How to Build Credit Without a Credit Card: 7 Loan & Non-Loan Options

How to Build Credit Without a Credit Card

You’d agree with me that having a good credit score history makes life easier. Basically, it makes it easier to obtain low-interest mortgages and vehicle loans. But the advantages don’t stop there.

Your credit history might have an impact on your auto insurance prices, rental options, and even your job prospects.

The majority of people improve their credit by establishing a long history of timely loan repayments. It’s all about proving that you’re “good for” the money you borrow, whether it’s on a mortgage, a school loan, or a credit card.

There’s just one problem: borrowing money frequently necessitates a high credit score. Accessing even the most basic loans and credit cards might be difficult if you’ve harmed your credit or are starting from scratch.

Fortunately, this chicken-and-egg problem can be solved. Although, that’s If you’re prepared to put in the effort. You can literally build (or repair) your credit score from scratch. But then that’s beyond the scope of this post. With our post on how to build a business credit already in place, this post will educate you on to build credit without a credit card. We will also cover a few non-loan options to consider when building your credit score.

How To Build Your Credit Score Without Using A Credit Card

Most people think of credit cards as an excellent way to establish credit, but they are far from the sole option for establishing credit and payment history.

Credit cards are not available to everyone, and it may be tough to qualify for one if you are just starting to develop your credit profile or have had a few financial setbacks in the past.

Credit cards just develop your revolving credit history; however, a healthy credit mix, which includes an installment loan account, is necessary to build a strong credit profile and obtain a high credit score. Ten percent of your FICO® credit score is based on your credit mix.

In other words, you don’t have to rely solely on credit cards to build your credit score. While credit reporting bureaus frequently utilize credit card transactions and payments to assess your creditworthiness, this method isn’t limited to cards.

You can build up enough credit to qualify for the card you want if you make on-time payments and maintain your debt-to-credit ratio low (below 30%, ideally).

So, if you’re wondering “how to build a credit score without a credit card,” below are a few options that work with a proven track record.

#1. Get a Credit Builder Account/Credit Builder Loan

If you want to build credit rapidly without using a credit card, credit builder accounts are a dependable way to do this; plus you do not have to buy an expensive item with high-interest store financing or spend your money on monthly purchases with a credit card.

When you apply for a credit builder loan, the full money — usually between $300 and $1,000 — is deposited into a safe account. You can’t get the money immediately, unlike a typical loan. Instead, you make a regular monthly payment until the loan is paid off in full, and then you receive the full amount back.

It’s more like you’re making regular payments but not spending extra money. To assist you to improve your credit score, all payments are recorded to the major credit bureaus.

#2. Apply for a Personal Loan

Applying for a personal loan is another route you can take to build credit without acquiring a credit card. True, it’s a debt, but if you use the loan funds wisely, you can improve your credit while also getting something useful.

A personal loan can be used for practically any reason, including home renovations, vacations, and debt consolidation.

If you don’t qualify for an unsecured personal loan, secured loans are available from lenders. That means you have to put up some type of security as a guarantee for the loan. It may be your car, your house, or something else of significant value.

Before taking out any personal loan, you should thoroughly assess your personal financial status. This is to ensure that you will be able to repay it. On the other hand, your credit score will suffer if you take out a loan and then fail to pay it back on time. You should also look around for the best loan terms, as interest rates and costs can change significantly between lenders.

#3. Apply for a Student Loan

If you’re a student or have pondered returning to school, taking out a private or government student loan will add an installment account to your credit history. However, if you currently have student loans, be sure you pay them off on schedule, as late or missed payments can have a substantial impact on your credit score.

#4. Consider Taking Out a Car Loan

When you pay your car loan on time, it helps you build credit. If you pay cash, you won’t get this benefit, so if you need a car and want to develop credit, seek a low-to-medium APR with affordable monthly payments.

#5. Repay an Existing Loan

If you pay on time and don’t default on your existing loans, such as school loans, you can boost your credit rating.

#6. Report Alternate Payments

Student debts, vehicle loans, and personal loans are merely the top of the credit iceberg, according to many creditors. As a result, they’re generally prepared to take into account alternative payment information in order to help you improve your credit score.

How To Build Your Credit Score Without Using A Loan

The following methods will help you build your score without opting to go for a loan like the above methods.

#1. Use Experian Boost

Utility payments can also be reported to credit agencies, which can help you develop credit without getting into debt. Basically, Experian Boost will track your payment history for some of your existing bills, such as your phone, utilities, and streaming services. Experian, one of the three major consumer credit bureaus, manages it.

However, you should be aware that there is a cost associated with using Experian Boost. Furthermore, Experian will require access to your bank login information. It will also scan your bank account history for recurring utility payments to add to your credit report when you share your credentials.

#2. Become an Authorized User

You might be able to be added as an authorized user to a family member’s or significant other’s credit account. This means that the account belongs to your loved one, but you obtain your own credit card and use it to make purchases; building your credit in the process.

Your credit card activity will almost certainly be reported to the credit bureaus, resulting in the creation of a credit account in your name. To develop a solid credit history, it’s critical that both users handle their credit activity properly and complete all payments on time.

But then, both individuals’ credit can be harmed if one of them misses a payment.

#3. Obtain a Protected Credit Card

Although this is technically a credit card, it can be a useful tool for quickly building credit. Even if you don’t qualify for an unsecured credit card, practically everyone with a good, bad, or no credit score can receive a secured credit card.

A secured credit card works like this: you make a cash deposit that serves as the card’s collateral. Your credit limit is equal to the amount you deposit. You can charge up to that amount, then pay off the loan. Credit bureaus are notified of these payments.

If you pay your debt in full on a regular basis, you may qualify for an unsecured credit card account and have your initial deposit repaid.

Secured credit card issuers frequently charge a hefty annual fee and have higher interest rates than unsecured credit cards, so keep that in mind. Furthermore, to avoid high-interest costs and credit card debt that snowballs, it’s critical to pay your balance in full each month.

Also, make sure your credit card balance is kept low, ideally at or below 10% of your credit limit. Maintaining a credit usage rate of less than 10% will help you enhance or optimize your credit score.

Get Your Rent Payments Reported to the Credit Bureaus

While rent payments aren’t typically recorded to credit agencies, there are services you can utilize or request from your landlord that will. When you pay your rent on time, the service will add it to your credit report as a positive addition, which will help you improve your credit score and develop a positive credit history over time.

If you’re a renter who doesn’t want to take on debt to improve your credit, this could be a decent choice. There are a ton of services that report rent payments to credit bureaus online. But because all of these programs are always evolving, you should conduct comprehensive research before signing up for one to ensure that it is the best fit for you.

Other Factors to Consider

It’s also worth mentioning that your success in building credit, whether through a personal loan, a secured card or becoming an authorized user, is contingent on three essential factors:

Make Timely Payments

The best method to improve and build your credit is to make sure your payments are always made on time. You not only avoid monetary fines and APR rises, but you also demonstrate the financial integrity that credit agencies seek.

Maintain a Healthy Debt-to-Credit Ratio

The higher your debt-to-income ratio, the slower you’ll be able to build credit. Agencies look for percentages of 30 percent or less when comparing your current credit balances to outstanding bills. Basically, your debt-to-credit ratio is 30% if you have a secured card with a $1,000 limit and a $300 balance, for example. However, a credit score of less than 10% is optimal, and more than 50% makes it harder to create a decent credit score.

Make the Most of Your Credit History

The longer you’ve made on-time payments and kept your debt under control, the higher your credit score will be. However, if you’re just getting started with building credit or have recently experienced financial troubles, your credit history is likely to be restricted. So report as much information as possible to help jump-start your credit score, from rent and school loan payments to automobile and personal loan details.

Develop Good Credit Habits

It’s critical to establish solid credit habits, whether you’re starting from zero or trying to improve an existing credit score.

These techniques, in addition to making timely payments, may help you boost your credit score.

Make a financial plan: According to the Consumer Financial Protection Bureau, creating a budget to compare your income to your expenses is a crucial step toward achieving your financial goals. Knowing where your money goes each month can help you put money aside for loan or credit card payments before you start spending.

Get a copy of your credit report: allows you to request one free credit report from each of the three major credit agencies once a year under federal law. Any inaccuracies on your credit report may have a negative impact on your credit score.

Consider One Credit Card Option

You do have another alternative if you aren’t ready or weren’t authorized for a typical credit card.

Applying for a secured credit card is another option to develop credit without having a conventional credit card. They need a security deposit, but they can be a good method to improve credit if used responsibly.

Secured card status may not be reported by some issuers. If you want to improve your credit, find a secured card that reports to one of the three major credit bureaus.

You can still create healthy habits and improve your credit score even if you don’t have a credit card.

Debt-to-Credit/Income Ratio

We hope this article on how to build credit without a credit card has answered your questions. You should also be aware that opening credit accounts or using a secured credit card to establish a payment history isn’t the only approach to enhance your credit.

If you currently have credit cards or lines of credit, paying off your present balance can help you boost your credit score by lowering your debt-to-credit ratio. Your debt-to-credit ratio is the amount of debt you owe compared to the credit you have available. The debt-to-credit ratio is also known as the ‘credit utilization ratio.’

Your debt to credit ratio (credit utilization) is 20% ($1,000 / $5,000) if you have a combined credit limit of $5,000 across all credit cards and accounts and debt of $1,000. The smaller your debt-to-income ratio, the better. So, maintaining a credit usage rate of less than 10% is recommended.

Your credit scores are also influenced by the length of your credit history. This means that even if you don’t use your credit card, you should keep it since the longer you have each credit account, the higher your ‘average age of credit,’ which will boost your credit profile.

But then the number of inquiries on your credit report will also affect your credit scores, which is why it’s best not to apply for several credit cards or loans in a short period of time. Open cards or accounts only when you absolutely need them or if you have specific credit-building goals in mind.

Keep a close eye on your credit report to ensure there are no inconsistencies (incorrect information). If you know you’ve paid off a debt but it’s still showing up on your credit report months later, contact the credit bureau to have it deleted.

Keep an Eye on Your Credit Score

Check your credit score and track your progress on a regular basis to ensure that your hard work is paying off. It will get easier to get authorized for credit cards, loans, and other financial items as your credit report grows and your score rises. It will also assist you in instances where your credit will be reviewed, such as when you sign up for new utilities, apply for a job, or rent a home or apartment.

The Significance of a Credit Score

A credit score is used by lenders to determine how trustworthy you are when it comes to repaying a loan or other financial commitments. This score is calculated using information from your financial history over the last 7-10 years, such as payment history, overall debt, types of credit accounts, and credit card debt relative to available balance.

There are several credit scoring methods, but the FICO score is the most widely used. Also, FICO has a variety of scoring models, including:

  • FICO Auto Score
  • FICO Bankcard Score
  • (For Mortgages) FICO Score 4
  • FICO Score 8
  • FICO Score 9

As of May 2020, the FICO Score 8 variant is still the most popular.

FICO scores range from 300 to 850 for the basic models (FICO Score 8 and 9), and 250 to 900 for industry-specific models.

So basically, a credit score is significant because it not only determines whether a lender will approve you for a loan or credit card, but it also assists lenders in determining the terms of the loan or credit card, such as interest rates and fees.

For example, if your credit score is in the 650s, you may be approved for a loan or credit card, but if your credit score is 800 or higher, you may qualify for lower interest rates and fees.

Why Would You Need a Credit Card?

A credit card can be a valuable instrument for establishing trustworthiness and achieving a high credit score. In addition, cardholders may be eligible for a variety of advantages, including:

  • The convenience of swiping a credit card rather than carrying cash.
  • The ability to easily complete internet transactions.
  • Ability to contest accusations instead of chasing someone down for money.
  • Availability of extended product warranties, fraud protection, rental car insurance, and other specific benefits.
  • Eligibility for cash back, travel miles, store discounts, and other benefits.
  • Eligibility for other benefits like eclusive merchant discounts, hotel discounts, subsidized baggage fees, and more.
  • The convenience of automatically documenting your purchase history while tracking your spending.
  • Interest savings from balance transfers during promotional periods with a 0% annual percentage rate.

When Should You Avoid Using Credit Cards?

It’s critical to conduct a honest self-assessment before applying for a credit card. “The most important reason to avoid getting a credit card is that you don’t trust yourself to handle it responsibly,” Guina explains.

In fact, if you can check off any of the following boxes, you should generally avoid using a credit card:

  • You don’t think you’ll be able to make your monthly minimum payments on time.
  • You intend to use the card to pay for extravagances you can’t afford.
  • Instead of setting up an emergency fund, you intend to use your credit card for emergencies.
  • You’re applying for credit because you’re in financial trouble.
  • You’re only getting one for the benefits or the sign-up incentive.
  • You don’t grasp the card’s terms and conditions.
  • Your alternatives are restricted to cards with exorbitant interest rates and yearly fees.
  • You’re only eligible for a card with a little credit limit, which you’ll quickly exhaust.
  • You believe that obtaining a credit card is the only method to improve your credit score.


Building credit is a lifelong process that requires your undivided attention. To a large extent, this will ensure that your good credit profile increases over time while your credit score improves.

How to Build Credit Without Credit Card FAQs

Can I build my credit score without a credit card?

Yes, without a credit card, you may create credit and build a credit score. Experian®, TransUnion®, and Equifax®, the three credit bureaus that report on your credit score, are not the only ones who report your payment and usage history.

How long does it take to build credit without a credit card?

It takes at least six months to build a credit score if you’ve never used credit before, and even longer to get a decent or excellent score without a credit card.

Can you rent an apartment without credit?

A credit check is required by the majority of residential complexes and management organizations. Some private landlords, on the other hand, will rent to you even if you have no credit history. In most cases, these landlords will still want proof of income stability.

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