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Six Ways to Build Credit Without a Credit Card

Having good credit is essential for qualifying for loans, getting approved for rentals, and even securing some jobs. However, building credit can seem like a catch-22: you need credit to get credit. While credit cards are a common way to start, they may not be an option for everyone. Fortunately, there are several strategies you can use to build a solid credit history without relying on credit cards.

Get a Credit-Builder Loan

Credit-builder loans are designed specifically to help you establish credit. You borrow an amount, such as $500 or $1,000, and make fixed payments over 6-24 months. The lender deposits the borrowed amount into a locked savings account, and once you’ve completed the loan payments, the money is unlocked and given to you. This process helps build your credit history.

Become an Authorized User

If you have a family member or spouse with good credit, ask them to add you as an authorized user on their credit card account. The account history will be reported on your credit report, helping to establish your credit record.

Get a Co-Signer

A credit-worthy co-signer on an installment loan, such as an auto loan, personal loan, or student loan, allows you to benefit from their good credit while building your own. It’s crucial to make all payments on time to maintain your co-signer’s creditworthiness and build your credit.

Report Rent and Utilities

Some services allow you to have your rent payments and utility bills reported to the major credit bureaus, helping to create a record of timely payments. Look into getting your landlord to enroll in a rent-reporting service like Piñata (which is free to use). Otherwise, here’s my guide on how to report your rent to the credit bureaus.

Apply for a Secured Credit Card

With a secured credit card, you place a refundable security deposit that typically becomes your credit limit. Make small charges and pay them off on time to build a positive payment history.

Give It Time

Establishing good credit takes time, so be patient. Make all minimum payments early or on time, keep your credit utilization low, and avoid actions that could negatively impact your credit score. Consistently practicing good financial habits is key to building an excellent credit score.

Building credit without credit cards requires some creativity, but it’s entirely possible. By responsibly managing loans, bills, and low credit limits, you can develop a strong credit profile over time.

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