Building credit without credit cards does require some creativity, but it's definitely possible.
Having good credit is essential for qualifying for loans, getting approved for rentals, and even getting hired for some jobs. However, building credit can seem like a catch-22: You need credit to get credit. Credit cards are a common way to get started, but that may not be an option for you for a variety of reasons.
The good news is that there are several strategies you can employ to build a solid credit history without relying on having credit cards of your own. Here are some tips:
With a credit-builder loan, you borrow an amount like $500 or $1,000 and make fixed payments over 6-24 months. The lender deposits the borrowed amount into a locked savings account, and once you've completed the loan payments the money is unlocked and given to you. These loans are designed solely for building credit history.
See if a family member or spouse with good credit will add you as an authorized user on their credit card account. The account history can get reported on your credit report, helping establish a track record for you.
Having a credit-worthy co-signer on an installment loan, like an auto loan, personal loan or student loan, allows you to piggyback off their good credit while building yours. Just be sure to make all payments on time.
There are services that allow you to opt to have your rent payments and utility bills reported to the major credit bureaus. This helps create a record of timely payments. Look into getting your landlord to enroll in a rent-reporting service like Piñata (which is free to use). Otherwise, here's my guide on how to report your rent to the credit bureaus.
With a secured card, you place a refundable security deposit that typically becomes your credit limit. Make small charges and pay on time to build positive payment history.
Establishing good credit takes time, so don't get discouraged. Make all minimum payments early or on time, keep credit utilization low, and avoid situations that create negative credit events. Practicing good financial habits consistently is key to building an excellent credit score.
Building credit without credit cards does require some creativity, but it's definitely possible. With responsible management of loans, bills and low credit limits, you can develop a strong credit profile over time.
