8 Ways to Build Credit Without a Credit Card


There are certainly plenty of reasons to avoid credit cards. However, there are also many reasons to get one. Regardless, if you can’t get one or don’t want one, there are still several ways to build credit without one.

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How to Build Credit Without a Credit Card

Here are eight ways to build credit without a credit card, plus one way that is technically a credit card but doesn’t require you to have credit to get it.

1. Credit Builder Loan

Credit builder loans are great loans for people who have little to no credit history. You borrow a small amount (say $1,000) and make monthly payments on that amount for one to two years.

Your payments are deposited into an interest-bearing CD or savings account, so you’ll get back a little more than you put in. However, note that you won’t have access to the funds until you’ve paid them in full.

The only purpose of a credit builder loan is to establish positive credit history. Think of it as getting a federal refund check after you’ve done your taxes.

It shows up on your credit report as an installment loan. So, every monthly payment you make takes down the remaining balance, and is reported to the credit bureaus as an on-time payment.

The flip side to a credit builder loan is that they can hurt your credit if you don’t make those payments! Make sure you can make the payments before you sign up.

If you’re interested, have a look at our top 5 credit builder loans, or visit your local bank or credit union to see if they offer them.

2. CD Loans

Even if you have poor credit, passbook or CD loans are relatively easy to secure. To get a CD loan, you can use either whatever savings you have accrued or a CD account. Whoever grants the loan uses those funds as security should you fail to pay them back.

It’s a challenging route for those who have little to zero savings. However, if you can get a CD loan, you can build credit with it over time.

3. Personal Loans

A personal loan is what is often referred to as unsecured debt. Unsecured loans are those that are not backed by collateral (usually a house or car). Because the loan is unsecured, lenders will typically charge higher interest rates to borrowers.

Borrowers with no or low credit scores often have to get a cosigner. Otherwise, you’re facing high interest rates if you’re able to get approved at all.

Personal loans can be used for just about anything. However, in this case, it should be used to build your credit and to advance your financial goals.

It’s not wise to get a personal loan just for building credit, but we discuss such loans below. Make sure if you get a personal loan, you have a legitimate reason for it.

4. Rent Payments

Most landlords don’t report on-time payments to the credit bureaus. In fact, the only time rent-related credit data is collected is if your debt is sent to a collection agency. When this happens, the only way rent normally affects your credit is negatively.

If you’re not sure whether your landlord or property manager reports your rent payments, simply ask. You can ask them to consider it if they don’t. If they decline, there are still options.

Currently, there are several companies that report your rent payments to credit bureaus. RentTrack is a relatively new company that aims to help consumers build credit without having to take on more debt.

How it works:

  1. Sign up, answer a few basic questions, and verify that you are, indeed, you.
  2. RentTrack processes your payment using either your bank, debit, or credit card to schedule your rent payment.
  3. RentTrack pays your landlord for you by either mailing a check or making a direct deposit. Then, they report your rent payments to all three credit bureaus. You will also have an account where you can verify payments and track your credit score, while protecting your identity.

According to RentTrack, tenants using this service raise their credit score on average by 29 points in two months, and a whopping 132 points after two years. Considering that credit scores only go up to 850 points, this is impressive!

There are other services that allow you to add your rent and utility payments to your credit report such as Extra Credit, a service provided by Credit.com.

5. Federal Student Loans

Your payment history on a federal student loan is reported to all three major credit bureaus. So, make sure you make all of your payments on time after graduating from college. Those payments are reported.

Making on-time payments on student loans will help you establish a positive payment history and build credit.

The great thing about federal student loans is that you don’t have to have a good credit score to receive them. In fact, you don’t need a credit score at all. Federal student loans are based on need, not merit.

6. Authorized User

Most credit card companies allow cardholders to add authorized users to their accounts. So, if you have a friend or family member with a strong credit history, you could become an authorized user on their account.

If they make every payment on time and keep a low balance this will help your credit score significantly. Every monthly payment they make shows up as a positive payment on your credit report, too.

You’ll also diversify your types of credit and gain access to the length of credit history associated with this account. It doesn’t matter when you were added. The entire positive payment history for that credit card will show up on your credit report.

It can’t be emphasized enough that the person you use for this being financially responsible. If they start missing payments, your credit score will be lowered too.

For those of you muttering, “I thought this was going to be about building credit without a credit card,” know that we’re not telling you to use the credit card.

You simply need to become an authorized user on it to make this credit hack work. If you have someone who is willing to add you to their account, this is perhaps the best way to build credit.

7. Peer-to-Peer Loan

Another type of loan, peer-to-peer loans usually do report on-time payments (or late payments) to the credit bureaus.

Interest rates can be high. However, they come with a higher limit than a credit builder loan, so you get a little more flexibility there.

8. Secured Credit Card

This one’s technically a credit card, but not in the traditional sense. Secured credit cards are very much like credit builder loans, but the difference is that you get access to the funds immediately.

A secured credit card is no risk to the credit card issuer because, to use it, you must provide a security deposit. The amount of your deposit is then your card’s credit limit; so the more money deposited, the more credit you have available.

This money is then set aside and used by the lender should you not make payments. In essence, you are borrowing money from yourself.

Whenever you use your secured credit card, you have a balance the same as you would on a credit card. Pay off the balance in full every month, and you will build credit the same as you would with an unsecured credit card.

If you’ve never had credit, you may also want to check out our article ‘How to Build Credit from Scratch‘.

What determines a credit score?

The first step to building your credit is to understand what determines your credit score. If you’re new to the credit scene and just beginning to understand it, here’s what you need to know.

The Five Credit Score Influencers

There are five categories that contribute to your credit score. They are:

  • Payment History (35%)
  • Amounts Owed (30%)
  • Length of Credit History (15%)
  • New Credit (10%)
  • Types of Credit Used (10%)

Each is unique and will impact your credit in different ways; likewise, they are all connected. When one falters, others falter; when one is lifted, others are lifted. It’s a financial food chain, so to speak.

Payment History

Your payment history reflects how often you have paid your bills on time. Late payments by more than 30 days, for instance, will lower your credit score.

This is why paying your bills on time is so important because this category is the biggest contributor to whether you have good or bad credit.

Amounts Owed

This category reflects your overall credit utilization. Your credit utilization ratio is a percentage of how much credit you have available to you vs. how much you owe on all of your accounts. Car loans, student loans, and credit card debt (if you have it), are all added together and are combined with available credit. In short, it’s what you owe versus what you still have available.

Length of Credit History

How long have your credit accounts been open or active? The longer, the better for this one. If you close a longstanding credit account, it will negatively impact this category when it eventually drops off your credit report.

New Credit

How new are your most recent accounts? How many credit inquiries have you had, and when was the last time you had one? Too active and too quiet are both red flags.

Types of Credit Used

There are three types of credit. Installment, revolving, and open credit. Credit cards and home equity lines of credit (HELOCs) are revolving credit.

Mortgage loans, auto loans, student loans, and personal loans are installment credit. Open credit includes utility accounts such as electricity, gas, water/sewage, garbage, internet, and cable TV.

The types of credit you have on your credit report account for 10% of your credit score. Generally speaking, you want a mix of different types of credit accounts to have a good credit score.

So, for example, if you only have installment loans and no revolving credit accounts, your credit history is limited. Because of this, you’re considered more of a risk than a person who does and who makes on-time payments.

Get Started Building Your Credit

Now that you’ve learned how to build credit without a credit card, it’s time to start building your credit and achieve the credit score you need to succeed in life.

Regardless of which option you choose to build credit without a credit card, it’s very important to get in the habit of making on-time payments. Remember, just one late payment can damage your credit score and set you back significantly.

Lauren Ward
Meet the author

Lauren is a personal finance writer who strives to equip readers with the knowledge to achieve their financial objectives. She has over a decade of experience and a Bachelor's degree in Japanese from Georgetown University.