How to Build Credit With and Without a Credit Card

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Building good credit is much like the age-old puzzle of the “chicken and the egg” conundrum. You need a credit card to build credit, but how are you supposed to build credit without a credit card?

You might be wondering, why do I even need credit? Doesn’t borrowing money just mean unnecessary debt? The truth is, if you want to make progress and become financially stable in our modern world, then understanding how to build credit is essential. Everything from taking out school loans and becoming a homeowner to renting a car and applying for an apartment requires credit. In fact, some employers can even use creditworthiness as a deciding factor in the hiring process, so it’s important to work toward establishing a positive credit history. Having a good credit score not only makes you attractive to lenders, but it can open doors to a wealth of financial opportunities.

Applying for a credit card may seem like the most obvious way to build credit, but it’s not the only way. Whether you’re a college student who recently received an email about student credit cards or are simply interested in how to build credit fast, you can use this guide to start building your credit responsibly. Want to find the best way to build credit? Use the links below to find what you’re looking for. 

3 Easy Ways You Can Build Your Credit

There’s no one size fits all approach when trying to figure out how to build credit. Whether you’re a new credit card holder or still researching what card type is best for you, there are a few options you should consider based on your individual circumstances when determining which card makes the most sense for you.

First things first, it’s important to know your credit score. Use the Mint app to check your credit score for free. Once you know where you stand on the credit score scale, you’ll have an idea of just how much work you have to do and can figure out the best way to build your credit moving forward. 

You have three options when it comes to choosing how to build credit:

1. How to Build Credit with a Credit Card

A credit card may seem like the most obvious way to build your credit, but it’s also a good option because using a credit card directly influences what’s factored into your credit score, like payment history and credit utilization. Using credit cards to build credit can be one of the quickest ways to achieve your goals, as long as you do so responsibly. Here are some of your options for using credit cards to build credit:

  • Secured credit cards: These require a cash collateral deposit that becomes the credit line for that account. For example, if you put $500 in the account, you can charge up to $500. This card works much like a debit card, only you’re working toward building credit. After a series of good payments, it’s common for the bank to reward you by extending your credit line without requesting an additional deposit.
  • Student credits cards: These cards are an excellent first step in establishing credit, and they often come with perks like short-term, interest-free financing and rewards geared toward students. However, just because you’re a student doesn’t mean you automatically qualify. In most cases, you will need to demonstrate proof of income, and some cards may require a credit history.
  • Department store credit cards: If you have little credit established, department store credit cards can be a good way to help you build your credit. Banks approve much lower scores for store cards than they would normally allow if you applied directly for a bank credit card online. This is because banks promise retailers a certain approval rate, which then requires them to approve customers that are typically considered too risky due to low credit.

As you can see, even if you have limited borrowing history, you can find certain credit cards to build credit.

2. How to Build Credit with Help

If you don’t have any established credit, chances are you may need a little help before being approved for a credit card of your own. This may be a good option if you have a friend or family member with good credit who is willing to help you if you can’t figure out how to build credit on your own.

  • Credit card piggybacking: Trying to figure out how to build credit fast? Consider credit card piggybacking. This practice is much like its name suggests and allows you to leverage someone else’s credit. In this scenario, the primary holder of a credit card adds you as an authorized user on their card. Your credit report then acquires the entire history of that credit card account, which is translated to your credit score. This is a good option when building credit from scratch or to help give a low credit score a boost.
  • Get a credit co-signer: Another option is to have someone with good credit co-sign on your credit card. In this case, the co-signer is legally responsible for your debt if you are unable to pay. While co-signing isn’t typically offered by many major credit card companies, we recommend checking with your local credit unions or small banks to see if it’s available.

3. How to Build Credit without a Credit Card

Using a credit card or leveraging help are some of the easiest ways to build a good credit score. But what if you don’t want a credit card or neither of those options are available to you? Whatever the reason, there are alternative ways to build your credit profile.

  • Credit-builder loans: These loans work the opposite way of a traditional loan or credit card because you borrow a specific sum, but don’t have access to the funds. Instead, the bank or credit union deposits the money in a type of savings account. With this option, you begin repaying the amount, and the lender sends your payment pattern and balance to the credit bureaus. Once you pay the balance, you get your money back, and in the process, you’ve helped build a positive credit history.
  • Federal student loans: These loans show up on your credit report, so if you’re a student, make sure to pay your student loans on time to help establish a positive credit history.
  • Auto Loans: Auto loans can be an excellent way to start building credit history. If you’re going to buy a car, make sure to finance your purchase instead of paying cash outright. When shopping around, consider APR on your financing (seeking a moderate interest rate is your best bet) and make sure you get a monthly payment you can afford. You won’t be doing yourself any good if you start missing payments or default on your loan.
  • Get credit for your rent: Most credit files don’t contain your rental history. However, all three major credit bureaus—Experian, Equifax, and TransUnion—do include rent payment information in credit reports if they receive it. You may be able to take advantage of this by using a rent reporting service which takes a bill you are already paying and reports it to credit bureaus.  In this case, on-time rental payments can help you build a positive credit history.

Follow Smart Financial Practices to Build Credit Over Time

Building a good credit history doesn’t end with establishing a line of credit. The next step is to be proactive about your financial choices, balances, interest, and payments.

Make Your Payments on Time

Making on-time payments is of the utmost importance when it comes to building a good credit history. Any bill that becomes delinquent can wind up on your credit report and cause a ding in your credit score. Keep track of your billing cycle and due dates to make sure you never miss a payment. Always check to see if you can make use of any automatic payment features offered for added convenience.

Minimize Interest Charges

There are many good reasons to never pay your credit card bills late, but did you know there are also perks for being proactive about your payments? By carrying a balance on your credit card, you accumulate interest charges. When you make a payment prior to the due date, you are lowering your average daily balance. This reduces your interest charges and helps you allocate the money you would’ve spent on interest for more important things.

Avoid Opening Too Many Accounts at Once

You might be interested in shopping around to see who will approve you for a card, but think twice before going on an application spree. When you apply for a credit card, a hard inquiry is generated on your credit report and can lower your credit score. Since new credit makes up to 10 percent of your score, several inquiries in a short amount of time can cause your score to plummet. Follow the rule of thumb of waiting three to six months in between credit card applications, to maintain the stability of your credit score.

Keep Spending within Your Means

Following the rule of only borrowing what you can afford helps you keep your balance under control and can let lenders know that you’re a responsible borrower. Steer clear of reaching your credit limits—In fact, FICO suggests that a good debt-to-credit ratio (also known as credit utilization) is below 30 percent to keep your score as high as possible.

Check Your Credit Score Regularly

Now more than ever, it’s important to keep close tabs on your credit score. Not only can monitoring your credit help you keep an eye out for identity theft and fraud, but it can help you catch and dispute any reporting errors. Checking your annual credit report can save you from paying interest that you shouldn’t have been charged in the first place. Additionally, keeping a close eye on your credit can help prevent costly damage and lost time in the event of credit card fraud. While you’re trying to build credit, you may want to check your credit more frequently to track your progress. With Mint, you can check your credit for free (with no ding to your credit score), and get a summary of your credit score along with tips for improvement.

Getting Your Credit in Order Should be a Priority

Good credit not only opens the door to further financial opportunities, but it’s necessary to live and live well in today’s society. Whether you’re applying for a new apartment, in the background-check process of your dream job, or looking to purchase a vehicle, credit is essential to getting you where you need to be. While there’s no one hard and fast rule for establishing good credit, there is a lot of recommended advice you can follow (check out all the free resources in our blog) to make sure you’re responsibly managing your credit and using it to your advantage.


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