5 ways to build credit without a credit card

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice.See Lexington Law’s editorial disclosure for more information.

A good credit score is not only an indication of your financial health,  but it can also save you money. When you have a bad score, it can actually cost you more. A low credit score can also lead to increased interest rates, higher deposits when you rent and less access to funds when you need them. As you can see, your credit score matters quite a bit, which may lead you to wonder how to build credit without a credit card.

A credit card is one of the most common ways to build your credit score, but in order to get a credit card, you need credit. Fortunately, there are other strategies you can use to build your credit score without a credit card. Here, we list some simple ways to start building credit, whether you have a bad score or no score at all.

Key takeaways: 

• You can build credit without a credit card, regardless of your credit score.
• Some of the most common ways are to report additional payments, like rent and utilities, becoming an authorized user, and getting a secured credit card.
• When building credit without your credit card, making your payments on time is important to improve your credit history.

Table of contents: 

1. Become an authorized user
2. Get a credit builder loan
3. Gain credit for rent, utilities and more
4. Obtain a secured credit card
5. Take out an auto or personal loan

1. Become an authorized user

Becoming an authorized user is one of the easiest ways to build a credit score, and it’s a great way to start building credit for your child. To become an authorized user, you just need to find a financially responsible friend or family member with a credit card. They can add you as an authorized user on their account, and as they make their monthly payments, it also helps build your credit score.

It’s important to know that when you’re an authorized user, your credit is now linked to the other person. This means that both of your credit scores will be negatively impacted if either of you misses payments. The credit card company will issue you a credit card, but you don’t need to use it, and this can help avoid harming the primary cardholder’s score.

2. Get a credit builder loan

Typically, you need a good credit score in order to get approved for a loan, but credit builder loans are specifically for those looking to build credit. 

Credit builder loans work differently than standard personal loans in a few ways: 

• The loan amount is often only up to $1,000
• You don’t receive the money immediately
• The money is held in a secured account

Once you’re approved for the loan, you build credit as you make your payments for the borrowed amount because the payments are reported to the major credit bureaus. Once you make all of your monthly payments, you receive the funds. Any fees associated with the loan are subtracted from the total amount. 

3. Gain credit for rent, utilities and more

Many of your monthly payments (rent, utilities, subscriptions, etc.) aren’t reported to the credit bureaus, so they don’t show up on your credit report. The only time items like your rent and utility payments show up on your credit report is if you become delinquent. Fortunately, there are alternative ways to have your good payment history reported as well.

Experian®, one of the major credit bureaus, provides additional reporting services. You can use Experian Boost, a free service that lets you report items like your phone bill and streaming subscriptions. It’s important to note that Experian Boost will only help your Experian credit score. Other services, like ExtraCredit, provide additional reporting as well.

4. Obtain a secured credit card

The primary reason it’s difficult to get a credit card with no credit or bad credit is because you’re perceived as a credit risk by financial institutions. Secured credit cards work by borrowing your own money, meaning there’s little to no risk for the banks. This makes them a great option for those with a low credit score or no credit history.

When you get a secured credit card, you deposit money with the bank. Some cards have a minimum deposit, and others don’t. Once you make the initial deposit, that amount will become your credit limit. As you use the card and make your payments, the issuer reports your activity to the credit bureaus to help improve your credit score. You can get many secured credit cards with a score as low as 300.

5. Take out a personal loan

One of the common ways to build credit without a credit card is by taking out a personal loan. To get a personal loan, you can go to a bank or credit union to apply. Along with the application, you’ll often need identification and proof of employment. There may be a minimum requirement for the loan, but requesting a lower amount can improve your chances of approval. 

If you have no credit or bad credit, you may want to try to get a co-signer. Similar to becoming an authorized user, this method links your credit with the other person. Finding a co-signer who has good credit alleviates some of the potential risks, helping to improve your chances of getting an approval for the loan.

Gain valuable credit insights

A great way to start building credit is to know exactly where you stand with your credit history. One of the challenges people face is that once they know their credit score, they’re unsure what to do with the information.

A good place to start is to sign up for a free credit assessment to get a snapshot of your credit score and additional information from your credit report.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.