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3 Ways to Build Credit Without a Credit Card

By: Michael Millington

Credit can be a hard thing to obtain, especially if you have no prior experience in using it. A Catch-22 of sorts, having no credit can hinder you from being able to successfully applying for new lines of credit. Many individuals want to have a concrete way to build credit without placing themselves in a risky situation. Due to this mindset, some may choose to avoid applying for credit cards early on. Without a credit card it may be hard to think of other ways to build credit, but it is possible. Here are three ways to build credit without using a credit card.


Loans To Build Credit


Credit builder loans can present a fine alternative towards building your credit without using a credit card.  These loans work as their own collateral, being secured by the same money that created the line of credit in the first place. Making proper, on-time payments may be reported to the major credit bureaus.  If you’d like to have your progress reported, look to make sure the credit builder provider will report your progress accordingly.

A credit builder loan works in a very different way than most other loans available. With a credit builder loan, you must provide the amount you want to borrow as collateral first. Some credit builder loan providers will allow you to pay the amount in installments before you’re able to borrow the money. Once you have provided the adequate amount of money, you’re able to use the money as a form of credit.

Since a credit builder loan is treated as a form of credit, your positive and negative interactions with the line of credit can be reported to the credit bureaus. This can help to influence your credit rating if you pay your loan on a regular basis. Just remember that the opposite can happen if the loan remains unpaid. In order to build credit with this loan, discipline and smart repayment are key to having it work to your advantage.


Other Types of Loans


There are more types of loans that act as collateral for the purpose of acting as credit. Certificates of deposits (CDs) or other savings accounts might be eligible for a collateral role when requesting a loan from a bank. There might be some restrictions involved when using a savings account as loan collateral. Some banks might not allow you to borrow the entire amount of the balance, instead relegating you to a smaller percentage.

With the transition into loan form, you might end up paying an origination fee, plus interest. The interest will be greater than the interest you may have been collecting from your savings account, thus providing a profit for the bank. As with the credit builder loan, you must exhibit excellent control over your finances to have the desired effect. If you make regular payments and avoid being late, an installment loan can show on your credit report.

Make sure to consult your bank or credit union as to what you can use as collateral. They can assist you in making some of the better choices in building your credit for future use. You might benefit from only having a percentage of your money being made available through a line of credit. If you do not pay the loan back in a prompt manner, the money acting as collateral will be used to satisfy the remainder of the payment.


Paid Credit Reporting


Paid credit reporting allows you the ability to have other forms of payment history reported to the major credit bureaus. Through this method, individuals can have more information sent for consideration towards their credit report. To do so, a third party company would have to report such information for you. Third party companies might charge you a fee to be able to report to the credit bureaus.

These third party companies compile payment histories that aren’t normally reported and send them to the credit bureaus. Many people who rent find this form of reporting to be beneficial to their credit report. The third party would have to garner the information from the landlords involved. It is possible that the landlords would refuse to cooperate as they are not required to (plus, smaller mom-and-pop landlords might not be able to afford to cooperate).

One thing to remember is that this form of reporting, while positive for your credit report, does not have an effect on your FICO score and may not help to build credit. Only the negatives aspects of your rent payments (specifically, if your rent payments become delinquent) appear on your credit report and effect your FICO score. There are other, lesser used scores that may still be effected by this form of paid credit reporting, so keep this in mind when looking to report your rent payment habits to the credit bureaus.


Trying to build your credit can be a long, daunting road. Using credit cards can lead to struggles with debt that are not easily handled. One way to move towards fixing your credit is to eliminate your existing debt. That’s where Guardian Debt Relief comes in. We know how trying debt can be, and we are here to help usher you out of the unsecured debt you may be harboring. Our trained debt professionals are waiting to show you how quickly you can achieve debt freedom. Our consultation call is free, but the information is priceless. Don’t delay. Call Guardian Debt Relief today.

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