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7 Ways to Build Credit Without a Credit Card

How to build credit without a credit card
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A credit score is a report that shows your lender how likely you’re to repay a loan on time. It’s typically scored between 300–850 (e.g. FIGO) g. or 0-999 (e.g. Experian). The higher the number, the better score you have!

The score is based on your credit history containing credit cards, total debt, repayment history, and other such factors. However, many people have the misconception that without a credit card, they can’t build a credit score – which is entirely false! So let’s explore how to build credit without a credit card. 

How do I build credit without a credit card?

Building your credit score often becomes topical when you are looking to apply for a mortgage or other type of loan. The higher your score, the more likely you are to get approved and get a cheaper loan. 

While credit cards can be useful money management tools, they aren’t your only option to build a credit history! Although they’re one of the easiest ways to evaluate your creditworthiness, here are seven other methods through which you can prove your credibility to a lender.

1. Debt repayment

Since a credit score is proof of your trustworthiness, it is essential to build that trust with something else if you don’t have a credit card. If you have a debt to pay, ensure that you pay it off on time with no outstanding dues. This leaves a good impression and boosts your credit score.

Whether it is medical debt, personal loan, or any other kind of loan, pay every bill on time before it reaches its due date. Timely payments earn you brownie points on your credit report. But your credit score takes a dip with missed or late payments.

how to build credit without a credit card

2. Mortgage

If building your credit is the only aim you have in mind, starting with a mortgage is not the best idea because getting a mortgage without a credit history is difficult. But if you want to own a home with the possibility of building credit, there are options within mortgages.

There’s an option for first-time homebuyers with a small credit file. Smaller lenders can be more flexible and qualify you for a mortgage. Although a huge debt can hit your credit score, it will rise again with timely repayments.

3. Rent

Landlords don’t bother reporting your rent payment activity to credit agencies (unless you stop paying of course!). But showing your timely rent payment, or even other recurrent payments like utility, mobile and internet bills, boosts your credit. It demonstrates your financial consistency and is valid as proof of your creditworthiness.

You can ask your landlord or utility operator to report your payment pattern to your credit agency or contact the agency directly.

4. Authorised user

Fortunately, having no credit card doesn’t mean you can’t qualify to become an authorised user on an account. If you don’t have a credit card because you can’t qualify for one yet, consider becoming an authorised user on the account of a partner or family member. For example, if your partner has one but makes you its user, the card activity will be reported under your credit profile, and you’ll be responsible for repayments.

It doesn’t matter who uses the card; the owner has to take care of repayments. If you’re made the authorised user, you need to make timely payments to build good credit.

Related: How to navigate finances a couple

building credit without credit card

5. Instalment loan

By the time you’re a young adult, you might already have one type of instalment loans like a student, car, personal loan, or mortgage. If you already have one of these loans, repay it on time. Don’t skip an instalment and avoid late payments. Keep these factors in mind to create a good credit score.

6. Credit builder loan

Similar to a personal loan, a credit builder loan allows you to make instalment loans with fixed monthly payments. But here’s the catch, unlike the normal loans where you’re granted cash, the lender instead deposits the cash in your savings account. You can access it once you repay the loan.

Timely repayments of this loan leave a good impression on your credit score. This is one way to build a good credit score.

7. Personal loan

Lenders offer unsecured personal loans to people with no or bad credit. You can even borrow a £1000 loan and develop credit by making on-time payments for the duration of the loan. This type of loan has higher APRs than a credit builder loan. However, there are platforms available where you can compare loans from multiple lenders and select the one that is suitable for you.

Secret to start building credit

Whatever the above methods you use to build your credit score without a credit card, the key lies in making timely payments. Late or missed payments damages your credit score. Hence, ensure that you’re always up to date on payments. If you’re bad at remembering due dates, set reminders or direct debits!

Author Bio:

This article was written by Tanya Singh who works as a Content Marketer at LoanTube – a loan comparison marketplace where borrowers can connect with multiple lenders via a convenient and transparent application. She writes about topics related to personal finance and loans helping her readers in making smart decisions when they need to borrow.

Ways to improve credit score without a credit card

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Gen
Gen
2 months ago

I definitely need to raise my credit since I will buying a house soon! Have some old debts that I need to pay. Thanks for the tips!

Russell
2 months ago

Being on the electoral register will also help improve your credit score as it allows an interested party to confirm that you are who you say you are, and that your details are accurate and correct.

arnetta
2 months ago

Such great tips thank you so much for the income.

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