How to build credit without a credit card

There’s a very straightforward equation to building credit with a credit card: open up a credit card, charge a regular amount to that card, and pay your bills regularly on-time. Simple.

But what if you can’t get a credit card because you don’t have good credit? Or what if you don’t want to open up a credit card in the first place?

What are your options if you want to build credit without a credit card?

Well, there are actually loan options that can help you build credit and you don’t actually have to borrow and spend any money – and you certainly don’t have to use a credit card.

Here are a few options for building credit without having to open up a credit card:

Open a secured credit card with a bank or credit union: I know what you’re thinking: “secured credit card” has “credit card” in its name! But secured credit cards are actually very different. These special kinds of cards are offered through banks and credit unions to help you build credit. Unlike a credit card where you borrow money upfront, you first deposit funds into an account to guarantee your line of credit with the bank. You’ll then use your card regularly and pay your balance in full every month. If you have a good record with your card, you can establish new credit or improve your credit score.

Take out a credit building loan: Credit builder loans are sometimes offered through financial institutions and nonprofits specifically to help people build credit. It’s not like a regular loan because you don’t get money upfront. You make payments on the credit builder loan over time and the bank puts that payment money into an interest-bearing savings account. Once the loan is paid off, you get access to your money. If you have a good record and make on-time payments, this can help establish new credit or improve your credit score.

Ask for a co-signer to get a new loan: If you want to take out a loan to help you build credit but you have poor credit and can’t get a loan in the first place, you may want to seek a co-signer for a new loan. A co-signer guarantees to the lender that the debt will be repaid. If you (the borrower) can’t repay the debt, the co-signer is responsible. This means you’re much more likely to get a loan with a co-signer with good credit. But just remember: the loan payments will impact the credit history of both the borrower and the co-signer, so be sure to make on-time payments!

Become an authorized account user: Becoming an authorized user on another person’s credit card means that the other person’s payment history will be reported on your credit history as well. If the account holder has a good record and pays their bills on-time, this can enhance your credit score (even if you never use the account). However if the account holder begins missing payments, it can negatively impact your credit score.

When it comes to building credit without a credit card, some of these options are safer than others. But just know that you don’t have to feel beholden to the credit card companies to build good credit. Want to find out what’s in YOUR credit report so you can build credit? Get started with Quizzle today and get your free credit report and score, no purchase or credit card necessary!