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How to Build Your Credit Without a Credit Card

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Road sign that says credit and has a dollar sign above it. For build your credit without a credit card article.
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Even if you choose to remain debt-free, having a good credit score should still be a priority since many insurance companies look at your credit score to determine what you’ll pay for insurance.

Are you searching for a job? Not all, but some employers will use credit reports upon screening job applicants, so having a good credit history can improve your chances of getting the job you really want.

If you ever do decide to get a loan, you don’t want to be stuck with high interest rates. The better your credit the lower your interest rates will be on future secured and unsecured loans. Having a lower interest rate helps you pay off the debt much easier and quicker than a loan with higher rates.

What to Do Before You Start to Build Your Credit Without a Credit Card

The very first thing you should do is view your credit report for any inaccurate information. If something isn’t correct, follow the instructions on the report for sending in a dispute.

So, how do you get your credit report and what will it cost you? By law, you are entitled to one free report from each of the three major credit bureaus: TransUnion, Experian and Equifax. Go to annualcreditreport.com to send your request to all three bureaus.

How to Build Your Credit Without a Credit Card

Get a credit builder loan (a.k.a. secured personal loan, fresh start loan or starting over loan).

With a credit builder loan, you don’t receive the money upfront as you would with a normal loan. What usually happens is the lender agrees to loan you $1,000 or less, but rather than giving you the money, they put it into a special account and hold it until you pay it off.

You’ll agree on a minimum monthly amount to pay. Then once you’ve paid off the loan, the lender releases the loan amount, and in most cases, the interest it drew. Then you’ll be free to spend it on whatever you like. Just make sure you make the monthly payments on time, because this is what’s going to build your credit.

Financial institutes that usually offer credit builder loans are community banks and credit unions. If you’re unable to find a bank or credit union in your local area that offers these types of loans, there are online lenders such as Self Lender. However, before you use an online lender, do your homework by reading reviews about the company and read all the fine print in regards to the loan you plan on applying for.

Take out a secured loan against your CD or savings account.

If you want to build your credit but need money right away for an emergency situation or etc. and you have a CD or savings account, ask the financial institution that your account is with for a secure loan. Let them know you want to use your CD or savings account as collateral.

If you don’t need the money for anything and you’re just trying to raise your credit score, the best way to pay back the loan is to put the money you borrowed into a new checking account that you can open with a different financial institute, and ONLY use that money to pay off the secured loan. You’ll better build your credit by making more than the minimum monthly payment for at least a few months before you pay in full.

Become an authorized user on a friend or family member’s credit card.

Do you have a friend or family member who’s really good at paying their debts on time? Ask them to add you as an authorized user on their credit card. They don’t have to get a credit card for you. All they have to do is add you as an authorized user, and within a few months of them paying their balance on time, your credit score will increase.

Ask utility companies to report your account activity to TransUnion, Experian and Equifax.

Although utility companies don’t normally report account activity, some will if you ask them to, so it doesn’t hurt to ask. As long as you pay your electric, water, and other bills on time, and the utility companies you pay your bills to agree to report your activity, this could also improve your credit score. You must do your very best, though, to continue making timely payments or you’ll hurt your credit rather than help it.

What to Do After You Begin to Build Your Credit Without a Credit Card

Once you start working on obtaining good credit, you’ll want to keep track of how well you’re doing. By signing up for a FREE Credit Sesame account, you’ll be able to keep an eye on your credit score. The higher your score, the better!

Credit Sesame is totally free! I’ve been with them for over two years now, and I can tell you for certain that unlike some other companies out there, this is NOT a free trial where you have to sign up and cancel before you’re charged a fee. It is 100% free, and they won’t even ask you for credit or debit card information. Again, it is completely free, so go ahead and sign up today to see your current credit score and other information that will help you build your credit.

Have you discovered a way that I haven’t mentioned to build your credit without a credit card? Please comment to share your credit-building story with others. Or if you want to share everything about your story (how much it helped, what you did, tips, etc.), contact me and I may write about it and publish it here at Living Frugally, with a link to your blog, website or YouTube channel, of course.

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