I Don’t Need a Credit Card But Want to Build Credit. What Can I Do?

Good credit is essential if you hope to borrow money one day for things like a new car or home. But good credit can also be important for smaller things like renting an apartment or even landing a new job. And one of the easiest ways to build the credit necessary for these things is by getting a credit card.

If you have no credit, or even bad credit, and you’re averse to getting a secured credit card to help improve your credit, there are other ways to go about establishing and building good credit.

Here are three other options for building credit and improving your credit scores.

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1. Get a Credit-Builder Loan

A credit builder loan is a loan with a set amount you pay back over a set period of time (referred to as an installment loan). Most have repayment terms ranging from six months to 18 months, and because these loans are reported to one or more of the three national credit reporting agencies, on-time payments will help build up your credit.

Here’s how it works: A lender places your loan into a savings account, which you can’t touch until you’ve paid it off in full, allowing you to build credit and savings at the same time. And because loan amounts for credit builder loans can be quite small (just $500) it can be much easier to make monthly loan payments.

Credit-builder loans are best for people with no credit or bad credit. But, if you have good credit but don’t have any installment accounts on your credit report, a credit-builder loan could potentially raise your score since account mix is another major credit-scoring factor.

2. Pay Your Rent 

If you’re in the process of moving or need to do so in the near future, it’s a good idea to find a landlord who reports your rent payments to the major credit bureaus. Depending on what credit report or credit score is being used, these on-time monthly rent payments can give you a quick and easy credit reference and help you qualify for a loan (or at least another apartment down the road).

3. Become an Authorized User

Asking your spouse, partner or even your parent to add you onto one of their accounts as an authorized user could give your credit a boost. If the account they put you on has a perfect payment history and low balances, you’ll likely get “credit” when that account starts appearing on your credit reports. You won’t necessarily need to use the card to benefit from this strategy. It is a good idea to have your friend or family member check with their issuer to be sure that it reports authorized users to the three major credit reporting agencies (not all do).

Remember, one of the most important things in building good credit is making timely loan and bill payments. Bills like rent or utilities may not be universally reported to the credit bureaus, but if they go unpaid long enough, they can hurt your credit, especially if they go into collection. (You can see how any collections accounts may be affecting your credit by viewing your two free credit scores, updated every 14 days, on Credit.com.)

If your credit is in rough shape, due to a collection account or other payment history troubles, you may be able to improve your scores by paying delinquent accounts, addressing high credit card balances and disputing any errors that may be weighing them down. And remember, you can build good credit in the long term by keeping debt levels low, making timely payments and adding to the mix of accounts you have as your score and wallet can handle it.

[Offer: If you need help fixing your credit, Lexington Law can help you meet your goals. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

More on Credit Reports & Credit Scores:

  • The Credit.com Credit Reports Learning Center
  • How to Get Your Free Annual Credit Report
  • How Credit Impacts Your Day-to-Day Life

Image: Jacob Ammentorp Lund

The post I Don’t Need a Credit Card But Want to Build Credit. What Can I Do? appeared first on Credit.com.

Source: credit.com

3 Ways to Build Credit if You Can’t Get a Credit Card

Credit cards, interest rates, loans, even where you live—these all depend on your credit score. If you have a good credit score, you’re more likely to get better financial offers. But if you have a low or nonexistent score, the chances of getting prime financial offers are pretty slim.

If you have low or nonexistent credit, improving your credit can seem almost impossible. Because you don’t qualify for the best financial offers, you can’t get the opportunities you need to bump up your credit. Plus, you’ll probably find yourself paying a lot more interest than you’d like.

This might feel like a no-win situation. But there’s good news—there are alternatives to building credit besides credit cards. Those with poor or nonexistent credit can have the opportunity to build up their scores. Learn about good credit scores and how you can work to get your rating in that range.

What Is a Good Credit Score?

If you’re completely unfamiliar with credit, it’s time to learn where your credit score stands. Here’s the breakdown—credit scores range between 300 and 850. According to Experian, an average credit score for Americans is around 675.

Credit scores are ranked as bad, poor, fair, good or excellent. Experian’s numbers are based on a model called VantageScore. The VantageScore model is broken down to the following:

  • Excellent: 750-850
  • Good: 700-749
  • Fair: 650-699
  • Poor: 600-649
  • Bad: 300-599

FICO scores are based on a slightly different model with a range of 300 to 850. The average FICO score in 2018 was 704. For FICO ratings, a good or excellent score is above 740. Here’s the breakdown of FICO Score ratings:

  • Exceptional: 800-850
  • Very good: 740-799
  • Good: 670-739
  • Fair: 580-669
  • Very Poor: 300-579

How to Build Low or Nonexistent Credit

It is possible to get a credit card for bad credit. But you’ll find that they’ll either have no rewards, higher interest rates or both. These are worth looking into, but you might want to consider other methods before you commit to a credit card. Here are some great options for building your credit score—that aren’t getting a credit card.

1. Get a CreditStrong Account

In a frustrating turn of events, building or rebuilding credit often requires that you have some credit to begin with. That’s where credit builder loans, such as the ones provided by CreditStrong, come in handy. Credit builder loans allow you to take out a loan without a hard credit pull. The money is placed in a locked savings account to secure the loan.

Once you make the required payments, the savings account is unlocked and you gain access to the funds. In the meantime, you get up to 24 months of positive payment reports to the credit bureaus, helping to build your score.

Each loan payment you make will be reported to all three credit bureaus each month, which will help build your credit history. Because 35% of your credit score is based on payment history, making on-time payments towards a CreditStrong account can improve your score.

2. Try Experian Boost

You already know that payment history makes up 35% of your credit score. Experian knows that, too. That’s why they launched Experian Boost earlier this year. This program allows you to include both your cell phone and utility payments in the calculation of your credit score.

Worried that you’ll miss a payment or two? Missed payments will typically harm your credit score, but Experian only counts the payments you’ve made on time. That means that any bill you don’t pay on time won’t harm your score. While you should try to pay your bills on time, this is a life-saver if you accidentally slip up on a payment or two.

3. Improve Your Credit with Rent Track

When you have a low credit score, any payment you continually make on time helps. RentTrack is a great rent reporting tool that will track your rent payments, therefore helping you build your score. RentTrack is often used by property management companies, letting their tenants pay rent online.

How does this help your credit score? When you pay your rent, RentTrack offers to report your payments to all three major credit bureaus. If you choose to do, every payment you make will show up on your credit report. Make your payments on time, and you’ll watch your credit score increase over time.

The post 3 Ways to Build Credit if You Can’t Get a Credit Card appeared first on Credit.com.

Source: credit.com