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How To Build Credit Without A Credit Card

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Credit cards make people weary, and with good reason. So, for those who are looking for alternative ways to build credit, here’s how to build credit without a credit card.

How To Build Credit Without A Credit Card

Establishing good credit is a vital part of living in the United States. Without good credit, it will be difficult, or even impossible to rent an apartment, get a car loan, a student loan, or a home mortgage. Furthermore, those with poor credit will often be asked to pay higher rates for home and auto insurance.

A popular way to build credit is to open a credit card account, but this solution isn’t right for everyone. For some, having a line of credit leads to overspending and debt. While others with poor credit are turned off by the high fees charged by standard credit cards, or the security deposit required to open a secured card.

Thankfully, there are still ways to build credit without opening up a new credit card account.

Become an authorized user on someone else’s account

When you become an authorized user on someone else’s credit card account, their payment history will be reflected, in part, on your credit report. However, the primary account holder remains solely responsible for any charges made by additional authorized credit card holders.

And as an additional cardholder, you won’t be able to perform many account management tasks like redeeming rewards. But here’s the thing, even if you never use the credit card, just being an additional authorized account holder will still help build your credit history and improve your credit score, so long as the primary cardholder manages their account responsibly.

For example, I use Chase Freedom(R) and have an authorized user on my account.

Obtain other types of loans

Aside from credit cards, there are many other types of loans that you can use to build credit. For example taking out a student loan, a car loan, or a home mortgage will allow you to build credit without a credit card. But as with all loans, you will only build your positive credit history when you make your payments on-time.

Also, if you have credit problems, you’ll only be able to qualify for a loan with very high interest rates. For example, unsecured personal loans may be an option, but these can be very expensive and difficult to find for those who don’t have good credit.

CD and passbook loans

To build credit without paying high interest rates, you can obtain a credit builder loan such as a CD or passbook loan. A CD loan is one that offers you a loan based on an amount that you’ve already deposited in a certificate of deposit, often called a CD.

A passbook loan is similar, as it uses a deposit in a savings account as collateral against a loan. To find institutions that offer these types of accounts, go to credit unions or community banks. A Community Development Financial Institution is also a good place to look. There are also private companies, like Self Lender that offer these loans for a fee.

Peer-to-Peer loans

These are loans offered by individuals to individuals, through sites like LendingClub, rather than going through an institution. Without that overhead, a peer-to-peer loan can offer borrowers lower interest rates and reduced fees. But like other loans, peer to peer loans will still report to credit bureaus and can help you build your credit history when you make your payments on time.

Pay rent on time

While most landlords don’t report payments to credit bureaus, some will. There are also a variety of online payment submission companies that you can use to pay your rent electronically. When these services report your payments to the major consumer credit bureaus, and you make your rent payments on-time, then you’ll add to your positive credit history. Just be aware that these services will often charge the renter a nominal fee.


There are many ways to build credit without a credit but you have to be careful. If you fail to make all of your payments on-time, then you will hurt your credit instead. You also have to be on the lookout for exorbitantly priced loans and other credit building services that prey on those who have had credit problems and are desperate to rebuild their credit histories and rebuild their credit scores.

By choosing a reasonably priced credit building option from a reputable institution, and making your payments on-time, you can rebuild your credit without using a credit card.

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About Jason Steele

Jason Steele has been writing about credit cards, travel and personal finance since 2008, and is passionate about using his cards to travel for free. Jason contributes to many of the top personal finance and travel sites and has been widely quoted in mainstream media as a credit card expert. Jason lives in Denver Colorado where he enjoys bicycling, snowboarding and flying. You can follow Jason on Twitter, Facebook or on his website.


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