Establish Credit History Without a Credit Card


Using credit cards responsibly is one of the easier ways to start building credit. Fortunately, there are several alternatives to build credit without an actual credit card. The approaches below will help you strategically establish a solid credit history.

Student Loan Repayment

A student loan, or any loan for that matter, directly affects your credit score based on the loan amount, the terms of the loan and payments made. Installment loans are viewed more favorably than revolving debt. When managed properly, student loans can be advantageous in helping to build your credit history. Making payments on time is a key component to building a solid history and  improving your credit score when you’re building debt.

Authorized User

Becoming an authorized user under someone else's credit card is probably one of the easiest techniques. Your credit score could quickly and dramatically improve with this method. Being an authorized user means you can use someone else's credit card in your name. You can make purchases and use the card as if it were your own. By being added as an authorized user, you’re inheriting the primary account holder’s credit habits (good or bad). Once you are added as an authorized user to an account, the history of that account appears on your credit report and it will be treated as if it was your credit history. The most important, thing to look for is whether the account holder pays their bills on time and has an excellent credit score. Another thing to keep in mind is that some lenders have age restrictions & not all report authorized users to the credit bureau. The major credit card issuers (American Express, Bank of America, Chase, Citibank, Capital One and Discover) do report.

Secure Credit Card

A secured credit card is another great alternative. What makes a secured credit card different from "regular" credit cards is that you're required to make a deposit to be approved for the credit card. The deposit is usually equal to your credit limit, so if you deposit $500, you’ll have a $500 limit. This deposit serves as collateral for the purchases you make using the card. If you default on your payments, the card issuer keeps your deposit. If you always pay your bill on time, you’ll eventually get the deposit back. Use the card responsibly, and you can improve your credit enough to qualify for an unsecured card.

Self Lender Loan

A self lender loan is a low cost loan that you essentially make to yourself that allows you to build savings and your credit. Once you’re approved by Self Lender, the loan amount is deposited in a certificate of deposit with the firm’s partner, Austin Capital Bank. You can choose a CD for $550, $1100, or $2200. For 12 months, you pay level payments to the bank. Self Lender reports each of the payments to all three major credit reporting bureaus, which will reflect on your credit report. When the loan is paid off, you have access to the deposit plus the interest you’ve earned.

FinanceLaurie Nicolas