If your current FICO credit score doesn’t qualify you for a credit card or you’re simply not interested in having one, you can improve your credit by getting a personal loan, paying your rent and bills on time, or becoming an authorized user on someone else’s card.
How to build credit without a credit card
Opening a credit card, keeping your debt-to-credit ratio low, and making your monthly payments is one of the quickest and easiest ways to build your credit. But if you don’t have good credit already, you may struggle to meet credit card companies’ strict requirements.
Fortunately, there are several other ways you can establish a healthy credit score so that future lenders are more likely to work with you.
Get a personal loan
A personal loan is a loan that does not require collateral or security and is offered with minimal documentation. You can typically get them from banks, credit unions, and online lenders, and can be used for pretty much any personal reason—from consolidating debt to paying for home renovations to planning a dream wedding.
- Usually easy to qualify
- Great way to establish a line of credit
- Higher APRs
- Late payments will quickly lower your credit score
Compare auto insurance policies
No spam or unwanted phone calls · No long forms · No fees, ever
Repay existing loans
Do you already have a car loan, federal student loan, or another secured loan? A simple credit-building tactic is to focus on the repayment of these loans. This helps you establish a great payment history and will improve your credit score.
- Lowers your debt-to-income ratio
- Larger payments to existing loans can eat into savings
Become an authorized user of a credit card
Many financial institutions allow existing cardholders to add authorized users. As an authorized user, you receive your own credit card (with your name on it) and can access the account holder’s line of credit—all without ever undergoing a personal credit check. It’s best to only do this with a trusted family member or friend.
- Positive activity will be reported to credit bureaus
- If the account holder doesn’t make payments, it can impact your credit
Pay rent and utility bills on time
Most landlords won’t report your monthly rent payments to credit agencies—but always making your rent and utility payments can still help demonstrate a pattern of financial consistency. For most of us, our rent, mobile phone bills, internet, and utility bills are our most regular monthly expenses.
Ask your landlord and/or telecommunication provider if they work with any rent reporters—such as
Experian RentBureau—and if they’ll report your positive payment history. You can also sign up for
Experian Boost, a service that tracks your phone and utility payments each month to help you build up a good credit score.
- Helps demonstrate consistent, reliable payments
- Not all companies or landlords report to major credit bureaus
Get a credit builder loan
If your credit profile is lacking sufficient history, or if you have a poor score, a credit builder loan is a great way to establish new credit or improve bad credit.
Credit builder loans are typically available in amounts from $300 to $1,000. When you apply, lenders place the full amount of a loan into a secured account. Unlike traditional loans, you cannot access the money right away. Instead, you must make fixed monthly payments until you’ve paid off the entire loan. Then, you’ll receive the proceeds.
- Build your credit without spending extra money
- Great alternative to a savings account, which doesn’t build credit
- Can’t access the money right away
Apply for a car loan
If you’re in the market for a new or used vehicle, it may seem like a good idea to pay for the entire car upfront—but applying for a car loan can help improve your creditworthiness in the long run. Once again, just be sure that your finances allow you to make regular, on-time monthly loan payments so that you don’t end up damaging your score even more.
- Allows you to build credit while making set monthly payments
- May require a down payment or co-signer to quality for a good APR
Find out if you can reduce your monthly car payments in minutes
* checking your rate won’t affect your credit score
Check your rate
* checking your rate won’t affect your credit score
What affects your credit score?
Before you can truly build or improve your credit score, it’s essential to understand how credit calculators determine your score in the first place.
It’s easy to obtain a free credit check online—just make sure you’re not performing a hard inquiry as those can decrease your score. Once you understand your score, you can begin to think about the factors that affect it.
Your debt-to-credit ratio—sometimes called a credit utilization ratio—refers to the amount you owe across all revolving credit accounts compared to the amount of revolving credit available to you. The best credit card issuers want to see that you have an excellent debt ratio below 30%.
Your loan repayment history has a major effect on your credit score. Consistently making on-time payments will increase your score, while late or missed payments will damage it.
Keep in mind that late or missed payments can hurt your score much faster than on-time payments can improve your score, so it’s important to remain consistent. If you know you won’t be able to make an approaching payment, contact your loan provider to see if they offer any sort of pause or forgiveness.
To have a good (or bad) credit score you must have a credit history—that is, you must have open lines (or previously opened lines) of credit in the first place.
Young people often struggle to qualify for major credit cards or substantial loans because their credit files contain limited amounts of credit history. Opening a loan that’s designed for new borrowers—or using any of the tactics above—is a great way to establish a history of positive credit.
Find cheap car insurance no matter your credit score
Car insurance providers consider a myriad of factors when pricing out your policy—including your credit score. Drivers with good credit typically enjoy better rates—but that doesn’t mean that you’ll be stuck with sky-high
car insurancepremiums if your credit history is less-than-perfect.
Jerryis a trustworthy car insurance broker app that quickly gathers customized quotes from more than 55 brand-name providers so you can be sure you’re getting the lowest price possible.
All you have to do is pick your perfect policy and then let Jerry handle the logistics—from securing your great low rates to helping cancel your old coverage upon request. You won’t have to settle for a second-rate policy and you’ll save big bucks in the long run!
Find insurance savings (100% Free)
Let Jerry find your price in only 45 seconds
No spam · No long forms · No fees
What is the fastest way to build credit?
Generally, opening and using a credit card is a fast and easy way to build credit—but there’s truly no one way to build credit quickly. Paying your bills on time, paying off existing debt, and keeping your credit utilization rate low all help build your credit.
How long does it take to build credit?
How long it takes to build new credit—or repair damaged credit—depends on your unique financial circumstances.
If you are young and lack a credit history, you can build positive credit within a few months by opening a credit card, regularly utilizing only 30% or less of your available credit, and making on-time monthly payments.
If you have a generally positive credit history but missed one payment, you’ll be able to repair the damage in a few months by returning to good financial habits.
If you have a long history of late payments, maxed-out credit limits, and defaulted loans, it could take you years to build your credit back up to a satisfactory level.