How to Build Credit Without a Credit Card

Updated on March 12, 2024
At a Glance: You can build credit without a credit card by reporting payments to creditors, repaying federal student loans, getting a credit builder loan, applying for a personal loan or car loan, paying your mortgage, and making payments on existing loans. Additionally, keeping new accounts to a minimum, paying bills on time, maintaining a low credit utilization ratio, and ensuring all accounts are in good standing are important for building credit the right way. With responsible financial behavior, your credit score will improve over time.

Having a credit card of your own is one of the biggest signs that you’re already an adult who’s responsible for your own finances.

Unfortunately, sometimes, getting a credit card can feel like a hopeless case – to get a credit card, you need to have good credit, but to have good credit you need to have a credit card.

Don’t despair – in this article, we’ll tell you how you can build credit without a credit card!

Can You Build Credit Without a Credit Card?

Although having – and using – a credit card is one of the easiest and most straightforward ways of building credit, it’s far from the only method.

You can definitely establish and improve your credit without a credit card. Contrary to popular belief, credit card companies aren’t the only ones to report payments and usage to credit bureaus.

As long as you have a financial transaction with a company that reports to the three major credit bureaus, Experian, Equifax, and TransUnion, you can build your credit.

7 Ways to Build Credit Without a Credit Card

Interested in building credit without a credit card? Here are 7 easy ways!

1. Report Payments to Creditors

You can actually report your payments yourself. If you’re renting, for instance, you can self-report your rent payments to the credit bureaus.

The effect on your credit score is admittedly negligible, but at least it will show that you have some kind of payment history. This can be helpful for future loans or credit card applications.

2. Repay Federal Student Loans

Federal student loans are just like any other type of loan. If you can pay them on time, you’ll eventually establish good credit. 

If you want, you can even pay more than the minimum amount to pay them off faster. This may not be always possible, but if you want to build credit fast, this will certainly help.

3. Get a Credit Builder Loan

Credit-builder loans are offered by lenders specifically to help borrowers build credit. It’s also known as a “starting-over loan” or a “fresh-start loan” due to its purpose and is best for people who have poor credit or no credit at all.

Since they’re designed to build credit, they work differently from regular loans. Although you also have a monthly installment payment, the money won’t actually go to the credit-builder company. Instead, they will deposit the money you pay to a dedicated savings account. After the loan term is over, you’ll be able to get the funds back – with the agreed-upon interest and fees taken out.

This means that not only did you build credit, you also managed to save money. A win-win for both the credit-builder company and the borrower.

4. Apply for a Personal Loan

If you need money and are good at making payments on time and in full, you can also get a regular personal loan – with or without a cosigner. Not only will this help you get money immediately, you can also use it to establish a good payment history.

5. Get a Car Loan

Need a car? Consider getting a car loan instead of paying in cash. Although a cash payment is good at getting it over with, a car loan can help build your credit – if you can make the payments on time, that is.

6. Pay Your Mortgage

Paying your mortgages on time can help boost your credit score. It doesn’t happen overnight, but as you pay more and more off, your credit is also bound to improve.

7. Make Payments on an Existing Loan

You don’t have to take out a new loan just to build credit. If you already have an existing loan, all you have to do is to make payments on it. As long as you do this regularly and on time, you should build credit in no time at all.

Tips for Building Credit the Right Way

Now that you know the 7 ways to build credit without a credit card, here are 4 additional tips for building credit the right way.

Keep New Accounts to a Minimum

Every time you make a new application, an inquiry is made into your credit history.

There are two types of inquiries. The first one is called a soft inquiry. This includes actions like looking into your own credit report and letting a potential employer check your credit. It doesn’t affect your credit score so you have nothing to worry about.

What you have to worry about are hard inquiries. A hard inquiry can negatively affect your credit for a period of time – as short as two months and as long as two years.

Applying for a new credit card, an auto loan, a personal loan, a mortgage, and other types of loans will trigger a hard inquiry.

Although one hard inquiry every few months is alright, many of them within a short period can negatively impact your score.

Worse, it also gives financial institutions the message that you’re financially in trouble. After all, someone who’s doing well financially wouldn’t be applying for 5 credit cards and 3 personal loans at the same time, right?

So, if you want to build credit the right way, make sure you space out hard inquiries appropriately.

Pay Bills On Time All the Time

Another way to build credit the right way is to pay bills on time all the time.

By doing this, you’re establishing a good payment history and telling whoever is looking at your credit report that you’re a responsible borrower.

If you frequently make late payments, your credit score is bound to take a hit.

Keep Your Credit Utilization Ratio Low

Credit utilization is a term used to refer to the percentage of your credit limit that you’re currently using.

For example, if your credit limit is $10,000 and $2,000 is currently tied up in installments, that means your credit utilization is 20%. That’s a good, healthy number.

However, if your credit limit is $10,000 and you’ve used up $9,000, that’s a bad sign. Credit utilization of 90% tells financial institutions that you’re in dire need of money. 

Always aim to keep your credit utilization below 30%, preferably 10%. This doesn’t mean not using more than 30% of your credit. It simply means not leaving an outstanding balance of more than 30%.

Here’s one example. Suppose your credit limit is $10,000 and you want to buy a $5,000 item. You certainly can, as long as you can pay off at least $3000 by the end of your current billing period. This will put your credit utilization at 20%.

In fact, you should ideally be able to pay off your balance in full every month, but we understand that it’s not always possible.

Make Sure Your Accounts Stay in Good Standing

Last but not the least, you should ensure that all your accounts are in good standing. This means not letting any accounts go past due, and paying at least the minimum amount on time every month.

Building Credit Without a Credit Card: Wrap-Up

Building credit without a credit card is certainly possible. You can report payments to creditors, repay federal student loans, get a credit builder loan, apply for a personal loan, get a car loan, pay your mortgage, and make payments on an existing loan.

As long as you can fulfill your financial obligations responsibly, your credit score will improve before you know it!

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Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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