How to Build Credit Without a Credit Card

Many people think that getting a fee-free credit card and paying off the balance monthly is the easiest way to build credit. However, this isn’t the best strategy since you’re more likely to overspend.

This guide will show you how to build credit without expensive fees or borrowing lots of money.

How Can You Build Credit Without a Credit Card?

Good credit is a necessary evil as it helps you get better rates and save money. It might seem difficult to improve your credit score, but there are ways to simplify the process.

Here are the best ways to build credit if you don’t want a card.

1. Try Experian Boost

Typically, your credit report only tracks payments from your installment loans and credit cards. This means you don’t receive credit for recurring payments like a utility bill or cell phone service. You also don’t get credit when you make a rent payment.

Payment history is the most significant credit score factor. It accounts for 35 percent in most scoring models, so including as many payment accounts as possible can work to your benefit.

Experian Boost is a free service that includes your recurring payments from the last 24 months in your score. You can link your banking accounts and see an instant credit score increase. 

Eligible bills include:

• Cable and satellite
• Internet
• Phone
• Rent
• Streaming services
• Utilities (electric, gas, water, trash)

The potential increase depends on several factors, including your current score, payment history, and the number of bills you add. 

According to Experian, the average user sees a ten-point increase on their FICO Score 8. Thankfully, missed and late payments won’t hurt your score. 

However, you’ll want to keep in mind that these extra details won’t appear on your Equifax and TransUnion credit reports. This only impacts your FICO score.

While you should primarily consider this service to boost your credit, you can also receive Experian credit monitoring alerts as well as regular score and credit report updates. 

Read our review of Experian Boost to learn more.

2. Take Out a Credit Builder Loan

Credit builder loans let you report monthly payments to the three credit bureaus (Equifax, Experian, and TransUnion). This is similar to personal loans, student loans, or an auto loan. 

Instead of borrowing money to make a purchase, your payments go into a federally-insured bank CD. 

After your final payment, your account balance is deposited into your linked bank account minus administrative fees and interest. 

This loan will show as paid off on your credit reports and can help boost your credit profile for up to seven years.

Self lets you pay as little as $25 per month with a repayment term of either 12 or 24 months. Your monthly payments are reported to the bureaus, and your cash deposits into a bank CD during the loan term. 

You will see the best results if you have a poor credit score of 620 or lower. It’s common for borrowers to see score increases as high as 60 points.

Read our Self review to learn more.

3. Get a Secured Credit Card

Secured credit cards can be one of the best ways to rebuild bad credit. These tools can also improve your financial situation if you have no credit and don’t qualify for traditional banking services.

A secured credit card reports your late and on-time payments to the bureaus. It typically doesn’t charge an annual fee or require a credit check, but it does require an upfront security deposit to open an account.

Your credit limit is usually $500 to $2,000 and is the same amount as your refundable security deposit. For example, your spending limit is $500 if you deposit $500. 

You will get your cash deposit back when you close your account as long as it is in good standing.

Since you have a low spending limit, try to keep your credit utilization ratio below 30 percent of your total credit limit. This ratio measures the total of your balances divided by the sum of the limits on your respective cards.

Consider making regular payments during the billing cycle to stay below this threshold since this practice can help improve your score faster. 

Most banks review your FICO Score every six months and may upgrade you to an unsecured card. If this happens, they will refund your deposit.

Here are some of the top choices to look at if you’re considering this option.

4. Become an Authorized User

If you have a trustworthy family member or friend with good credit, you can ask to become an authorized user on their credit card account. 

Some people refer to this practice as “piggybacking” since you can benefit from your friend’s credit without being responsible for the account.

It’s free to add authorized users to most cards online or by phone. The bank asks for your name, date of birth, and Social Security number. However, it won’t run a credit check. 

Since your friend or relative is the primary cardholder, they are responsible for paying any balance before the due date. This includes all of your purchases. They are also legally liable for any purchases you make.

To avoid potential conflicts, consider not making any purchases with the card.

Building credit isn’t a guarantee with this strategy because you’re not the primary account holder or responsible for making payments. 

Simultaneously, the credit reporting agency may not penalize your score if your friend misses a payment or has a high credit utilization ratio.

To maximize the benefits of this strategy, look for an account with these traits:

• The primary cardholder has a FICO Score exceeding 680 (good or excellent credit)
• Low credit utilization ratio
• Zero late payments
• No carryover balance
• The account is several years old

When you apply for new credit, lenders will see that you’re an authorized user on a particular card. Being on an excellent account can diversify your credit mix, which accounts for ten percent of your credit score. 

5. Repay Outstanding Indebtedness or Loans

Focusing on debt repayment can also improve your score because you demonstrate to the credit bureaus your ability to manage debt responsibly.

Each debt payment improves the two largest credit score factors, including your payment history (35 percent) and amounts owed (30 percent). 

There are several ways to pay off debt quickly to minimize your interest costs and reach your debt-free date sooner. 

An excellent starting point is paying off your accounts with the highest interest rates first. Cleaning up accounts with a past due balance and restoring them to their current status is also helpful.

This is known as the debt avalanche method. Here is how that works.

You can also try the debt snowball method. Here is how that works.

Regardless of the method you choose, the most important thing is to pick one and stick to it.

6. Get a Personal Loan

Applying for an unsecured personal loan to consolidate and refinance your existing debt at a better interest rate can also be a wise move. Having more favorable repayment terms can provide an affordable monthly payment.

While you may have an initial credit score drop after opening the new installment loan, establishing a positive payment history can erase that temporary penalty. 

Additionally, closing your old accounts can help if they have a history of missed payments.

SoFi personal loans offer competitive rates and flexible repayment terms. You can view personalized rates in as little as 60 seconds without hurting your credit. 

The lender also offers several other financial products that can provide credit insights and help you save money. 

Your SoFi loan may even qualify for unemployment protection, which can temporarily place your loan in forbearance if you lose your job. You can use this time to focus on other financial priorities without hurting your credit.

Our SoFi personal loans review provides an in-depth look at your member benefits.

7. Become a Co-signer

Co-signing a loan can be a more productive way to build credit than being an authorized user on a card. Since you’re legally responsible for paying the debt if the primary borrower doesn’t, the on-time monthly payments have a greater impact on your credit history.

Your credit can also improve as your credit mix expands. If this loan is for a different product than your existing loans, you can expand your credit mix types.

This option is ideal when you need a secured loan, such as a car loan. The asset acts as collateral, but lenders may require a co-signer with better credit and income for additional assurance that you will make your monthly payments.

Additionally, a handful of banks allow parents to be co-signers on student credit cards for their children.

Before entering into this agreement, be sure you trust your co-signer and review the repayment details to protect your friendship as well as each person’s credit.

These situations can lead to a credit score drop:

• Payments are at least 30 days late
• The vehicle is repossessed
• An unsecured installment loan is sent to collections 

If you’re the primary borrower, consider asking a friend or relative with good or excellent credit to be your co-signer. Their partnership can help you secure financing and start the next chapter of your credit-building journey.

How to Build Credit FAQs

Building good credit can be challenging for many people. Here are some common questions we receive from readers about how to move in the right direction.

What Is the Fastest Way to Build Credit?

Paying your full balance on time each month is the most effective way to boost your credit. 

You should also apply for new credit sparingly to avoid hard credit checks and multiple young accounts that reduce your average account age.

What Is a Good Credit Score? 

A good FICO Score usually ranges from 680 to 740, and excellent credit is from 740 to 850. Being within a particular credit score range is a simple way to estimate your approval odds and interest rates.

However, many banks and lenders analyze several other factors. This includes your credit utilization, payment history, debt-to-income ratio (DTI), and recent credit applications. 

Can You Build Credit With a Debit Card?

Unfortunately, traditional debit card purchases don’t appear on your credit report as they are not installment loans or credit cards with a minimum monthly payment. 

As a tradeoff, you don’t have to worry about paying interest because you pay for purchases immediately.

Can I Build Credit Without Having a Credit Card?

It’s simple to establish a credit history without a credit card. One of the best options is signing up for Experian Boost, which reports qualifying recurring payments that don’t require a credit account.

You may also want to consider credit builder loans or secured credit cards to establish a good payment history with minimal fees and risk.

Bottom Line

Good credit makes getting approved for financing, certain jobs, and moving into a rental property easier. You can also refinance debt at a lower interest rate if your current credit score is higher than when you originally borrowed money.

If you need to boost your credit without a credit card, try one of these methods to simplify the process.

What’s one challenge you face in trying to maintain good credit?

*Personal Loan Disclaimer: Fixed rates from 8.99% APR to 25.81% APR reflect the 0.25% autopay interest rate discount and a 0.25% direct deposit interest rate discount. SoFi rate ranges are current as of 05/19/23 and are subject to change without notice. Not all applicants qualify for the lowest rate. See Personal Loan eligibility details.

Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed and will depend on the term you select, evaluation of your creditworthiness, income, and a variety of other factors. See APR examples and terms.
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