Building Credit Without Credit Cards

Oct 20, 2023 By Triston Martin

Credit cards are often seen as a way to build credit. However, credit cards are not the only way to improve your credit score and pay off debt. Credit cards are not available to everyone. If you have had financial difficulties in the past or are just beginning to build credit, it might be difficult to get a credit card. Credit cards do not build your credit history. It is essential to have a credit mix that includes an installment loan account. Your FICO(r), a credit score, is calculated by your credit mix.

Keep Paying Old Bills

Although an old student loan can seem like an ogre around your neck, years of regular payments and the age of the account is likely to boost your score. A good account will count towards your score for 10 years after it is closed. Don't forget to pay or miss payments. Also, pay off collections accounts. The newest FICO score does not consider paid collections but seriously damages your score for unpaid ones.

Report Your Rent

Reporting rental payments to consumers with unscored or subprime credit is a smart move. Experian found that consumers with weak credit records (not enough data to calculate a score) were more scoreable if they had rental history. Many people jumped straight to prime credit. Consumers with credit scores already high saw their scores increase by an average of 29 points.

The payment history and age of the account are major factors in determining a consumer's credit score. Both types of points are awarded to consumers who make regular mortgage payments on time. However, responsible renters have been historically at a disadvantage in this situation. Although evictions or collections can cause a lot of damage, responsible rental history has provided little credit benefit until recently.

All major credit reporting agencies now include rent payments in consumer credit files. FICO scores do not include rental payment history, but landlords may receive a special credit report. The VantageScore includes rental history and can boost a consumer's credit score in less than a month.

Consumers cannot report their rent. Either the landlord or property manager can report directly to the credit agency. Or, the tenant can sign up for a third-party rent reporter. These include Rental Kharma, RentReporters, ClearNow, RentTrack, and PayYourRent. All of these rent reporters are part of Experian RentBureau.

Get a Loan

Borrowing money and repaying it on time is a great way to show that you are a credit risk. The credit reporting agencies will want to verify that you can manage an installment account. Ask your bank for a personal loan. You might be eligible for a loan secured by collateral, such as funds in a Certificate of Deposit account. The loan cannot be withdrawn while it is still outstanding. Peer-to-peer lenders like Prosper and Lending Club are an alternative to banks. They have higher approval rates and can report to credit bureaus.

Register for a Store Credit account

Many stores offer credit accounts. Many stores offer credit accounts that can be used as revolving credit. This is the same as a credit card. Home Depot offers project loans. Local home improvement stores offer credit accounts. Some are available with a deposit, while others require good credit. Staples offer a variety of credit products, including a Citibank personal credit account. Be sure to verify that the vendor reports to credit bureaus before applying for store credit. However, keep in mind that not all credit cards are created equal. Some credit cards can be better for those with low credit scores, while others may help people rebuild their credit.

Get in Touch With Your Utility Company

Most utility providers don't report any derogatory information. However, if you live near Detroit and pay your bills on time, you are in good shape. DTE Energy provides all payment history information, positive and negative. Responsible management of household expenses is possible for customers who pay their bills on time. Ask your utility provider if the utility company reports to credit bureaus. If so, you can put the bill in your name. You can still benefit from the positive payment history if it does not. Utility providers will gladly provide a letter to refer a current account holder.

Stay on the Job

Although employment doesn't affect your credit score but does show up on your credit file, mortgage lenders may require proof of stable employment before they approve credit applications.

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