Five Ways to Build Credit Without a Credit Card

It may seem impossible, but you can build credit without having a credit card.

U.S. Money Reserve
7 min readMay 4, 2023

by Sherry Hao, Controller, U.S. Money Reserve

I’ve written a lot about the ins and outs of managing your credit score and some of the nitty-gritty details you need to know to keep your credit in good standing. While credit cards may be a great way to build solid credit as long as you use them wisely, they may not be a good option for those who have struggled with maintaining good credit and currently don’t have strong enough scores to secure a card. It’s a common misconception that you must have a credit card to build credit! Never fear. There’s an alternative way to build credit even when you don’t have a credit card. Here’s what you need to know.

Understanding Credit and Credit Scores

As I’ve discussed in the past, credit scores are your financial lifeblood. These scores allow lenders to get a quick snapshot of what kind of borrower you might be and whether or not they can lend you cash. Having credit and your credit history are necessary for everything from buying a home or car to getting a job. A negative credit score can have wide-ranging effects on your ability to do things in our capitalist society.

Credit is a tool that allows lenders and banks to loan borrowers money while guaranteeing that borrowers will pay back what they borrow. When you take out a loan, a lender checks your credit by looking at your credit score to get an idea of how likely you are to repay the loan you’re getting. Credit comes in a few different forms, including revolving and close-ended (among other types).

Revolving credit is credit that often comes in the form of credit cards where you can roll a balance forward from month to month. You don’t have to pay it off in full each month, even though that’s a best practice to adhere to if you’re trying to build a solid credit history and increase your score. Revolving credit hangs around until you decide to close the account, and even then, you’ll have to pay off any remaining balance before the account can be in good standing.

Close-ended credit is credit that is extended with a payoff date. Examples of close-ended credit (or close-ended debt) include things like car and home loans, where at some point in the future (even if it’s 30 years in the future), the debt will be completely paid off. Close-ended credit has a payoff date, at which point you’ll no longer be in debt.

Both types of credit can help you manage and improve your credit scores. These scores are assigned by the major credit bureaus and are based on a number of factors, including whether or not you pay your debts on time, how much debt you’re carrying, and what kind of debt you have. If you’d like to find out more about credit scores and how to improve your credit score fast, you can read my story at Medium.

In general, credit scores range from 300 to 850 and can vary widely depending on which of the credit bureaus you pull them from. If your credit score is above 629, it’s generally safe to say that you have good credit. Scores closer to the 629 threshold are less healthy than those at the top of the range, and those lower than 629 are generally considered to be poor credit scores.

To maintain healthy credit, the best thing you can do is pay your bills on time and keep a low credit utilization — the amount of debt you carry versus the amount of credit you have available to you. You really don’t want to use more than 30% of your available credit to keep your credit healthy. For example, if you have $10,000 of available credit, you really want to keep your balance below $3,000 to ensure that you maintain a healthy credit score and utilization ratio.

While it may seem that you need to have a credit card in order to build credit and maintain a good utilization ratio, you don’t necessarily need a credit card. Here’s what you need to know about building credit when you can’t get a traditional credit card.

Building Credit Without a Credit Card

Getting and using a credit card is generally the fastest way to build credit, but there are a few other ways you can do so without going the credit card route.

Take Out a Credit Builder Loan or Personal Loan and Make Regular, On-Time Payments

First, you can take out a small loan and pay it off regularly and on time to prove to lenders that you are worthy of future credit loans. These small loans are often called credit builder loans, and you can find offers for them at banks, credit unions, lending circles, and online lenders. Credit builder loans are similar to personal loans in that you have to pay interest in installments over a regular period of time. A credit builder loan works differently in that a lender puts the money into a CD or certificate of deposit account and only allows you to draw on that balance once you’ve paid off the loan in full. There’s no guarantee that your credit score will improve with a credit builder loan, but the payments and status are reported to the major credit bureaus that rate your creditworthiness. If you make regular, consistent, and on-time payments, you’ll most likely see your credit rating improve so you can be eligible for other credit offers.

Become an Authorized User on Someone Else’s Credit Card

Another alternative to building credit when you don’t have a credit card is to become an authorized user on someone else’s credit card. This means that you can have access to a credit account held by someone else, like a family member, spouse, or parent. In this case, you aren’t required to pay the card off, but the person who is the main cardholder is. You can get access to a credit account and build your own credit with the help of the main cardholder. The only hitch is that the primary cardholder must add you as an authorized user — and keep their own credit score high. Before choosing this option, be sure that your family member checks with the card issuer to ensure that the account will be added to your credit history. Not all credit cards offer this feature.

Get a Secured Credit Card

A secured credit card is a card that you put a deposit on and then draw down the balance as you use it. These often have minimum deposit requirements that can range from $49 to as much as $5,000, and the creditors use the cash you deposit to protect against any missed payments. You’ll need to hold on to and manage a secured card for a few months before you’ll see the effect on your creditworthiness, but this type of card can be a quick way to build up good credit so you can open a regular credit card in the future.

Leverage Your Rent and Utility Payments

If you rent and pay your rent on time, you can begin to build credit, too. Ask your landlord to report your regular on-time payments to the credit bureaus, and you’ll be well on your way to building a solid credit history. You can also use your utility payments to show that you are creditworthy, as long as you are not in arrears or behind on payments.

Use Other Types of Loans

Finally, you can use other types of loans to demonstrate that you are worthy of credit. If you have a car payment on a car loan and have paid it off consistently and on time, your credit score and credit report should reflect that. Credit reports often lag, though, so be patient and wait for your positive car payment history to show up on your report. You can also take out and pay off a small personal loan to start building your credit. Just be sure you practice good credit hygiene and don’t make late payments or forget to pay these loans all together. Incidences like that can be detrimental to building credit.

Tips for Building and Maintaining Your Credit

In addition to these options for building credit without a credit card, you should also practice good credit hygiene. That means monitoring your credit reports and being sure to dispute anything that looks off. It also means keeping your balances low and paying all your debts regularly and on time. It can take a long time to improve your credit score and build a credit history, so be patient. Consistency is key.

The Bottom Line on Building Credit When You Don’t Have a Credit Card

While it can seem daunting to try and build credit when you have no access to a credit card, it can be done. By using alternative lending methods, paying your debts on time, and staying consistent and committed, you can begin to improve and grow your credit. The key is to begin as soon as you can so that you have more history to show potential lenders. The more consistent and responsible you are with your credit, the sooner you can build up good credit without having to rely on a credit card. Maintaining your financial health and wellness is key and ultimately comes down to understanding how credit works, recognizing its pitfalls, and managing it well.