A good credit score and history are the keys to getting approved for a car loan or mortgage. If you're trying to build up credit, most of the advice you get will typically be centered on using credit cards. But what if you want to build credit without a credit card?
How to Build Up Credit without a Credit Card
Responsibly using credit cards is certainly a good way to establish or improve credit, but they aren't for everybody. You may have had trouble with credit cards in the past and want to avoid them. Maybe you don't like the fact that credit cards have variable interest rates and monthly payments.
Whatever the reason, you want to avoid plastic while improving your credit. There are several ways this can be done. Here are a few options you can try:
Become an Authorized User
Becoming an authorized user on a friend or family member's credit card account lets you have the benefits of the credit-building aspects while avoiding the drawbacks of having a card in your name. The key is attaching yourself to an account that's managed responsibly, as your credit can be negatively impacted as well. Make sure the primary cardholder makes payments on time and keeps the balance low, and it doesn't hurt if the card's been open for a long time.
Sometimes, the provider gives the authorized user their own credit card. With the point being to avoid plastic, know that you never have to use it. You can cut it up, lock it away in a safe or strong box, or have somebody else hold onto it. When you're an authorized user, you don't have to use the card or pay for charges and can still improve your credit.
Make sure that the card provider reports authorized user activity to the three national credit bureaus (Experian, Equifax, and TransUnion).
Have Bill Payments Reported
If you have bills you're paying each month (cell phone, cable, rent, electricity, gas, internet, and more), you can try to get some reported to the credit bureaus. While these providers report late payments, they typically don't report positive payment activity – but you can ask them to.
Talk to your utility providers and ask if they have a program to report positive payments or if they're willing to for you. You can also ask your landlord about reporting your rent payments. If they won't, there are third-party pay-for-report companies for rent payments. Essentially, you pay these companies a small fee, and they collect and report your rent payment information to help you build credit.
Since you're already paying these bills every month, you might as well try getting them on your credit reports. It's just another way to show the world you're responsibly managing monthly bills.
Get a Loan
Another way to avoid credit cards is to take out a loan. Make payments on time and in full, and you're building credit as you pay it back.
Maybe you already have student loans like many college students and graduates. If not, you can try for a small personal loan or a credit-builder loan, which exist only for the purpose of improving credit.
With credit-builder loans, you don't actually receive money to pay back. Instead, you establish a payment schedule with a lender for a certain amount, and make payments into an account until you reach that amount. Once paid back in full, you get access to the money you saved up, so think of it like getting to build credit while successfully saving up some money.
If you're in need of a car, you can explore special finance auto loans to get the wheels you need as well as a chance to improve your credit.
Using an Auto Loan to Build Credit
Just like being an authorized user, having payments reported, or getting a personal loan, a car loan can help you build up credit without a credit card. However, it can be tough to get approved for one without a strong credit history behind you.
Auto Credit Express can help you solve that problem. We help people with bad credit, no credit, and other credit issues find financing more easily. We do this by matching car buyers to local dealerships that are equipped to handle unique situations. You can get this process started by submitting our free and easy auto loan request form right now.