Build Credit Without Credit Cards

It is a frustrating contradiction: You cannot qualify for credit without a credit history—and you cannot build a credit history without borrowing. Borrowing is the most common way to build a credit history, but it is not your only option. Here are 8 ways to build or rebuild credit without credit cards.

Get a Credit (Re)Builder Loan

When you apply for a credit (re)builder loan, lenders place the full amount into a secure account. Unlike a traditional loan, you cannot access the money right away. Instead, you make a fixed payment every month until you have paid off the entire loan and then get the full amount back. During this time, all payments are reported to the major credit bureaus to help give you positive credit history and raise your credit rating.

Apply for a secured credit card or personal loan

With a secured card, you pledge an amount of money to be held in a savings account, which sets your credit limit. You use the credit card and pay it back while leaving your savings in place. After a time, perhaps a year or two, during which you consistently meet your secured card payments, you ask to convert to a conventional credit card.

A similar option, if you qualify, is to ask for a secured loan. In this case, you receive the loan amount as a lump sum and repay the loan in monthly installments. Again, you’re demonstrating that you are a reliable borrower.

Use Other Forms of Payment History

Put services such as utilities, cell phone, and cable in your name and always pay your bills on time. Then use a checking account instead of cash or money orders. This will allow you to be able to show your payment history.

Save Regularly

It may surprise you but saving regularly in itself is a good habit to show a lender. It demonstrates that you can make a commitment to regular payments and shows that you understand that saving comes before borrowing. Many people borrow because they have no savings to fall back on when they have financial needs. If you are already a saver, you show that you are living within your means and saving for your goals.

All these habits together contribute to an “alternative credit history” that substitutes for your lack of a conventional credit record. If you have questions about how to become creditworthy, talk to a Texas DPS Credit Union loan officer at 512-452-5211 or txdpscu@txdpscu.org.