How to Build Credit Without a Credit Card

How to build good credit

A great credit score offers plenty of advantages. But getting one is sometimes easier said than done. 

And that’s particularly true if you don’t currently own a credit card — one of the most popular ways to establish a good credit history. 

Perhaps you’re a new credit user looking to develop a robust credit history. Or maybe, after some financial troubles in the past, you’re ready to improve your existing credit score. 

Being without a credit card doesn’t need to hold you back. You can build your credit without one. Here’s how. 

A quick look at how credit works 

Your credit score gives lenders a quick way to compare you against other borrowers. Currently, the average FICO score stands at 711. The higher you are above that number, the more fiscally responsible you’re considered to be. 

The way you manage your existing credit is reported to three major credit bureaus — Equifax, Experian, and TransUnion. Those entities each compile your data into what’s called a credit report. Within your credit report is an accounting of your current loans and lines of credit, your payment history, applications for new credit, and more. 

When you have good or excellent credit, lenders consider you a low risk for defaulting on a loan. So, they’re more likely to approve your financing application, offer you attractive lending terms, and compete for your business. 

One of the most popular methods for using credit is through a credit card. 

Right now, four out of five American adults have at least one credit card in their wallets. And, when you use those cards responsibly, the data reported to the credit bureaus can help you build good credit. 

But what if you’re among the 20% of Americans who don’t own a credit card? How can you build your credit history and improve your credit score over time? 

Methods that won’t help you build your credit 

Not every part of your financial life has an impact on your credit history. So, focusing your efforts on improving those areas will not yield any positive effect on your credit score. 

These factors won’t change your credit history at all: 

  • Key demographic information: Your age, gender, marital status, race, ethnicity, national origin, religious affiliation, and political party 

  • Geography: The town, state, and region in which you live 

  • Employment information: Your job title, current employer, length of employment, and prior places of employment 

  • Earnings: Your take-home pay, interest and dividends earned, business revenue, and any other income 

  • Assets: Your net worth, bank account balance, investment portfolio size, home value, home equity, and value of any other assets you own 

  • Debit card usage: Cards that directly withdraw cash (e.g., from a bank account) instead of cards that use credit for transactions 

  • Rent payments: The money you pay a landlord for renting your home (Unless you use a rent-reporting service) 

  • Utility payments: The bills you pay for electricity, gas, water, phone, and more 

Ways to build your credit 

So, what does work? If you don’t have a credit card, using these methods may help you improve your credit history and increase your credit score: 

1. Correct existing errors. 

One in three Americans have an error on their credit report. And that error might be adversely affecting your score. Credit report errors are generally one of two things — a simple mistake or evidence of identity theft. 

If someone is opening new accounts in your name or illegally using your existing accounts, take immediate steps to stop the fraud. Acting quickly will give you the best chance of minimizing the damage and cleaning up the effect on your credit. 

If there’s simply a mistake on your credit report, dispute the error to resolve it. You want the information in your credit history to be 100% accurate. 

2. Take good care of your current loans. 

Most American adults have at least one active loan — usually a mortgage, auto loan, student loan, or personal loan. A few easy habits with those loans can actually improve your credit history and score over time: 

  • Make sure your lender is reporting to the credit bureau, so you get credit for your responsible loan behavior. 

  • Pay at least the minimum owed on time every single month. 

  • Consider paying more than the minimum owed to reduce your debt quicker. 

3. Treat your existing lines of credit well. 

Do you have a line of credit already in your name? Credit cards are a popular form of credit, but there are plenty of others. Maybe you have a home equity line of credit, or a personal line of credit. 

If you do have a line of credit, apply the same responsible credit habits to it that you do to your existing loans. 

4. Consider a secured credit card. 

A secured credit card is often available to people who are denied access to traditional credit cards. With a few hundred dollars of collateral — which you get back when you’re through with the card — you can use a secured card just like a regular credit card. 

And, with consistently good financial habits, your secured card will help you build credit too. 

5. Look into a credit-builder loan. 

Credit-builder loans are short-term loans designed exclusively to help you grow your credit history and boost your score. 

With a traditional loan, you receive the funds upfront and repay in installments over time. With a credit-builder loan, however, you make all of your payments on time and then receive the cash. 

Pay your loan consistently on time and you’ll do your credit score a favor. 

6. Submit alternative data. 

Some of your financial transactions don’t ordinarily count toward your credit score. But, sometimes, you can use that history to impact your credit history after all. 

For instance, paying rent isn’t ordinarily reported to the credit bureaus. But you can work with a rent-reporting service to deliver your payment data to the credit bureaus on your behalf. 

Likewise, utilities (water, electricity, phone, etc.) don’t appear on your credit report. But a service like Experian Boost can incorporate your responsible utility payments into your credit report and potentially bump up your score. 

7. Become an authorized user. 

Have a relative or friend with great credit? If they agree to add you as an authorized user to their credit card, it can give you a credit score increase. 

Credit cards are certainly a useful tool for building credit when used responsibly. But they’re definitely not the only path. With one or more strategies in place, you can create a solid, impressive credit history all your own. 


The material presented here is for informational purposes only and does not represent specific financial advice to you or your circumstances personally.