Monthly service fees. – Not all bureaus may accept these reports.
Alternative Credit DataServices that use non-traditional data (like utility bills, rent, etc.) to establish credit. – Helps those with no traditional credit history. – Can provide a broader view of creditworthiness. – Not universally accepted by lenders.- Some services might charge fees.  

How Long Does It Take To Get a Credit Score?

When you start building your payment history, you will not get a credit score immediately. Typically, a consumer needs about three to six months of credit account activity before credit bureaus can generate a FICO score. The amount of time varies based on how quickly lenders report credit account data and the credit scoring formula used.

However, it may only take a month for a credit account to appear on your credit report. Most creditors report accounts at the end of the first billing cycle. If you apply for quick cash loans online, you may see the account on your credit report within one or two months of approval. 

Building Credit Without a Credit Card: FAQs

What is a credit score and why is it important?

A credit score is a numerical representation of a person’s creditworthiness based on their history of credit. It’s important because lenders, landlords, and even employers might use it to gauge your financial responsibility.

Can I build credit by paying my student loans?

Yes, consistently paying off student loans on time can positively impact your credit. Federal student loans are reported to all three major credit bureaus.

How does being an authorized user on someone else’s credit card affect my credit?

As an authorized user, the account’s payment history can appear on your credit report. If the primary cardholder maintains a good payment record, it can positively impact your credit.

Do all landlords report rent payments to a credit bureau?

No, not all landlords report rent payments. However, you can use rent-reporting services to ensure your timely payments are reflected in your history of credit.

How do secured credit cards differ from regular credit cards?

Secured credit cards require a security deposit, which typically becomes your credit limit. They’re designed for people looking to build or rebuild their credit.

Can taking out a personal loan help in building credit?

Yes, if you consistently make on-time payments on your personal loan, it can help build your credit. However, it’s essential to ensure the loan terms are favorable and that you can manage the repayments.

Does paying utility bills influence my credit?

Some utility companies report payment histories to credit bureaus. Regular, on-time payments can help improve your credit, but it’s essential to check with your utility provider. Paying other debts on time (car loans, outstanding loans, credit card balances, etc.) is also important for boosting credit or maintaining a high score.

How can I monitor my credit score and report?

You’re entitled to a free credit report from each of the three major credit bureaus annually. Regularly reviewing these reports can help you monitor your credit and spot any inaccuracies.

What should I do if I find errors in my credit report?

If you find any inaccuracies in your credit report, you should immediately report them to the respective credit bureau. They are obligated to investigate and correct any errors.

Are there any services or apps that can help me build credit without a credit card?

Yes, several apps and services are designed to help individuals build credit. Examples include rent-reporting services and apps that offer credit builder loans. Always research and choose a reputable service.

A Word From CreditNinja About Building Your Credit Without Credit Cards 

Thankfully, there are plenty of ways to build your credit without having a revolving line of credit, proving it’s completely possible to survive without having a credit card

But, what do you do if you need some extra money for emergency expenses and don’t have a credit card to rely on? In that case, you may consider personal installment loans with CreditNinja! We have been an accredited lender since 2018 and specialize in providing bad credit loans to borrowers. With a personal loan from CreditNinja, not only could you take care of your expenses without needing a credit card, but you may also see your credit improve once you’ve paid off your loan balance. Start our easy online application today to see how much cash you may qualify for! 

1. 30 Credit Score Statistics for 2023 | Lexington Law
2. What Are Credit Bureaus and How Do They Work? | Experian
3. How Long Does It Take to Get a Credit Score After Opening an Account? | Experian

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