How Can I Build Credit Without a Credit Card?

Posted By: Family Credit Management | Wednesday December 4, 2019

Did you know that 43 million Americans have bad credit? That's nearly a quarter of the population! And, 45 million Americans are living with no credit score?

In other words, half the population either has a bad credit score or no credit score at all. This is bad news, seeing as a good credit score can have a dramatic impact on your overall quality of life. A good credit score can help you with buying a house, buying a car, getting a job, starting a business, and getting lower interest rates.

If you have a bad credit score or no credit score at all, now is the time to start building credit. But, if you don't have a credit card, how are you supposed to build credit?

Check out this guide to learn how to build credit without a credit card.

1. Gain Authorized User Status

If you have a spouse or close family member who has a credit card, you can ask them if they'd be willing to sign you on as an authorized user.

Revolving Door Made of Credit Cards

As an authorized user, you'll have access to the primary cardholder's card and you'll be able to piggyback off of their credit card activity. The card activity will still be reported to credit bureaus and used to boost your credit, even if you never use the credit card.

However, this method does come with some risks, as your credit report will reflect how the card is being used. In other words, if the primary cardholder racks up excess balances and misses payments, it could end up damaging your credit.

This is why you should only choose a cardholder who is responsible. Also, be sure to verify with the credit card company that they're reporting the activity of the authorized user. Otherwise, you'll be wasting your time.

2. Obtain Other Types of Loans and Pay Them Off

Other than credit cards, there are many other types of loans that you can use in order to build credit.

But, as with all types of loans, you will only gain credit when you make the payment on time. Also, if you already have credit problems, you'll likely only qualify for loans with very high-interest rates.

That being said, here are some types of loans that you can use to build credit:

Passbook or CD Loans

In order to build credit without paying high-interest rates, you should also consider taking out a credit builder loan, such as a passbook loan or a CD loan.

A CD loan is one that offers you a certain amount of money based on how much you've already deposited in a certificate of deposit, otherwise known as a CD.

A passbook loan is similar, in that it allows you to deposit money into a savings account as collateral for a loan.

As you pay down these types of loans, you'll build credit. And, once the loan is paid in full, you'll be able to access your balance again.

To find sources for passbook loans and CD loans, you can go to community banks, credit unions, community development financial institutions, or private companies.

Peer to Peer Loans

Peer to peer loans are ones that are made by individual investors rather than large financial institutions.

And, instead of the accrued interest going back to the bank, it goes back to the investor. This is also a much better option than borrowing money from a sketchy relative, as P2P loans are completely legitimate and they can be set up through a reputable service.

Interest rates and credit requirements will vary depending on the lender, but this is another excellent way to build your credit.


If you have a mortgage or are considering taking one out to buy a home, then you should know that it can help boost your credit score.

While your credit score may initially take a hit when you first assume this big of a debt, it will rise over time as you consistently make monthly payments.

Auto Loans

Just like mortgages, auto loans can give you the opportunity to establish a positive payment history and build your credit.

However, keep in mind that if you pay cash for a car, you'll save money on interest, but this won't help you boost your credit score in any way.

If you're in high school, repaying an auto loan gives you a great opportunity to jump-start your credit history.

Of course, you shouldn't buy a car solely for the sake of building credit, so first make sure that it's really a necessary purchase.

Personal Loan

The final type of loan you can take out to build credit is a personal loan.

With personal loans, you borrow a fixed amount of money from a bank and make fixed payments each month. Typically, people will use personal loans to consolidate debt and get lower interest rates.

Pay Rent on Time

While rent payments typically aren't part of your credit report, some landlords do report them.

If your landlord doesn't report your rent but you'd like them to, you can use a third-party service to report rent payments on your behalf.

And, you don't need to stop there. You can also ask your utility company to report your on-time payments as well.

Cellphone Payments/Alternative Data

Some lenders are starting to look at alternative forms of data when assessing your overall credit-worthiness. In addition to cellphone payments, cable and rent may also be taken into consideration.

Currently, these companies have the option of reporting this information, so you should check with your company to see if your payments are being reported.

Tips for Building Credit Responsibly

Last but not least, let's take a look at some tips for building credit responsibly.

Here are some things to keep in mind as you continue your journey to building better be credit:

Don't Pay Interest

Contrary to popular belief, you actually don't need to pay interest in order to build credit.

Therefore, if you can swing it, pay off your entire balance each month. This will help you avoid interest charges, and then you can put that extra money towards paying off other bills.

Don't Miss a Payment

Late payments can wreak havoc on your credits score, so make sure you don't miss any.

Even if you can only make the minimum monthly payment each month, do your best to pay it on time. If you're someone who has trouble remembering to make payments, you can set reminders on your phone or schedule auto-payments.

With auto-payments, you never have to worry about missing a single bill.

Beware of Loan Scams

There are many loan scams out there that prey on people with bad credit or no credit, so make sure you're on the lookout for these.

Typically, these loans guarantee approval but then also ask for some type of upfront payment.

This is a scam, and it should be avoided at all costs.

Know Which Loans to Avoid

There are certain types of loans that won't help build your credit at all. These include payday loans, pawnshop loans, and title loans,

In fact, title loans and payday loans can damage your credit if you default on the loan and the account is sent into collections.

The collection agency would then report the delinquency to your credit bureau, which in turn would hurt your credit score.

And, be sure to check out our debt management program if you're looking for better ways to take control of your debt. 

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