How to Build Credit Without a Credit Card

To build credit without a credit card, you can get a loan and pay it off on schedule or get your on-time rent and utility payments reported to the credit bureaus. These options can add positive information to your credit reports, which will build up your credit score.

Using a credit card responsibly still is the best way to build credit, as credit cards are easy to get, don’t require you to incur debt, and will report information to the major credit bureaus on a monthly basis. However, not everyone can get a credit card, and not everyone who can get one wants to. Whether you’re too young to apply for a credit card on your own or you’re hesitant to use credit for fear that you will overspend and rack up debts you cannot afford to repay, you can try these alternative methods to build credit.

1. Build Credit with a Loan

Most types of loans report account information to the major credit bureaus on a monthly basis, allowing you to build credit if you pay your bill on time. But going the loan route has its fair share of flaws. For one thing, taking out a loan requires going into debt.

Loans are typically much harder for people with limited or bad credit to get than credit cards. That’s why mortgages loans, for example, typically aren’t included among the best types of loans for building credit. However, if you are looking to build credit with a loan, you do have a few avenues you can try.

Best Loans for Building Credit

Credit-Builder Loans: Credit-builder loans offer high approval odds for people with no credit. With the loan, you’ll make monthly on-time payments, and the lender will report these payments to the credit bureaus, which can have a positive impact on your credit score. You generally cannot access the funds until the loan is fully repaid.

Compare the best credit-builder loans

Secured Loans: A secured loan is a personal loan that uses a savings account, certificate of deposit (CD), car title, or other item of value as collateral. The loan amount generally can’t be higher than the collateral’s value.

Peer-to-Peer Loans: Peer-to-peer loans are loans extended by fellow consumers, rather than a financial institution, often via crowdfunding. Not many financial institutions offer peer-to-peer loans, but Prosper is one example of a company that offers them.

Federal Student Loans: These are loans intended for educational purposes. Federal student loans can be subsidized, and they are far less expensive than private student loans.

Personal Loans: Personal loans are unsecured loans that can be used for any purpose. They do not require collateral, typically have fixed interest rates and must be repaid in equal monthly installments.

Auto Loans: An auto loan is money that you borrow to buy a car. The car you purchase is used as collateral for the loan, and you don’t fully own the car until you have paid back the auto loan in full.

You can see how these types of loans compare in a few key categories below.

It’s worth noting that all of these options will be more expensive and riskier than simply placing a deposit on a secured credit card. The deposit amount (~$200) is fully refundable, and you can find offers with no annual fee.

You can learn more from WalletHub’s secured credit card guide.

2. Build Credit with Rent Payments

Not all landlords report monthly rental payments to the credit bureaus, but some do. If your landlord doesn’t report your rent payments, certain third-party services can help facilitate the transfer of information to your credit report. You just need to ask your landlord to decide how to proceed.

If you need a third-party service to get rental info onto your credit report, here’s a quick overview of some popular options:

*Fees are charged to the landlord but may be passed on to you.

Bear in mind that you may have to opt in for monthly credit reporting. Not all services will do it automatically. Plus, not all credit score models will consider rental payment history, even if it’s on your credit report. So the benefit of this strategy depends on the type of credit score a lender uses to evaluate your application, which can be impossible to determine.

You may be interested to know that most of these third-party services accept credit card payments, too. For more information, check out WalletHub’s guide on how to pay rent with a credit card.

3. Build Credit with Utility Payments

You can use your on-time utility payments to build up your credit score. Just like rent payments, your utility payments usually aren’t reported to the credit bureaus. However, if you pay your bills on time every month, your credit can benefit from adding them to your credit report. Some companies that will report your utility payments include:

• Experian Boost
• Self’s Rent & Bills Reporting
• eCredable
• Bloom+

4. Build Credit as an Authorized User

OK, this method does involve a credit card, but it’s not your own account. You also don’t actually need to possess any plastic to benefit. By becoming an authorized user on a family member’s credit card account, you can basically piggyback on their credit standing.

More specifically, their account will be listed on your credit report, and you will benefit from information about on-time payments and low credit utilization being reported to the credit bureaus every month. If the account information is negative, you can simply ask the credit bureaus reporting the information to remove the records from your file. Because authorized users aren’t responsible for making payments, they can’t be held responsible for the primary account holder’s failure to do so or for any other type of account misuse.

For more information on what this arrangement entails, check out WalletHub’s authorized user guide.

5. Practice Good Financial Habits

No matter which credit-building method you choose, your credit will only improve if you borrow responsibly. Above all else, that means always paying your bills on time. To make sure you are able to pay your bills on time, don’t borrow more than you can afford to repay, sign up for autopay if you’re forgetful, and make sure to save enough.

It’s also worth mentioning that you may have already built a bit of credit without realizing it. You can see for yourself by checking your latest credit report for free on WalletHub. Access to your latest credit data will also aid your credit-building efforts. You’ll be able to monitor your progress and make adjustments as necessary, with help from WalletHub’s personalized credit analysis.

Bottom Line

If you are unable to get a credit card or just don’t want to, there are many alternative ways to build credit, such as getting a loan or having your rent and utility payments reported to the credit bureaus. Whatever method you choose, practicing good financial habits, like paying your bills on time, will ultimately help you build your credit.

Learn more about how to build credit.