How to Build Credit Without a Credit Card

By Victoria Sado

Your credit score is a big part of your overall financial picture. If your score’s “good,” then a whole lot of adulting — things like leasing an apartment, buying a house, or getting an automobile loan — can get a lot easier.

And if your credit score isn’t so good, or if you’re just getting started in the world of managing your own money and don’t have a score at all, those things might be a real headache — or out of reach for a while.

How to Build Credit Without a Credit Card

Some people start building credit by getting a credit card. That can work, if you’re really, really careful. The thing about credit cards is they come with all sorts of potential downsides, the biggest of which is how easy it can be to dig yourself into expensive debt. And they’re not for everyone. Plus, it could be hard to get approved for a card if you’re just starting out.

Good news: Credit cards aren’t the only way to build or boost your credit. You can do it without them.

Quick recap: What affects your credit score

Your credit score is a number between 300–850 that tells potential creditors (aka companies that lend people money, like loan and credit card providers) how likely you are to pay off your debts. Other people also use your score to gather info about you, like insurance companies evaluating your “riskiness,” or potential employers deciding whether to hire you. The higher your score, the better.

There are five big things listed on your credit report that come together to affect your credit score, and each one carries a different weight:

  • On-time payments (35%): Do you pay your bills on time? (This includes not only debt repayments, but also things like utilities, rent, cell phone bills, medical bills, etc.)

  • Credit utilization rate (30%): If you have credit cards, how much of your available credit limit have you spent? (Lower is better.)

  • Age of credit (15%): Do you have a significant track record of borrowing money? (Longer is better.)

  • Credit inquiries (10%): How many times have you applied for new credit in the past few years? (Fewer is better.)

  • Types of credit (10%): Do you have a mix of different types of credit? (More types are better.)

Here’s an in-depth explainer on credit scores with more info about how all this works.

How to build credit without a credit card

If you have loans, keep making your payments on time

Unless you’ve been quite lucky (or you’re still quite young), you probably have at least some sort of debt — like student loans or an auto loan. In that case, every single payment you make on those loans on time will help to build your credit score. The longer your streak, the better it will get.

On the flip side, missing any payments will hurt your score — especially if that loan is the only thing on your credit report. If you can, I recommend putting payments on auto-pay so they can’t slip through the cracks. If auto-pay isn’t an option, set yourself reminders and to make it a top priority each month.

One other thing to note: We always recommend prioritizing saving and investing over paying off debt with interest rates less than 5%, because the amount you’d have historically earned by investing would be worth more than that. But building your credit score is another good reason to just pay the minimums on low-interest loans. The more of an on-time payment track record you can build, and the more types of credit you have on your credit report, and the older your credit accounts are, the better it is for your score.

Ask your landlord or utility companies to report your payments

All missed or late payments — including those for your rent, your cell phone bill, and your electricity bill — get listed on your credit report and can hurt your credit score. But only some on-time payments get reported, which means only some of them typically help your credit score. Debt payments typically are reported, and non-debt payments typically are not.

But that doesn’t mean you can’t ask those companies — your landlord, your cell phone provider, your electric company — to report your on-time payments for you. You can, and you should. They might agree. But if they say no (it can be a bit of a paperwork hassle for them, after all), there are also companies you can pay to report your rent to your credit report on your behalf. Since these services typically cost money, I’d turn to them only if you have no credit score at all, or if you need to boost your score quickly.

This could really help: The NYC Comptroller ran a study in 2017 to find out what would happen to people’s credit scores if their rent payments were included on their credit reports. The study found that for NYC residents who paid less than $2,000 a month in rent, 76% of those who had a credit score already would see a bump in their score. And 29% of people who didn’t have a score at all would gain enough of a credit history to get a score for the first time.

The three major US credit bureaus (they’re the ones who maintain your credit report) have already started making moves to incorporate more data into what they do, so all this could change in the future.

Become an authorized user on someone’s card

I know I promised you non-credit-card options … and this is a non-credit card option. You can ask a parent or other close relative to add you as an authorized user on their credit card, and never use (or even physically possess) one.

You don’t need to request or receive a card of your own in the mail, and the idea here is to never charge a single thing to that account (though technically you’re authorized to). But what you’re going for here is building your credit, and just having official access to their (hopefully) good credit should mean that their credit history and (ideally) high credit limit would get added to your credit report. That could give you a serious boost.

Just keep in mind that if they were to fall behind on payments, it would hurt you, too. You can ask to be removed as an authorized user — and in that case, their credit history (good and bad) would get removed from your report.

Think hard before going into debt just to build credit

Two other options you might see for building credit without a credit card are credit-builder loans and secured loans. With a credit-builder loan, the bank would give you a personal loan, but deposit the funds into a savings account in your name. You’d pay them back for that loan over some period of time, and at the end, you’d keep the amount in that savings account (minus fees and interest). Secured loans are similar, except instead of loaning you new money, the bank lets you borrow against your own savings account filled with your own money.

These types of loans would help you build up a history of on-time payments, which is why they’re advertised as tools to help you build credit. But the bank is going to charge you interest — so you’d essentially be paying the bank to help you build your credit. Also, you have to be sure that you’ll definitely be able to make the payment each month, because if you don’t, the loan will end up hurting your score instead.

If you’re trying to raise your score quickly, and if you can find an interest rate that’s not too high (less than 5% is ideal, but I wouldn’t go higher than 10%), then it might be an option. But save this one as a last resort.

Consider the you-need-a-credit-card-to-build-credit myth officially busted. You can do it without plastic (and you will!).


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Victoria Sado

Victoria Sado is a CFP® Professional at Ellevest. She works with Ellevest clients to help them take financial control and make a plan to hit their money goals.