Have you ever been denied a loan or financing due to having low credit? Maybe you’re a newcomer who has yet to build a credit report.
In many cases, it can seem like having a credit card is the only way to build your credit score. They’re convenient, adaptable, and occasionally even rewarding. However, what if you don’t want a credit card or can’t get one?
There is good news: you can increase that sum without using a credit card. Although credit cards are a convenient tool, they are far from the only means of boosting your credit score.
12 Ways On How To Raise Credit Score Without Credit Card
Using credit cards is one of many options for establishing a credit history. Although credit reporting bureaus frequently utilize credit card transactions and payments to assess your creditworthiness, cards are only one of the options for this method.
Here are some additional strategies to improve your credit rating without owning (or using) a credit card:
① Make Yourself a User on Someone Else’s Credit Card
Getting added as an authorized user to a loved one’s or friend’s credit card account can be helpful in many situations. Once you and the principal cardholder are on the same page, being an authorized user is a fantastic way to kick start your credit history.
If you are an authorized user, you can utilize the primary cardholder’s credit card and benefit from their credit history without incurring any of the primary cardholder’s responsibilities. Even if you rarely use the card, it might still help your credit.
Confirm with your credit card issuer whether or not they record activity from authorized users. If that does not happen, all of your efforts will have been in vain. Unfortunately, using this method carries certain risks.
Even if someone else purchases with your credit card, the transactions will show up on your credit report. You or the principal cardholder could do more harm than good to your credit score if you charge too much or miss payments. Only add an authorized user if you and the primary user are dedicated to responsible credit usage.
② Pay Your Bills on Time
In order to raise your credit rating, you must have a good payment history with your obligations. Payment delays are a major contributor to low scores.
Setting up reminders for yourself can be a great way to remember your due dates, and many utilities have programs that allow you to set up automatic monthly payments. Even if the bill is small, don’t skip it – every little bit helps.
You can do this manually or use a modern money management app to keep track of your bills and set up automatic payments. This way, you can avoid judging due dates incorrectly and accidentally missing a payment.
③ Get a Credit Builder Loan
It may be difficult to get a traditional loan if you have a short credit history or a poor credit score. This is where a credit builder loan can help. Credit builder loans are short-term unsecured loans that typically range from $300 to $1,000. Unlike with a regular loan, you won’t get the money right away.
Instead, your lender will hold onto the loan amount until you complete all payments. This can help you build your credit score by proving that you can manage debt responsibly and make on-time payments.
This type of loan is also helpful if you need more capital to open a secured credit card or become an authorized user.
④ Personal Loans
Personal loans are another excellent alternative for building credit. Like credit builder loans, lenders don’t need collateral to approve you for a personal loan. Also, like credit builder loans, your lender will report the payments you make on loan to the major credit bureaus. Assuming payments are made on time, this can be a useful means of enhancing credit.
Keep in mind that interest rates on personal loans are usually higher than those of credit builder loans, so make sure you understand the total cost of your loan before signing any agreements.
⑤ Apply for a Secured Credit Card
Due to the requirement for an initial cash deposit, secured credit cards are more accessible than unsecured ones. If you put down $200, you’ll have $200 in credit, $500 will get you $500, and so on. Secured cards allow you to make purchases with the convenience of a debit card, but they are backed by your cash deposit rather than a bank account.
Before applying for a secured credit card account, verifying that the company will share account information with the major credit reporting agency is important.
If they don’t, your secured card won’t help your credit score at all. Suppose you demonstrate your creditworthiness by making consistent on-time payments. In that case, your issuer may automatically upgrade you to an unsecured credit card, or you can request that your account be upgraded.
⑥ Rent and Utility Payments
Some landlords, cell phone companies, and utility providers now report tenant and customer payments to the major credit bureau. If your rent or utilities are not already reported, you can ask your landlord or provider if they will report them. Having a solid payment history on your credit reports is a good first step toward improving your scores.
It’s important to note that they will report only positive payment activity. This means that if you’re late on rent or your utility bill, that information will not show up on your credit reports.
⑦ Consider a Car Loan
Car loans can also help build credit fast. The same rules for personal and credit builder loans apply here – as long as you make consistent, on-time payments, a car loan can positively impact your credit score.
Thanks to the new trend of subprime auto lending, bad credit borrowers have more options for getting an auto loan. Just be sure to verify the total cost of your loan and what type of interest rate you’re receiving before signing any documents.
⑧ Federal Student Loan
Federal student loans are a great way to establish credit without a cosigner. Student loans backed by the U.S. Department of Education don’t require any credit check and can help you build your credit as long as you make all payments on time.
It’s important to note that federal student loan payments are reported to the credit bureaus monthly, so you won’t have to wait until the end of your loan term to see an increase in your credit score.
⑨ Take Out a Peer-to-Peer Loan
Instead of making loans through traditional financial institutions, individuals or groups make peer-to-peer loans and share interest payments. Contrary to borrowing money from a relative, peer-to-peer (P2P) loans are legitimate and may be set up through a respectable P2P provider.
Although the credit standards and interest rates of P2P loans are often more lenient than those of traditional lenders, the rates and fees of P2P loans might be higher than those of other personal loans. Before you sign up, find out if the company reports on-time payments to the credit agencies.
⑩ Open a Store Credit Account
Credit accounts are available at many stores. Most are recorded as “revolving” or “revolving credit,” which is the same as a credit card. Responsible use of a store credit account may help raise your credit score.
Make sure you read the terms and conditions of any store credit accounts you open, as some of them may have hidden fees and interest rates that could end up hurting your credit score more than helping it. Also, make sure the merchant you wish to do business with reports to the major credit bureaus before submitting an application for store credit.
It’s important to remember that not all credit cards are created equal and that some are better suited to persons with low credit than others, while others can actually aid in rebuilding credit. Doing your research is important, as is making sure that you’re not taking on too much debt or applying for multiple cards in a short amount of time.
⑪ Keep Your Job
Your employment history and income are two of the most important factors determining your credit score. If you keep your job for several years, lenders will be more likely to lend to you since it shows that you’re a reliable borrower capable of paying back their debts.
You should also update your income information whenever it changes because of the immediate impact it might have on your credit score. Having a stable income is key to obtaining and maintaining good credit. If you’re in the process of changing jobs, make sure you have enough saved up to cover any unexpected expenses.
A good rule of thumb is to save at least six months’ worth of living expenses before making a move. This will give you added peace of mind as you transition and help you stay on top of your payments if any unexpected income gaps occur.
⑫ Monitor Your Credit Scores
A three-digit figure, your credit score indicates how creditworthy you are. A higher score means you’re a lower-risk borrower, which could qualify you for better interest rates and terms on loans and credit cards. An excellent score would be 720 or above on a scale from 300 to 850.
Most lenders use your credit score when considering loan applications, so it’s important to stay on top of your credit scores. You can get your scores free from several credit reporting agencies, including Experian®, Equifax®, and TransUnion®.
Checking your scores regularly will help you catch any errors or signs of fraud, and it can also give you an idea of where you stand in terms of qualifying for loans and rewards credit cards. If you see any sudden changes in your scores, it’s important to take action to understand what’s causing the change.
Other factors that contribute to a high credit score include prompt bill payment, a low credit use ratio, and varied credit history.
By staying on top of your scores, you can catch errors early, get an idea of where you stand in borrowing, and refine your financial strategy as needed.
How To Build Credit Responsibly
In your quest to establish a good credit score and earn a credit card, it’s important to stick to several tried-and-true methods. While there is no surefire answer to how to build credit without a credit card, here are a few tips that can help you get started.
Pay Your Bills on Schedule And in Full
If you want to show that they can trust you with credit, one thing you can do is pay your bills on time every month. This includes utility payments, rent payments, and other monthly payment bills. Doing this will show potential lenders that you understand the importance of paying back debts and that you’re a reliable borrower.
Don’t Open Too Many New Accounts
Numerous account applications submitted in a short time frame can have a negative effect on a credit score. To avoid this, take your time deciding which account you want to open and ensure it’s the right one for you.
Maintain Your Credit Utilization Ratio Low
It’s vital that you don’t use up all of your allotted credit at once. As a general rule, credit card users shouldn’t spend more than 30% of their available credit limit at any given moment. According to experts, a greater utilization rate negatively correlates with lower credit scores.
If you want to maintain a high credit score, you should avoid carrying a high balance on any of your credit cards and should certainly avoid using any card to its maximum limit.
Engage in Credit-Building Activities
You can do several activities to build your credit, such as taking out a secured loan from a bank or credit union or even opening up a savings account and paying monthly deposits into it. Any of these activities will show potential lenders that you’re capable of being responsible with credit and money.
Keep Good-Standing Accounts
When establishing credit, remember that account age plays a role in the overall score. The longer positive details have been established about your credit history, the better.
Keeping a dormant credit card open can help you maintain a lower credit use ratio and demonstrate stability. The fact that the account was canceled in good standing and will remain on your credit report for ten years is something to keep in mind.
So don’t worry about how closing an account might affect your credit if it isn’t worth the fees.
Talk To an Expert
Lastly, don’t be reluctant to seek assistance when you need it. If you’re having trouble understanding a good credit score or establishing your credit history, the best thing to do is to speak with an expert. Financial advisors and credit counselors can provide valuable advice on how to get started and take steps toward building a strong financial future.
Final Words
Building credit without a credit card is possible, and it often requires patience and dedication. Following the tips outlined in this article on can help you get started on the path to establishing good credit and living a financially responsible life. With the right steps and information, you can experience the benefits of having an excellent credit score.
So take control of your financial future and start building your credit today. With a little bit of work, you can have the financial freedom you need to live the life you want.