Here’s How to Build Credit Without a Credit Card

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Credit cards may be the most effective way to build strong credit, but they’re not the only way. Learn how you can build a credit score without a credit card. 

Hands down, the easiest way to build your credit score is to borrow money on a credit card, pay your statement balance on time, and never allow debt to become too unwieldy for you to handle. But if credit cards aren’t an option — or you really don’t like them — don’t worry: There are other ways to build a strong credit score without using credit cards. Here are three of the most effective ways.

Get credit for your monthly bills

Got a Netflix account? How about a cellphone? If you’re paying monthly bills for streaming services, internet, phone, cable, and utilities (gas, electricity, and water), Experian will count those toward your FICO® Score if you enroll in Experian Boost.

Experian Boost comes as a feature within a free Experian membership. After you give Experian permission to monitor whatever accounts you use to pay bills, the company will start recording them in your credit history. The process takes a few minutes, and you’ll see your score boosted in real time. For instance, when I linked Experian Boost to my checking account, my score was boosted 2 points instantly (Experian claims the average boost is 13 points).

For a bill to qualify, you need three months of payments within the last six months. If you don’t have three months of payments, Experian will list the account as “pending” and notify you when you can add it to your credit report.

Report your rent payments

Some landlords and apartment complexes can help you boost your score by reporting on-time rent payments to credit bureaus.

But even if your landlord isn’t willing to do this, you can enroll in third-party services, like Rental Kharma and RentReporters, that will report your payments for you. Experian Boost will also keep track of your rent payments. But if you’d like to send rent activity to the other major credit bureaus (Equifax and TransUnion), these services can be your middle person.

Both Rental Kharma and RentReporters claim that reporting rent boosts scores by an average of 40 points within 10 days. But their services are not free — Rental Kharma charges a $75 upfront fee, plus $8.95 per month. RentReporters is slightly higher: $94.95 to set up your account, plus $9.95 per month.

That’s a hefty fee for a credit reporting service. For this to really benefit you, you should have at least 12 to 48 months of good rent payments. It doesn’t hurt to try them, however, as both companies offer refunds if your score is not affected.

Get a credit builder loan

Credit-builder loans are low-risk installment loans designed to help you put positive debt repayments on your credit report.

To be sure, these loans only exist to help you build credit and are not a great option if you actually need to borrow money now. The reason: your lender won’t give you money upfront. Rather, you pay monthly installments up to a certain amount, usually between $1,000 and $1,500. As you make payments, your lender will put the money in an interest-bearing account, like a certificate of deposit (CD). It will report your loan payments to credit bureaus, then release what you’ve paid after the loan term ends.

The problem with credit builder loans is they’re not the best choice for a thrifty person. Even though you’re not technically borrowing money, your lender will still charge APR, anywhere between 6% and 29.99%. You might also have to pay an origination fee for the loan.

That’s right — you’re essentially paying the lender to report your payments to credit bureaus. That’s it.

Don’t rule out credit cards just yet

If bad credit is stopping you from getting a credit card, you still have options.

For one, you can become an authorized user on someone else’s card. The credit card won’t be in your name, but the credit card company will report your activities to credit bureaus. As long as the account holder pays off balances and never misses a payment, you can strengthen your credit score.

You could also get a credit card for bad credit. Many of these cards are “secured,” meaning you put down an upfront payment, like $1,000, in order to open your account. The upfront payment gives your credit card provider peace of mind: if you default, they can use the payment to cover the unpaid balance. These cards will help you build credit, especially if you use them alongside some of the methods above, like reporting rent payments or enrolling with Experian Boost.

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