How to Build Credit Without Credit Cards: Top 15 Ways to Do It

how to build credit without credit cards

If a person does not have a good credit score or doesn’t have one yet, there are multiple things in life that they will not have access to.

To establish a good credit score, the basic premise is that they must accumulate an excellent history of loans and repayment. Their score will start once they have made their first loan.

The fastest and easiest way to build a credit history is with a credit card. However, many shy away from them because of their perceived negative connotations. But most importantly, people do not like to have and use them because of the high interest that comes with them. 

In combination, if one mistakenly sets themselves for minimum payments, the amount of time for them to get rid of their credit card debt can easily become as long as five to ten years. And that is no exaggeration.

It is important to realize that having a credit card is not for everyone. However, if you want to build credit, there is still hope. And actually, some of the alternative methods are way better. Here are the top ways to do it.


1. Credit Builder Loan

If a person wants to improve their credit score without forcing themselves to borrow and spend, they can take advantage of credit builder loans. The concept is simple: 

  1. One can virtually borrow money, but they will not be able to receive it or cannot use it until they completely pay for the whole amount. 
  2. It is like keeping a time deposit that counts as debt or a loan. And the best thing about it is that the money can earn interest. 
  3. Banks and credit unions offer it. And of course, even if the borrower did not get the money, they must pay the loan on time. 
  4. Know that late payments can hurt credit score. This method of building credit sounds a bit crazy, but it is an excellent way to save and improve credit ratings fast.
  5. Typically, an individual can pay credit builder loans for a year or two. And it is ideal for those who do not have any debt yet and are focusing on saving a lot of money.


2. Personal Loans

This is the most accessible type of loan for everyone. A personal loan, or unsecured debt, can be a quick way to borrow money without any complex requirements or procedures. Primarily, it is because it does not require collateral like a car or house to borrow money; hence, it is referred to as an unsecured loan.

The other advantage of a personal loan is that it can be used for any purpose. However, know that if a person does not have a credit score yet, they will need to have a cosigner to avoid getting high-interest rates.

Even if the borrower does have a cosigner or already has a credit score, they can expect that the loan will still have a high-interest rate.

Aside from that, do not just get personal loans only for the sake of it. Be sure to have a good enough reason, as it can drain money.


3. Rent

If a person is renting, it is important that they do not forget to pay their rent on time. Even if landlords do not waste their time reporting payments that are not late, they may make a fuss when their renters do not pay their due on time.

They do this by sending debt to a collections agency, which can negatively affect a person’s credit score.

However, a renter should at least talk to their landlord about reporting their on-time payments. If they do not want to bother, there is still hope.


Some companies can help get on-time rent payments reported to credit bureaus. It can effectively build credit over time. 


These companies only need their clients to sign up and verify that the information they submitted to them is accurate.

They can handle the payments by processing and scheduling them. Once a landlord receives payment, they will confirm it, which effectively will count as an on-time payment.


4. Student Loans

Just like with rent, payments can improve credit score over time as long as one pays on time and does not let student debt get transferred to collections agencies.

The payments people send for their federal student loans are all reported to the main three credit bureaus: 

  • TransUnion
  • Experianan
  • Equifax


5. Authorized User

This is a workaround solution that involves a credit card that is owned by another person.


If a person knows a friend or family member who is very good with their finances, they can ask them to make them an authorized user for their card.


When one becomes an authorized user, every on-time payment of the credit card owner positively reflects on their credit score. Of course, there are underlying risks to this setup, and not all people are comfortable with it.

Thankfully, an authorized user does not need to exercise the right to use the card if they only plan to build credit.

As long as the owner has an active history of payments, it will be reflected on the authorized user’s credit history as well.


6. Secured Credit Card

This involves a credit card, but it is very different from the traditional plastic.

In actuality, it is much more similar to a credit builder loan, but unlike it, it is through the form of a credit card. The owner of the secured credit card can have access to your credit.


If a credit builder loan is like a time deposit, a secured credit card is like a regular savings account written off as debt. It is like a credit card, but payments come first before one can use it. 


This is how secured credit cards work:


7. Check Installment Loans

A person who is building credit must always check if they have any ongoing installment loans.

It is common for people to forget about them and get surprised by a sudden call from a collections agency. So, it is gravely important to be aware and make payments for them on time.


8. Take Advantage of Creditor Reporting Services

Companies like Experian offer a free service called Boost that tracks credit whenever a person pays monthly bills on time.

Before, most credit reporting agencies only tracked utility bills like gas, water, and internet. Now, they can also track other subscription-based services like online streaming.


9. Have a Phone Bill

This is another monthly bill that one can add to build credit. Just like with federal student loans, phone plan payments get reported to credit bureaus.

However, if a person has a bad credit score, they should not get a phone plan yet, as the hard inquiry that a phone company will make can negatively impact their credit score.

Besides, a rejected application can also affect the score badly.


10. Mortgage and Car Loans

Most on-time car and mortgage loan payments are reported to credit bureaus. They can effectively build credit, and one does not need to get a credit card involved in it.


Like with other loans, an aspiring borrower needs to have a good credit history before they can take this option.


If their history is still fresh, they have a higher chance of getting a mortgage and car loan by paying the down payment and having a steady job and higher than average income. 

To further raise their chances, they can get someone with an established credit history to cosign for them. Know that if someone pays late, their cosigner's credit score will be affected as well.


11. Avoid Scams

Instead of just focusing on building a credit score by making many loans, a person should also avoid getting scammed. Here are a few things people should look out for: 

  1. A person who is trying to build credit is a prime target to scammers and lenders with unbelievably difficult to repay loans. 
  2. If someone or an organization advertises their capability to give people a 100% approval rate on borrowers, be skeptical. If they ask to pay first, it is best that people should not do business with them.
  3. Aside from those, people should also avoid payday loans. Sure, a person can pay off payday loans, or a loan can get a person out of a tight spot even if they have astronomical interest. However, they do not report loans and payments to credit bureaus. Not to mention if a person defaults on a payday loan; the consequence will be too great for their credit score.


12. Keep Credit Cards on Standby

If one already has a credit card, there is no need to cut the plastic yet. The longer a person keeps any financial account in good standing, the faster their credit score will improve.

And even if they close your credit account in good standing, it will still reflect on their history for ten years.

However, if the maintenance fee is too high, one should not hesitate to close the account down.


13. Make a Payment Schedule

Building good credit is all about letting the bureaus know that a borrower pays on time.

To ensure that a person does that, they should make and follow a payment schedule. Know that payment history determines a third of a person’s credit score.

So, it is in their best interest to ensure that they are on top of their game when paying their debts on time, as one missed or late payment can be costly.


14. Pay All Debts ASAP

A person can nudge their credit history to improve faster by paying all debts as soon as possible. Unfortunately, it is an ideal that is not an option for everyone.

Individuals who want to get started paying off their debts should keep these things in mind: 

  • Even if a borrower cannot do it, they shouldn’t fall into the trap of believing that maintaining a balance while paying on time is the best way to build credit history. 
  • Finances can take a hit by letting interest grow, even if they know that they can end the loan anytime.
  • Do not let those fees and interests compound. Pay everything in full if possible, but if it is not possible, it is best not to force it. 
  • Do not get into a spot where one will need to retake another loan after paying the previous one in full.


15. Dispute Fraud and Errors

This cannot be stressed enough: keep track of loans.

A new debt appearing on one’s record may indicate that they were a victim of identity theft.

Fraudulent charges on an account can quickly destroy a credit score rating.

Always be vigilant, and never hesitate to contest any mistakes or discrepancies.


Play the Long Game

Building an excellent credit history without a credit card takes a long time. It is important to set expectations.

This will not happen overnight. Of course, as people go about this, new avenues will open up. And to know if things have improved, people can always check their credit score themselves.

Know that some websites and services can let people see their scores for free. However, be sure to read the fine print before signing up and providing information. One of the most reliable sites people can access for a free check is Experian's website.

Also, feel free to research more about this topic. Managing finances, building credit, increasing savings, and eliminating debts are crucial to having a secure and better life.

Alternatively, you should definitely take advantage of the free financial education we provide.

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