How to Build Credit Without a Credit Card (2024)

Building credit is a cornerstone of a healthy financial life. A high credit score can mean lower interest rates on financial products such as mortgages and car loans, among other things. One problem: An ideal way to build your credit score is to make regular, timely payments on a credit account, like a credit card—and it's relatively difficult to access credit without a good score.

“It can be a frustrating experience,” says Emily Irwin, senior director of advice for Wells Fargo in Minneapolis. It’s a “chicken-and-the-egg situation."

Fortunately you can still build credit, so long as you are willing to be patient.

The best methods—like being added as an authorized user on another’s card—allow you to gain some credit right away, although it can take months or longer to achieve a good or excellent score.

With more traditional methods—like simply paying your bills on time—you'll likely wait months to start building credit and several years to achieve a top score. “Building credit history isn’t done overnight, but is done over time,” says Irwin.

You can do all of this with a credit card, but if you don’t qualify, check out these five methods.

Become an authorized user

The fastest and easiest way to build your credit score—if it’s an option for you—is for a family member or friend with a good credit to add you as an authorized user to their credit card.

Once a cardholder adds you to their account, you’ll get credit for on-time payments and a credit utilization ratio. While this is most commonly done between parents and children, you don’t have to be related to someone to become an authorized user on their account.

The risk is that the primary cardholder is still responsible for all payments, so you’ll need your friend or family member to take the risk. And it goes both ways, because if the primary cardholder defaults, it hurts your score too.

Experts favor this option because it allows you to automatically benefit from the established credit history of the primary cardholder. As soon as you’re added as an authorized user, you inherit the positive payment history of the account owner—which means you could immediately show years of on-time payments. Your credit score could jump to the fair or good range in as little as a few weeks.

Of course, if the primary account holder doesn’t have a significant credit history, it’ll still take a few months of payments to start seeing benefits.

Wondering where you stand in terms of credit?

Here’s how FICO and VantageScore scores rank

Experian

Pay all your bills on time

Of course, not everyone will be able to utilize family and friends. You can also build credit by paying all your bills—including loans, rent, and utilities—on time. Doing this, you’ll typically see an increase to your score after about six months, though the longer you pay on time, the more your score will grow. It may take several years to achieve a good or excellent score.

While paying your bills may seem straightforward, there are some nuances to be aware of. Not all bills you pay (including some basic ones like your phone and power company) count toward a positive payment history. It all depends on whether or not your service provider reports your payments to the three major credit bureaus. Many utility and phone companies don’t automatically do this.

But even if you can’t always count on getting credit for good behavior, paying your bills on time should be your priority when it comes to credit-building. That’s because not paying bills—even ones that won’t boost your score—can result in your debt being sent to collections, which harms your credit score for up to seven years. (Note, most credit score calculations result in less of a ding for medical debt.)

Paying your bills “is the most significant component in credit score calculation, accounting for 35% of scores,” says Freddie Huynh, former vice president of data optimization with Freedom Debt Relief.

Make sure bills count toward your credit score

If your electric, gas, water or phone service provider doesn’t report to credit bureaus, it doesn’t mean you’re out of luck when it comes to getting credit for those payments.

Services like Experian Boost allow consumers to opt in to sharing this information. The service essentially lets customers who sign up link data from their bank accounts to track payments on things like utility bills and rent, so Experian can factor it in when it assigns you a score. This is a particularly useful tool for those who don’t have a credit card or other type of loan, as you can get credit for the payments you already make.

It’s free to sign up for Experian Boost, and you’ll see results immediately. The downside is that it only affects your Experian credit score, and different loan providers or employers could pull your credit score from any one of the three major credit bureaus.

Another one of the three major credit bureaus, TransUnion, offers a similar tool called eCredable. Equifax, the third major bureau, doesn’t currently offer a comparable service.

Similarly, rent isn’t generally reported to credit bureaus, though you might be able to opt in by reaching out to your landlord. It’s up to the individual landlord or company if it reports payments to bureaus, but if enough tenants request it, it's possible.

For those whose landlords don’t report, you can take advantage of TurboTenant to report to TransUnion or add to Experian Boost for Experian. Upon sign-up, you’ll be prompted to either link your bank account or invite your landlord to join the service.

Make loan payments

Credit scores involve both revolving credit, or credit cards, and installment credit, which includes loans like your car payment or student loan. Making on-time payment on all kinds of loans builds your score. “Obtaining a loan for the sole purpose of building credit is generally not a good idea. But if you have a loan, making on-time payments allows you to develop a history,” says Huynh.

Student loans

If you already have a student loan payment, responsibly paying your bill will help you increase your credit score.

Like with other bill payments, on-time student loan payments will take about six months to have an effect on your score. And if you are still in school or deferring your payments, your loan won’t help your payment history.

Car loans

Just like a student loan, car payments also help you build credit. Unfortunately, you also typically need a good credit score to qualify for the best interest rates on car loans from major lenders.

However, car loans are more accessible to those with poor credit than many other kinds of loans, because your vehicle serves as collateral, says Kenneth Chavis, senior wealth counselor with Versant Capital Management in Phoenix. You’re just likely to get stuck with a higher rate to compensate for the risk, he adds.

Still, if you make your payments on time, you might be able to refinance your car loan once your score improves for a more favorable rate.

Credit-builder loans

Credit-builder loans are unique products designed specifically for those building credit. Essentially, your lender will deposit a few hundred to a few thousand dollars in a certificate of deposit account. You then make payments with interest against the balance over a set period of time, at which point the funds become available to you.

This is a bit different from both a traditional loan and a secured credit card. With a car loan or personal loan, funds are typically available immediately, while you have to make eligible payments on a credit-builder loan to access them.

Secured credit cards, on the other hand, require you to pay a deposit as collateral before issuing you a credit line, which is often equal to the amount you deposit.

Most credit-builder loans have modest interest rates compared with credit cards, but they can be harder to find. You likely won’t see a credit-builder loan from major banks like Chase or Wells Fargo, but instead from smaller, primarily digital banks.

For instance, Digital Federal Credit Union offers credit-builder loans with a fixed interest rate of 5%, and payment terms ranging from up to two years. Because these loans are designed for building credit, payments are typically reported to at least one—but ideally all three—major credit bureaus and can start helping your score in around six months.

Personal loans

Finally, personal loans are also an option for building credit via installment payments, though like with a car loan, you likely won’t qualify for the best rates until you have a good credit score. In fact, qualifying at all might be tough with poor or limited credit, though you can research options like a secured personal loan to add collateral and boost your approval odds.

Additionally, experts like Huynh recommend against taking out a personal loan just for building credit, as it could lead to unnecessary debt.

Get a secured credit card

If you don’t have any of the loans listed here or find you need another option for building credit, a credit card is still an option. Secured credit cards and student credit cards are both accessible choices even for those without an established credit history.

Specifically designed for those just getting started building credit, secured credit cards use a deposit as collateral to reduce risk, so even those with poor credit can qualify. Similarly, student cards might have higher interest rates or less favorable terms than a traditional rewards card, but they are made to be available to young adults getting started with credit.

Still, taking on any kind of revolving debt is risky, so you should make sure you are prepared to pay your balance responsibly before doing so.

“Making payments on any debt, including a credit card, shows that you are financially responsible,” says Irwin. “The key to using a credit card responsibly is to charge only the amount you can and will pay off in full and on time every month.”

Starting to build credit with your existing bill payments and loans can be a safer path, but no matter which option you choose, paying in full and on time is key.

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