Categories: Lifestyle

Ways To Build Credit Without Using A Credit Card

Although credit cards are some of the best methods for building a credit score, you don’t have to rely on them to help establish credit. Sure, a solid credit history is a key aspect of your financial health — from getting approved for loans or rentals, to lowering your monthly mortgage payments — and knowing how to strengthen your credit can save you money and allow for investing in better future opportunities.

Whatever your reasons for choosing not to have one, you can build a credit score without an additional piece of plastic in your wallet. You just need to understand the resources that are at your disposal. These are just a few of them.

Credit Builder Loans

Check with your local credit union or bank to see if they will offer a credit builder loan — where you will borrow a small amount and store it in an interest-bearing savings account or CD. You can use the funds after you make set payments and pay the loan off.

As the loans are generally $1,000 or less with low interest rates, these are great options for people with bad credit or who are just beginning their career.

Federal Student Loans

Since they don’t require a credit check, federal student loans are easy to secure; all you have to do is fill out the Free Application for Federal Student Aid (FAFSA). This is an installment loan, meaning they’re building your credit over time because they show creditors you’re a responsible and trustworthy borrower — just make sure you make all your payments on time.

However, if you’re not a student, taking out this loan to build credit could do more harm than good.

Peer-To-Peer Loans

P2P loans allow you to take out loans from a legitimate, individual investor, rather than a financial institution. These are set up through credible P2P services, so you’ll be able to raise your credit and the investor will be able to collect the accrued interest.

Keep in mind that, while this is a good option for building a credit score, your current score may impact the investors willingness to lend to you and the interest rates you’ll receive.


Generally, rent only affects your credit score negatively when your landlord sends your debt to a collections agency. However, rent payments can be used for good if you make them on time. Check if your landlord or property manager reports your payments, and, if they don’t, look for companies that will send reports to the credit bureaus.

Whatever method you choose, it’s important to remember to make your payments on time each month — failing to do so will damage your credit score (timely payments are worth 35 percent of your score), so make sure you’re able to pay in full before signing up for loans or renting a property. Check your credit on a regular basis to track your progress and assess areas for improvement.

All images via Getty

Kim Bussing

Kim Bussing is a writer and editor who covers lifestyle, finance, entertainment, technology, and business for Knew Money. She is passionate about discovering new trends and helping demystify the nuances of finance.

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Kim Bussing

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