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How to Build Your Credit Without Credit Cards

You do not require a credit card to build up your credit. What you do need to do is use a special approach to achieve this which we will outline in this article. Most people think that credit cards are essential for credit building but this is not the case.

Alternative Credit Reporting 

First of all you need to understand that if you don’t have credit cards there is a possibility that your credit score could be held back.  A new lender will want to see that you have established credit and a good track record for payments. They are looking for evidence that you are a responsible person when it comes to installment loans and credit card repayments.

You need to be aware that with your FICO® Score, payment history accounts for around 35%. Most lenders will look at your FICO score. A further 10% of your FICO score comes from your experience with a number of different accounts. 

You also need to understand that conventional calculations of credit scores relied mainly on your track record of borrowing with loans and credit cards. There is no consideration for payments classified “non-credit” such as paying your phone bill, utility bills and so on. The exception here is if these organizations post a paid or unpaid collection.

The flowing organizations also take your credit history into account when making decisions:

  • Insurance companies are likely to use this information to determine whether they will provide you with insurance and the premiums.
  • Potential employers could access your credit report, if you allow them to, to make a decision about hiring you or not.
  • Utility and phone companies may look at your credit report to determine whether they should provide their services to you.
  • A landlord may use your credit report to decide whether or not to accept you as a tenant.

You can use a Credit Builder Loan

A good alternative to using credit cards to develop your credit is the Credit Builder Loan. You need to go with a lender that will report your activities to the 3 top credit bureaus. If you want to take out a personal loan to develop your credit then you can do it because it is not a bad thing. But you need to make sure you can afford the repayments.

If you overstretch yourself with a personal loan there is a risk that you will miss making payments on time and this could have a negative impact on your credit score. Again you need to ensure that any personal loan lenders will report your payment activity to the 3 top credit bureaus. 

The funds of the loan go into a CD or savings account until you make full repayment. The money in the savings account is yours. Your credit report will contain details of your payments, so you need to make the payments on time as this is likely to give your credit score a boost. 

There is no point in arranging a Credit Builder Loan if you are not going to make the agreed payments on time. You will go through a lot of pain and the end result will be that your credit score will probably be worse.

Check out your local credit union as a good source of credit builder loans. 

Before you agree to a loan ensure that:

  1. You fully understand the rules and regulations
  2. Confirm that the lender reports your payment activity to the top 3 credit bureaus

If you prefer to deal online then take a look at They provide a credit builder loan program online that reports your payment activity to the 3 top credit bureaus. There is an administration fee to get started and there will be some interest to pay on the loan.

Mortgages and Car Loans

If you can get a mortgage or a car loan this is good as they will both report to the top credit bureaus. Either of these loans will help you to develop your credit score, as long as the payments are made on time of course. 

To qualify for a mortgage or car loan can be a challenge if you do not have a good credit history. But if you have a reliable income source and a healthy down payment then you will increase your chances of approval.  

Take a good look at the marketplace, and be prepared to shop around, but make sure that these companies will not access your credit report.  If a lot of lenders start to do this it could negatively impact your credit score. This is totally counterproductive. If you have a low credit score then you will probably pay a higher rate of interest.

Check out the Federal Housing Administration as you may have more chance if they back you. They will want to see that you paid your rent on time for at least 12 months and that you paid all of your other bills on time. The only account that can be in collection is a medical bill.

Another option is to find a co-signer to increase your chances of approval for a car loan or mortgage. This means finding someone that has a good credit score and is willing to help you by co-signing.

On Time Rent Payments 

In the past, payments of rent were not included in credit reports, but things are changing. The forerunner with this is Experian Credit Reporting. They have setup the Experian RentBureau as the first top credit report agency to include rental payment details in consumer credit reports, which enables tenants to develop their credit history by paying their rent on time.  

They collect rent payment information for your credit report. Also, TransUnion SmartMove provides this data for your credit report. All of this does not mean that the rent payment information is used to calculate credit scores.

There are also several third-party services that will report the details of your rent payments for you. All of these companies have different fees and some of them may not report to all 3 of the top credit bureaus.

Alternative Service for Credit Scoring

A good example of a alternative credit scoring service is Payment Reporting Builds Credit (PRBC). They use non-conventional data to develop a credit history. They calculate the score taking into account your payment history with utilities, Internet service providers, telephone companies and they will even take subscriptions into account. 

They use a scoring system that is similar to conventional credit reporting. They use a scale of 100 to 850 for credit scores and not the traditional scale of 350 to 850.  If you get a credit score of more than 750 with PRBC this suggests that you are responsible with your borrowing.

Having a PRBC is good as it highlights that you are a good payer but the reality is at the moment that most lenders still use the traditional credit reporting to make their decisions.

At Credit Achievers we have vast experience and we will be delighted to discuss how we can help you with any credit issues. Please contact us here.