Getting your first credit card is one of the best ways to build credit. However, a credit card increases the likelihood of debt, and too much debt can have a negative impact on your credit score. Fortunately, getting a credit card in your name isn't the only way to establish a good credit history. Here are seven awesome ways to build credit without a credit card.
1. Ask Your Landlord to Report Your Rental History
Typically, landlords don't report rental history to the credit bureaus. But if you ask nicely, your landlord may notify the bureaus of your good rental history. This is one of the easiest ways to build credit without a credit card. Each positive update by your landlord will build your credit history, and help establish or improve your credit score.
2. Speak with Your Utility Company
Like landlords, utility companies typically don't report to the credit bureaus on a monthly basis. Often times, they only send updates when an account holder doesn't pay his or her account. If you have a utility in your name, call the company and ask if they'll report your timely payments to the bureaus. All they can say is yes or no.
3. Get a Student Loan
If you're thinking about going to a college or university, getting a federal student loan can build your credit without a credit card. You can qualify for a federal loan despite your credit history. Repayment is deferred until 6 to 9 months after graduation, but you can start paying off the loan while you're still in school. Timely monthly payments add positive information to your credit report, which builds your credit history.
4. Finance a Used Car
Some car dealerships won't offer financing if you don't have a credit history. However, if you purchase your car from a fresh start dealer, you might qualify for a loan with no credit history. These particular dealerships offer in-house financing. And although you'll pay a higher interest rate for your vehicle loan, timely payments can build your credit history, helping you qualify for better loans in the future.
5. Open a Bank Account and Get a Small Personal Loan
If you haven't already, open an account with a bank or credit union. Once you're a customer or member, consider getting a small collateral loan. You can use any valuable personal property as collateral, such as electronics or jewelry. Apply for a small personal loan and then repay the loan over the next few months. The bank will report timely payments to all three credit bureaus.
6. Become an Authorized User on a Parent’s (or Spouse's) Credit Card
Even if you have no desire to get a credit card in your name, adding your name to a parent's or spouse's credit card can help build your credit history. As an authorized user, this credit card’s activity appears on your credit report. For this matter, only become an authorized user if the primary account holder uses credit responsibly. Being an authorized user will have either a positive or a negative impact on your credit score.
7. Look into Peer-to-peer Lending
There are individual investors who are happy to give private loans to borrowers. These loans typically feature lower rates than those offered by traditional banks. As a bonus, some private investors will report your timely payments to the credit bureaus.
Credit cards are useful and convenient, but you can get into trouble if a spending problem develops. Use the above suggestions and you can build your credit without the risk of massive debt.
Do you think it’s wise to build credit without a credit card?