The Ultimate Guide to Credit Cards
Monday, November 28, 2022

10 Expert Solutions — How to Build Credit Without a Credit Card

How To Build Credit Without A Credit Card

credit card advice

Ashley Dull

Written by: Ashley Dull

Ashley Dull

With more than a decade of experience as a content manager and marketer, Ashley has specialized in finance coverage since 2015. She has worked closely with the world’s largest banks and financial institutions, up-and-coming fintech companies, and press and news outlets to curate comprehensive content and media campaigns. Her credit card commentary is featured on national media outlets that include CNBC, MarketWatch, Investopedia, and Reader's Digest, among others.

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Edited by: Lillian Guevara-Castro

Lillian Guevara-Castro

Lillian brings more than 30 years of editing and journalism experience. She has written and edited for major news organizations, including The Atlanta Journal-Constitution and the New York Times, and she previously served as an adjunct instructor at the University of Florida. Today, she edits all CardRates content for clarity, accuracy, and reader engagement.

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It may seem a bit paradoxical, but here, we’ll take a look at how to build credit without a credit card.

No matter how tasty others find a dish, if you’ve had a horrible experience with a particular food, chances are you’ll avoid it like the plague thereafter.

Similarly, regardless of how many people extol their virtues, if you’ve been burned by credit card use before, chances are you’re not too keen to give them another chance.

Unfortunately, while there are thousands of alternative meal choices, you typically need credit to get credit. It’s kind of like the old question of which came first, the chicken or the egg? It can be difficult to avoid credit cards entirely, but other credit-building options do exist. Let’s explore some potential ways to build credit without a credit card, including personal installment loans, credit-building loans, financing a vehicle, or even taking out a mortgage.

1. Take Out a Personal Installment Loan

You generally need a credit product to build a credit profile, so you’re likely looking at some type of loan if you want to avoid credit cards. Personal loans are among the most flexible loan types and can be used for just about anything you may need to purchase.

Personal installment loans can be obtained in a wide range of amounts — from $500 up to $35,000 or more, depending on your credit risk — and can extend for up to 72 months. Borrowers can often easily compare sizes and lengths through online lending networks, like those below.

  • Loan amounts range from $500 to $35,000
  • All credit types welcome to apply
  • Lending partners in all 50 states
  • Loans can be used for any purpose
  • Fast online approval
  • Funding in as few as 24 hours
Overall Rating
★★★★
4.4
  • Loan amounts range from $500 to $10,000
  • Compare quotes from a network of lenders
  • Flexible credit requirements
  • Easy online application & 5-minute approval
  • Funding in as few as 24 hours
Overall Rating
★★★★★
4.6
  • Loan amounts range from $1,000 to $35,000
  • Flexible credit requirements
  • Loans can be used for anything
  • Five minute application
  • Funding possible in as few as 24 hours
  • Large lending network with multiple partners
Overall Rating
★★★★★
4.8

Although some personal loans are available that allow collateral, most personal installment loans will be unsecured credit, meaning there’s no down payment or other security. As such, getting a personal loan with no, limited, or bad credit may be difficult.

At best, without a decent credit history, be prepared to pay two-digit interest rates. You’re also unlikely to be offered a loan at the maximum end of the size range, especially if your income isn’t very high.

Once you’ve obtained a loan, be diligent about making your required payments on time every month to build a positive payment history. It takes six months of credit history to be eligible for a credit score.

2. Use a Credit-Builder Loan

If you don’t actually need to finance anything, personal loans can have a higher price tag than you’re willing to pay. But they’re hardly the only type of loan you can use to build credit.

In fact, there’s a whole slew of loans specifically designed to help people build credit. They’re called — wait for it — credit-builder loans. These loans are typically offered by credit unions and local community banks, but are also starting to appear online from companies like Self Lender.

Unlike traditional loans, in which you borrow money to make purchases and then repay the loan, the money you “borrow” with a credit-builder loan is typically put into a secure savings account to which you don’t have access until the loan is paid off.

Although you can’t spend the loan funds, you’ll still make regular payments and your repayment activity will be reported to the credit bureaus like any other loan product. This means you can build positive payment history by making your payments on time every month, then get your payment money back, often times with interest added, once the loan term is complete.

3. Finance an Automobile

Between things like work commutes, weekend errands, and summer road trips, Americans log an average of over 3 trillion miles on the road each year — which is a number that indicates that you’re likely going to need a new car at some point.

If you finance that car with an auto loan, you can build credit as you rack up the miles. Without a well-established credit history, you’ll likely pay a little more for your loan, so be sure to compare offers, perhaps through an online lending network like those below.

  • Dealer partner network has closed over $1 billion in auto loans
  • Can help those with bad credit, no credit, bankruptcy, and repossession
  • Established in 1999
  • Easy, 30-second pre-qualification form
  • Bad-credit applicants must have $1500/month income to qualify
Overall Rating
★★★★★
4.9

Unlike most personal loans, auto loans are secured loans. In most cases, the vehicle you purchase with an auto loan acts as the collateral for that loan, which has both ups and downs.

On the one hand, this means it can be easier to get an auto loan with limited credit than other types of financing because the risk is lower for the lender. At the same time, it also means that your vehicle can be repossessed and sold should you default on your loan.

4. Get a CD Loan

A common offering in banks and credit unions alike, certificates of deposit (CDs) are savings tools generally used by those who want a better return than a standard savings account provides, but who don’t want to invest their funds in stocks or other risky products.

Essentially, the consumer deposits a specific amount — usually a few thousand dollars — into the CD account, where it will stay for a specified period of time (typically three to five years).

Once the term is up, the consumer receives the principal plus all accrued interest. If money is withdrawn before the end of the term, however, stiff fees are applied to the withdrawal.

While you can’t remove your money early without penalties, some banks will allow you to borrow against the funds in your CD for a short-term loan, often at a much lower interest rate than other types of financing.

The maximum (and minimum) amount you can borrow, how long you can borrow it, and how much it will cost you, can all vary based on the individual bank, the amount in the CD account, and the length of time left on the CD term.

5. Become an Authorized User

Although this method does involve a credit card, you aren’t the one who signs up for it. Instead of taking on a credit card in your own name, you can become an authorized user on a credit card of a friend or family member.

Authorized users get a card tied to the primary cardholder’s account and the account is usually reported on the authorized user’s credit reports.

Plus, not only can authorized users make purchases, but they’ll even earn rewards when using a great rewards card like our picks below.

CASH BACK RATING

★★★★★
5.0

OVERALL RATING

  • INTRO OFFER: Earn an additional 1.5% cash back on everything you buy (on up to $20,000 spent in the first year) - worth up to $300 cash back!
  • Enjoy 6.5% cash back on travel purchased through Chase Ultimate Rewards®, our premier rewards program that lets you redeem rewards for cash back, travel, gift cards and more; 4.5% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and 3% on all other purchases (on up to $20,000 spent in the first year).
  • After your first year or $20,000 spent, enjoy 5% cash back on Chase travel purchased through Ultimate Rewards®, 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and unlimited 1.5% cash back on all other purchases.
  • No minimum to redeem for cash back. You can choose to receive a statement credit or direct deposit into most U.S. checking and savings accounts. Cash Back rewards do not expire as long as your account is open!
  • Enjoy 0% Intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 17.99% - 26.74%.
  • No annual fee - You won't have to pay an annual fee for all the great features that come with your Freedom Unlimited® card
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% Intro APR on Purchases 15 months
0% Intro APR on Balance Transfers 15 months
17.99% - 26.74% Variable
$0
Good/Excellent

CASH BACK RATING

★★★★★
4.9

OVERALL RATING

  • Earn 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases.
  • To earn cash back, pay at least the minimum due on time.
  • Balance Transfer Only Offer: 0% intro APR on Balance Transfers for 18 months. After that, the variable APR will be 17.74% - 27.74%, based on your creditworthiness.
  • Balance Transfers do not earn cash back. Intro APR does not apply to purchases.
  • If you transfer a balance, interest will be charged on your purchases unless you pay your entire balance (including balance transfers) by the due date each month.
  • There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5).
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
0% Intro APR Period 18 months on Balance Transfers
17.74% - 27.74% (Variable)
$0
Excellent, Good

Additional Disclosure: Citi is a CardRates advertiser.

CASH BACK RATING

★★★★★
4.8

OVERALL RATING

4.8/5.0
  • Earn a one-time $200 cash bonus after you spend $500 on purchases within 3 months from account opening
  • Earn unlimited 1.5% cash back on every purchase, every day
  • $0 annual fee and no foreign transaction fees
  • Enjoy up to 6 months of complimentary Uber One membership statement credits through 11/14/2024
  • Earn unlimited 5% cash back on hotels and rental cars booked through Capital One Travel, where you'll get Capital One's best prices on thousands of trip options. Terms apply
  • No rotating categories or sign-ups needed to earn cash rewards; plus, cash back won't expire for the life of the account and there's no limit to how much you can earn
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% for 15 months
0% for 15 months
17.99% - 27.99% (Variable)
$0
Excellent, Good

Being an authorized user can be a good way to build credit, but it isn’t without its risks — for all parties involved.

From the authorized user’s perspective, if the primary cardholder doesn’t practice good credit behavior — e.g., if they carry a high card balance — that poor behavior may be reflected on the authorized user’s credit report.

On the other side, while authorized users are able to make purchases to the account just like the primary cardholder, authorized users are not legally responsible for repaying the debt. So an authorized user could rack up a huge bill, but the primary cardholder could be stuck paying it.

6. Finance Your Education

Another way to establish and/or build credit is through the responsible repayment of a student loan — which may be one of the few silver linings of student debt.

In most cases, your student loans won’t come due until about six months after you graduate, but that doesn’t mean you can’t start paying them off early to build your positive payment history (and reduce the total amount of interest you’re stuck paying).

7. Take Out a Mortgage

As with other types of loans, mortgage loans can be used to build credit through responsible repayment. And while getting a mortgage without a credit history will likely require a pretty decent down payment, it’s not an impossible task.

Using an online lending network, such as LendingTree, can connect you with a wide range of lenders to increase your odds of finding the right lender for you.

  • Find lenders for new home purchases, refinancing, home equity loans, and reverse mortgages
  • Lenders compete for your business
  • Offers in minutes
  • Receive up to 5 loan offers and select the right one for you
  • Founded in 1996
  • Over $250 billion in closed loan transactions
Overall Rating
★★★★★
4.9

Depending on your current credit situation, you’ll typically need at least a 20% down payment to obtain a conventional mortgage, though a larger down payment may help smooth the way if your credit is severely limited.

Another option may be a mortgage insured by the FHA (Federal Housing Administration). FHA-backed loans require much smaller down payments than conventional mortgages and typically have much more flexible credit requirements.

8. Request Bill/Rent Reporting

For most of credit-scoring history, housing and utility payments were only sporadically considered in credit assessments. More recently, however, there has been an increased interest in incorporating rent and utility payments into both credit reports and scores.

Along those lines, the most recent FICO consumer scoring model, the FICO® Score 9, is one of the first to use rental data in its scoring algorithms.

Unfortunately, few landlords — as little as 0.3% — report rental data to the credit bureaus automatically. Although you can request that your landlord report your rental trade line, they’re under no legal or financial obligation to do so.

9. Use a Charge Card

This next option may skirt the credit card line, but it does vary in one key way that may make all the difference for some users: you can’t let balances carry over indefinitely.

With a charge card, users still have access to a reusable line of credit, but because balances can’t roll over from month to month, there are no interest fees that build up every month.

At the same time, if you can’t pay off your balance, you’ll be charged some serious late fees, so never charge more than you can pay off at the end of the billing period.

10. Try a Secured Credit Card

While charge cards might skirt the credit card line, secured credit cards are firmly on the dark side of it. That being said, secured credit cards eliminate a lot of the risks that traditional unsecured credit cards come with, potentially making them a better choice for the credit card averse.

The main difference is that secured credit cards require an initial deposit, and that deposit typically dictates the size of the credit line. For most secured cards, including many of our top-rated picks below, the minimum required deposit is $200.

SECURED RATING

★★★★★
4.8

OVERALL RATING

4.0/5.0
  • No annual or hidden fees, and you can earn unlimited 1.5% cash back on every purchase, every day. See if you're approved in seconds
  • Put down a refundable $200 security deposit to get a $200 initial credit line
  • Building your credit? Using a card like this responsibly could help
  • Enjoy peace of mind with $0 Fraud Liability so that you won't be responsible for unauthorized charges
  • You could earn back your security deposit as a statement credit when you use your card responsibly, like making payments on time
  • Be automatically considered for a higher credit line in as little as 6 months with no additional deposit needed
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
28.49% (Variable)
$0
Limited, Bad

SECURED RATING

★★★★★
4.7

OVERALL RATING

4.0/5.0
  • No annual or hidden fees. See if you're approved in seconds
  • Building your credit? Using the Capital One Platinum Secured card responsibly could help
  • Put down a refundable security deposit starting at $49 to get a $200 initial credit line
  • You could earn back your security deposit as a statement credit when you use your card responsibly, like making payments on time
  • Be automatically considered for a higher credit line in as little as 6 months with no additional deposit needed
  • Enjoy peace of mind with $0 Fraud Liability so that you won't be responsible for unauthorized charges
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
28.49% (Variable)
$0
Limited, Bad
Discover it® Secured Credit Card Review

at Discover Card'ssecure website

SECURED RATING

★★★★★
4.7

OVERALL RATING

  • No credit score required to apply.
  • No Annual Fee, earn cash back, and build your credit with responsible use.
  • Establish your credit line by providing a refundable security deposit of at least $200. That means a $200 deposit for a $200 credit line. Or a $500 deposit for a $500 credit line. Bank information must be provided when submitting your deposit, and the security deposit equals your credit limit.
  • Automatic reviews starting at 7 months to see if we can transition you to an unsecured line of credit and return your deposit.
  • Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases – automatically.
  • Discover helps remove your personal information from select people-search websites. Activate by mobile app for free.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
10.99% Intro APR for 6 months
25.99% Variable APR
$0
New/Rebuilding

So long as you keep your account in good standing, the deposit you put down for your secured credit card is completely refundable when you close the account (or upgrade to an unsecured credit card).

Additionally, you can avoid paying interest fees on a secured credit card simply by paying off your full balance before the end of the grace period, which is usually between 21 and 25 days after the end of the statement cycle in which you made the purchases.

Don’t Fear Credit Cards

Much like a bad fish experience can put you off seafood, an unfortunate credit card experience can certainly put you off plastic. Thankfully, a credit card aversion doesn’t mean you have to do without credit entirely.

But, there’s also no need to fear credit cards. When used responsibly, credit cards can be secure and rewarding ways to make purchases.

Of course, the key words here are “used responsibly.” Don’t put more on your credit cards than you can repay in full by the end of the billing period and always pay your bill before the due date to ensure a happy, healthy credit card relationship.

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CardRates.com is a free online resource that offers valuable content and comparison services to users. To keep this resource 100% free, we receive compensation for referrals for many of the offers listed on the site. Along with key review factors, this compensation may impact how and where products appear across CardRates.com (including, for example, the order in which they appear). CardRates.com does not include the entire universe of available offers. Editorial opinions expressed on the site are strictly our own and are not provided, endorsed, or approved by advertisers.