How to create credit without a credit card: 6 best ways

Credit cards are not the only option in generating your credit score. Learn how to get credit without a credit card with these simple steps.

According to Experian, total US credit card debt for the third quarter of 2020 was $ 756 billion. That was after a remarkable 9 percent drop from $ 829 billion in 2019. Experian also found that the average American has at least four credit cards.

These statistics show how credit cards are a popular means of obtaining credit. Generally, people use credit cards to help build their credit score, as this seems to be the easiest way. However, this is not true! These cards attract interest rates that can lead to a financial spiral down if not used well.

That is why we offer you the opportunity. We want to show you exactly how to create credit without a credit card. So if you’re tired of endless credit card debt, these tips may be just what you need.

Tips on how to create credit without a credit card

1. Use Experian Boost

Although your payment history is an important factor in determining your credit score, your utility payments are not usually included. However, all of that can change with Experian Boost. This is a free service that helps consumers include their utility payments for credit score calculations.

With Experian Boost, most of your monthly bill payments, including consumption (electricity, gas and water), cable, internet, mobile phone and even Netflix subscriptions, can help improve your credit score. Depending on their site, the service is free, and the average user can get at least a 10 point increase in their credit score.

The great thing about the service is that it only reports positive payments, and delays or negatives are omitted. This way, even a late payment does not spoil your result.

So instead of accumulating credit card debt to build your credit score, your monthly payments become your way out.

2. Use of a credit loan

These are loans designed to help you prove your ability to repay the loan as you build your credit score. Credit creation loans work in the opposite way as traditional loans. Instead of applying for a loan and getting money in your account, that money is locked until you pay the installments.

The whole process works like “exercise bikes”. You cannot access the money given to you until you prove your ability to repay. It helps with creating a frugal culture as you save on installments to receive a lump sum at the end of the period.

Usually, your bank or financial institution transfers a certain amount of money to your savings account (up to $ 2,000). You then start paying the monthly installments until you clear the loan. Once the loan is repaid, the bank unlocks your loan and you can now access the money.

With credit creation loans you will not only improve your credit score but also learn to save and also commit to specific goals. You can easily get these types of loans from banks, community banks, credit unions, etc.

3. Use your rent payments to obtain credit

As with utility payments, rent payments do not appear automatically when calculating your credit points. This is in contrast to mortgage payments for homeowners.

However, they can be included at your request. If you want your rent payments to have a positive impact on your credit score, you can ask the landlord to provide credit agencies with a history of rent payments.

Alternatively, there are a number of platforms that can also help you with submitting rent payments to offices. Some of the best platforms for submitting rent payment history include Rental Kharma, RentReporters, RentTrack, or PayYourRent. So, for a tenant trying to figure out how to create credit without a credit card, paying your rent is all you need.

These third party platforms, however, will require a verification of your landlord and a small service fee. For example, RentReporters requires a one-time account setup fee of $ 94.95 and a monthly subscription of $ 9.95. Rental Kharma, on the other hand, has a $ 50 (one-time) account set-up fee and a $ 8.95 monthly subscription.

If your landlord can send reports directly to agencies, it would be best! If this is not possible, the services of third parties can serve you well.

4. Become an authorized user

Becoming an authorized cardholder is an easy way to build your credit score without having a credit card under your name. This option allows you to be included as a user on the credit card of another person, mostly a family member.

As an authorized user, you enjoy a positive payment history of the primary user as it is included in your credit history. However, if the primary user does not make immediate payments, your credit score is also compromised. So make smart choices.

The good thing about this option is that you don’t even have to have a physical card. However, your card activities are also important. Therefore, be sure to agree with the primary cardholder on the use of the card, including the method of payment.

5. Pay the loan installments on time

You may be wondering how to build your credit score while you already have a loan to service. Now, securing a quick repayment of this loan is the first easy way to maintain a positive rating and even increase it.

Whether you are repaying a student loan, a car loan, or a personal loan, immediate repayments will have a positive impact on your credit score. On the other hand, late payments will ruin your credit.

Therefore, if you have an existing loan, start with timely and full repayments each month and you are on your way to creating strong credit.

6. Use federal student loans

While most students will avoid the burden of a student loan, this may be more of an opportunity than a burden. This is because all payments for federal student loans will be reported to credit bureaus.

If you pay on time, it means you are building your credit score. So when you’re done repaying, your credit rating will be better than the person who never took out a loan.

However, you need to be careful not to miss payments. Late payments will damage your credit score. So if you want start building your credit early, you can apply for this student loan and lay a strong foundation for your credit future.

The good thing about these types of loans is that most will not check your creditworthiness. This means they are the best type of loans for beginners or those starting from scratch.

There are four types of student loans you can qualify for, including direct subsidized, direct non-subsidized, direct PLUS, and direct consolidation loan. And the steps to getting a loan are simple.

See related: 12 reasons why your debit card was declined (how to fix it)

How fast can you create credit from scratch?

It’s great to know how to create credit without a credit card. However, this question will also arise; how long does it take to create a loan from scratch?

Well, the truth is, this is not a one-day process. Generally, it will take you about six months to set your first credit score from scratch. However, you also need to use these six months wisely to ensure that you build a strong credit foundation.

Note that repairing a bad credit score will be more difficult than setting up a new one. Also, getting a good credit score will take longer than these six months. That means you have to be quite patient.

But is there a way to achieve a good credit score faster? Definitely yes! Although the first six months can be constant, showing behaviors that excite lenders can help boost your credit score sooner than you expected.

Check out these tips:

Tips on how to build a credit score faster

Paying your bills on time has a positive effect on your credit score. On the other hand, late payments ruin your credit history. So always make sure your payments are never late (deadline).

Don’t overdo it with a credit card. In fact, if you can keep your purchases below the 30% available card limit, this will positively boost your credit score. The closer you get to your spending limit, the more it will hurt your credit score. Excessive spending is also a red flag for lenders, so it should be avoided.

• Keep your credit card accounts open

Do not keep a credit card that you are not using. Remember, you are trying to get credit. So if you open a credit card account, use it, but use it wisely. Keeping these accounts active has a positive effect on your credit.

If you have multiple loans that you repay on time, the best way is to prove your ability to repay to lenders. So don’t stick to one loan while you can service a few. Apply for more loans and make sure the installments are paid on time.

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