How to build credit with no credit card

Summary: You can establish your credit history without a credit card. It might be a little harder, but here are some tactics you can use to get going.


By Zina Kumok, Financial Health Counselor, Credit Counselor

When you don’t use credit cards, people tend to look at you funny. In a world run by plastic, sticking to good old fashion paper, copper and nickel seems old fashioned. It’s the financial equivalent of using a landline instead of a cell phone.

But everyone has a different relationship with money, and some people are better off without constant access to a line of credit. Financial expert Dave Ramsey famously advises readers to eschew credit cards, as the temptation can be enough to send them spiraling into a cycle of debt and a poor credit score.

While avoiding credit as much as possible can be a responsible choice, it makes establishing a credit history much harder. It’s entirely possible to build a good credit score without using a card, but you may need to use a few different tactics.

Read ahead to learn some of the best ways to build a credit history without a credit card.

Why it’s harder to establish credit without a credit card

Opening a credit card can be one of the best ways to begin your credit journey. Credit cards are easier to access than loans or other forms of credit, and you can often qualify for one even if you have no credit history.

If you have no credit history and no desire to get a credit card, the journey to a perfect credit score will be harder. You’ll have to take an alternate path, and remain patient as your score increases slowly. (See how long it takes to build credit.)

But building your credit history is worth the effort. When you don’t have a credit profile, it can be a struggle to rent an apartment, sign up for a cell phone plan or even hook up a utility service. Some businesses even use credit scores to help determine the best candidate for a job, particularly if that job involves handling company funds.

The good news is that once you have a credit history, those doors will start to open up. You’ll no longer have to worry about putting down a deposit with the electric company or getting your parents to co-sign on a lease. If the time comes that you decide to buy a home, you won’t have to worry about qualifying for a mortgage.


Your monthly rent payment probably won’t go on your credit report, unless your landlord reports it to a credit bureau. That’s pretty rare. The unfortunate Catch-22 is that rent typically only shows up on your credit history if you were evicted.

There’s a way to work around that. You can pay a third-party service like Rental Kharma or Rent Track to verify your rent payments and report them to a credit bureau. There is usually an activation fee and a regular monthly fee.

It doesn’t matter if your landlord is your best friend or even a relative. As long as they confirm your on-time payments, they’ll go on your credit history. Plus, you can often backdate payments for up to two years if your landlord is willing to support you. The longer you can prove a credit history, the more it should help.

This strategy is a good fall back if you don’t want to take out a loan from a bank or credit union to build credit. It doesn’t cost your landlord anything except a little time, so convincing them shouldn’t be too hard. If they don’t seem receptive to the idea, considering offering to pay a small monthly fee to compensate them. Building a solid credit history is worth it.

Credit builder loans

A little-known way to build credit without a credit card is the credit builder loan, which Self offers. Some credit unions and banks also provide credit builder loans to customers who want to build credit without taking out a credit card.

Here’s how the loan works: a customer takes out a credit builder loan for a specific amount. That amount is then held in a savings account or certificate of deposit (CD) for a certain term, usually 12 or 24 months. Sometimes the customer has to pay an application fee to open the account.

Each month, the customer makes a payment to the lender, who usually charges between 5-16% interest on the loan. The lender reports payments to the three major credit bureaus. After the term is up, the lender returns the money, which may have earned some interest depending on the CD.

Credit builder loans are perfect for people who know they need credit, but don’t trust themselves with - or can't get approved for - a credit card. Rates are fairly low, and since the amount borrowed is rarely more than $1,000, the interest paid is minimal.

Other loans

If you don’t have a credit history and need to take out a loan, you can usually be approved with a co-signer. An installment loan that you may want to consider can include an auto loan or mortgage loan from a reliable financial institution. A co-signer is a person, usually a spouse or parent, who agrees to be responsible for the loan if you default. They’re equally liable for the debt as you, even if they never personally benefit from the loan.

When you take out an installment loan with a co-signer, it will show up on both of your credit reports. If you make payments on time, your credit score will start to grow within six to 12 months. Use a free service like Credit Karma or CreditWise to check your credit score.

Once your score is high enough, you can try to refinance the loan and remove the co-signer.

Utilities and cell phone bills

Like rent, utility and cell phone companies don’t report successful payment activity to a credit bureau - although they will report missed or late payments. The Consumer Financial Protection Bureau has entertained the idea of incorporating this type of data into the credit reporting framework, but so far the system remains unchanged.

If you’re lucky, you might find a provider who’s willing to share your payment history with a credit bureau, but that’s less common.

In conclusion

Now that you know your different options on how to build credit with no credit card, it's time to decide which option is best for you. While you can build credit through a personal loan, auto loan, rent, or other types of bills, one of the most common ways is still to use a secured credit card.

For those considering the secured credit card route, know that it's a fairly smart option, especially if you have bad credit or no credit history at all. With a secured credit card, you will still have to make a monthly payment. This ensures that your card issuer won't be chasing you down if you make a late payment. If you miss a payment with a secured credit card, you’ll still be charged a late payment fee. Or, in some cases, if you miss a couple month’s worth of payments, your issuer will use your security deposit to cover the late payment.

To start building credit, consider applying for a credit builder loan from Self Financial.

About the author

Zina Kumok is a Financial Health Counselor and Credit Counselor, certified by the National Association of Certified Credit Counselors, who writes extensively about personal finance.

Written on November 1, 2018

Self is a venture-backed startup that helps people build credit and savings.
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Disclaimer: Self is not providing financial advice. The content presented does not reflect the view of the Issuing Banks and is presented for general education and informational purposes only. Please consult with a qualified professional for financial advice.

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