Lifestyle

How to Build Credit Without a Credit Card

Do you have a bad credit score or would like to build yours? Look no further!

Many people stress themselves out because their credit scores are bad so they can’t take out money on loans or get good interest rates. This can cause them to pay more money for things they need or they might miss out on the opportunity to buy a home.

Fortunately, there are several ways to build credit that don’t require a credit card. In no time, you’ll be able to get your credit score up, while being in little to no debt. 

Read on to learn how to build credit without a credit card!

Repay Student Loans

Today, many people take out student loans to ensure they can pay for their education. While many people are unaware of this, student loans are one of the best ways to build credit or recover your credit score.

Most people are eligible for these loans providing that they’re attending college for a certain amount of time. The best thing about these loans is that you don’t have to pay them while you’re in school.

The government is aware of this and have made several payment plans for students to pay them back. When a student loan is granted, you have a grace period of 6 months after you finish school where you don’t have to pay. 

Just like any other loan, student loans can affect your credit if you don’t pay them over time. Some people are eligible to pay these loans based on their income, so their rates might be less than a typical payment plan.

Get a Credit Builder Loan

Credit builder loans are essentially no credit loans that help people build credit from nothing. These loans aren’t based on credit score. Lenders will have you deposit your own money to use for the loan.

For example, if you want to get a loan for $500, you would deposit $500 to the lender and they would give you a loan for that amount. After you’ve paid back the loan, your money gets returned to you.

Payments on this type of loan affect your credit score because they still appear on your credit report. You have to ensure to pay these back on time to start building credit.

Look Into Peer-to-Peer Loans

Peer-to-peer loans are loans that come from individuals rather than from a bank or official lender. Some websites allow users to do peer-to-peer loans. They report to credit bureaus to ensure that no one gets the short end of the stick.

Repay your Mortgage or Car Loan

While mortgages and car loans often require individuals to have a good credit score, these loans can still be effective for those who need to rebuild or establish their score. Even without a great score, those who have a steady income and good down payment may be approved for one.

Mortgages and car loans can also be co-signed by someone else if need be. This will increase your chances of getting approved, but it can also put the cosigner at risk.

If you neglect to pay the loan, your cosigner will be held liable for paying it back. Because they cosigned it, yours and their credit can be affected if they also neglect to pay it back.

For the most part, you shouldn’t rely on someone to cosign with you as it comes with many risks.

Pay Rent on Time

Depending on who your landlord is, they might report your rent payments, which can affect your credit score. You might be building credit right now without even knowing it.

Some services allow you to report your rent payments to a credit bureau, but they’re hard to find because many credit bureaus don’t record rent information.

Be an Authorised User on Someone’s Card

Becoming an authorised user on another person’s credit card means you can use it just like you would if it were your own. And the payments you make will be reflected on your credit report.

While your payments will show up on your report, the primary cardholder will be responsible for any charges that are made on the card. If you were to start recklessly spending, the primary cardholder would have to pay them back if you didn’t. 

This is similar to cosigning in that you can both make payments. You can also build credit as an authorised user without buying anything. As long the primary cardholder makes their payments on time, your score will go up along with theirs. 

Now You Know How to Build Credit Without a Credit Card, So Start Doing It!

Rather than forcing yourself to pay a ton of money for things upfront like cars, homes, expensive electronics, etc., you can build your credit up to be able to finance those things.

Many people don’t know how to build credit without a credit card, but as you’ve just learned, there are many things you can do. By repaying any debt you’re currently in and making sure to pay your bills on time, you’ll notice that your score will passively increase. 

If you don’t have any debt to repay, you can try any of these useful tips. No one is left permanently with a low credit score. The options are there for you, so take advantage of them.

Feel free to browse our well-being section to read more articles that can help you live a healthy lifestyle.

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