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7 ways to build credit — without a credit card

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Dori Zinn · Contributing writer

Fri, Sep 6, 2024 5 min read

A revolving account, such as a credit card, can play a large part in your credit score. But if you can’t get a credit card or simply don’t want one, you can still build a positive credit history.

Consider one or all of these strategies to improve your credit without using a traditional credit card.

How to build credit without a credit card

Here are a few ways to start building your credit without using a credit card. Whether you’re new to the credit game or are recovering from past credit mistakes, these strategies may work for you.

1. Become an authorized user

If you don’t have a credit card yourself, you can use someone else’s credit history to boost your own. When you become an authorized user, your name is added to someone else’s credit card account. You’ll get a physical card, although you’re not required to use it (and the account holder may not want you to).

Once you become an authorized user, the account’s activity will be reported to your credit profile every month. If the primary cardholder uses the card responsibly and pays off the card in full, those positive actions can improve your credit.

But if the main cardholder misses a payment or regularly carries a high balance, their credit score could drop — and so could yours. Make sure you become an authorized user on an account for someone who has good or excellent credit and manages their account carefully. Otherwise, your score could take a hit.

2. Get a secured card

While secured credit cards and traditional cards are similar, they serve distinct purposes. A traditional card is useful for earning rewards on your spending or helping finance a large purchase, but a secured credit card is specifically designed for users with low credit. Some secured cards don’t even require credit checks.

However, most secured cards require a deposit when you open an account, which serves as your credit limit. If you put $500 down as your security deposit, for example, your initial credit limit would be $500.

You can use the card like you would a regular credit card and make monthly payments to pay off the card’s balance. The card’s issuer will report your activity to the major credit bureaus, and your credit can improve with consistent, on-time payments. Once you’ve proven you’re responsible with credit, the issuer may increase your credit limit or allow you to transition your account to a traditional credit card.

Not all secured credit cards have the same requirements. You may find some cards require a small deposit but offer you a higher credit limit. Others may charge an annual fee. While most cards report to the major credit bureaus — Equifax, Experian, and TransUnion — some may not report to all of them. It’s important to compare secured credit cards to see which one would work best for your circumstances.

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3. Get a loan

Auto loans, student loans, personal loans, and mortgages are all reported to the major credit bureaus. If you make regular, on-time payments toward your debt, that positive activity can improve your credit. But falling behind on payments or defaulting on your loan can cause your score to nosedive, in addition to other complications.

Avoid getting predatory loans like cash advance loans or payday loans. These types of debt prey on those who need money fast and don’t have the credit history to borrow through traditional means. These loans can charge as much as 400% in interest, while personal loans carry an average interest rate around 12%, according to the Federal Reserve.

4. Pay off outstanding debt

If you owe money to lenders or credit card issuers, paying that off can boost your credit score.

If you have a large credit card balance, for instance, paying down that debt can lower your credit utilization. Lowering your credit utilization shows creditors you’re responsible with credit and therefore, boosts your score. In addition, you’re proving that you can make reliable payments every month.

5. Remove old debt

Old debts, like defaulted and delinquent accounts, generally stay on your credit report for up to seven years. But if it’s been longer than that, you can ask for those old accounts to be removed by contacting the credit bureau showing the outstanding debt on your report. You can pull your credit report from all three of the major credit bureaus for free at AnnualCreditReport.com.

Removing old debt takes those bad marks off your report and highlights your more recent behavior. Keep in mind that it could take several weeks to get these old marks removed.

6. Manage your credit history

While cleaning up old debt is one way to boost your score, there are other ways you can jump-start your score by reviewing your report.

Make sure you’re paying bills on time every month and paying more than the minimum payment on your credit cards if you can afford it. Payment history is the biggest factor in your credit score, so the sooner you can show on-time payment history, the faster your score will rebound.

If possible, stop using current credit cards or severely limit your usage until you can make payments in full every month. This will show on-time payment history but also free up credit utilization. Ideally, your credit utilization should be 30% or lower.

7. Report your current bills

Even without any lending or borrowing opportunities, you could improve your credit by showing your on-time payments on other bills.

Reporting services such as Experian Boost or UltraFICO use alternate financial habits to rate your creditworthiness. Payments towards your rent, cell phone, and utilities can be counted, and your banking activity may also be considered. Both of these services are free to enroll in.

This article was edited by Alicia Hahn

Editorial Disclosure: The information in this article has not been reviewed or approved by any advertiser. All opinions belong solely to Yahoo Finance and are not those of any other entity. The details on financial products, including card rates and fees, are accurate as of the publish date. All products or services are presented without warranty. Check the bank’s website for the most current information. This site doesn't include all currently available offers. Credit score alone does not guarantee or imply approval for any financial product.