How to Build Credit Without Credit Cards

With fall approaching and students going to or returning to college, you’ll start to see more credit card marketers talk about how it’s important that students start building credit early. When the average household credit card debt in August 2010 was nearly eight thousand dollars and the average student loan at over $28,000, students are facing enough debt as it is.

How do you build credit without credit cards? The first step is to be added as an authorized user on your parents credit card account. You can piggyback on their credit performance for a short time, thus establishing something in the near term. It’s not as good as establishing your own line but it’s better than nothing.

Next, open a bank account or credit union account. This won’t have any impact on your credit score, this information isn’t reported to bureaus, but it will start a relationship with that bank or credit union so that it will be easier for you to get a loan from that bank later on. They can see a history of responsible behavior, even if it’s not reported to the bureaus.

Get an installment account, such as a car loan, mortgage, or personal loan. These, and revolving accounts such as credit cards, are reported regularly to the bureaus and can be used to build credit. If you have no history, you may need a co-signer, such as your parents, as a way to get a better rate.

That being said, building credit is easiest when you have a credit card. If you can use a credit card responsibly, by paying it off each month on-time, then you should open one. If you aren’t sure if you can take on that responsibility, don’t. A good credit score isn’t some magical key into a financial nirvana, it’s just a number.

Jim writes about personal finance at Bargaineering.com.

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  1. PaRa02 says:

    Except the auto loan for first time buyers can carry a High APR(25%), build your credit then get an auto loan.

    • SpoonyBard says:

      Wow, really? My first time, no credit loan was 8% simple interest. That was back in ’96 though.

    • stephent says:

      I think that is why the suggested getting a co-signer.

      • Coelacanth says:

        Except… aren’t there more than a fair share of reports that say why it’s never a good idea to cosign for anyone else’s loan?

    • Bargaineering.com says:

      25%? That’s absurd, get a credit union.

    • Julia789 says:

      I built my credit with a Macy’s card. They said I needed another credit card in order to open a Macy’s card, so I handed them my checking card, and it worked. That was 15 years ago when checking debit cards were new, so I don’t know if that will work now. But they gave me that Macy’s card, and I’d shop for needed work clothes and then pay the bill off right away. Then I got a car loan a couple years after that, and eventually a mortgage.

    • BobOki says:

      I disagree with that, a lot of banks will offer first time car loans at low 1.5-5% APR, I got mine that way.
      Great time to remind everyone to buy used.

    • Awesome McAwesomeness says:

      Ours was 6% for our first car.

  2. Bill B. says:

    Not everyone’s parents are going to let them ride off of their credit rating for any time, at any time, for any reason. When I was younger, I didn’t go to college, and my mother had no interest in helping me to build my credit. Getting past that first credit hump is nearly impossible without someone co-signing for you, as a teen, and even more so as an adult. I still can’t qualify for any credit card, and was even turned down from opening an account at Ally for insufficient credit history.

    • watch me boogie says:

      I had a similar situation. How I was able to progress my credit was to begin with a couple of store credit cards, which I used and paid off on time for about 2 years. Somewhere in there I also got a gas card. Then I was able to get a “real” credit card through my banking institution, which had a very low credit limit but was enough to work with.

    • bigTrue says:

      you can qualify for a card. Orchard Bank. It has an annual fee, but it’s relatively low. It’s made for people with bad/no credit. I had a 500 score when I first got it. They report every month and won’t report the occasional late immediately as long as you show a mostly decent repay schedule. I also have a First Premier, but I’m not a fan of it. Where Orchard Bank still sees you as a customer who isn’t the best with money, First Premiere pretty much sees you as a starving person and they happen to have a sammich.

  3. BannedInBrittan says:

    The authorized user is fairly solid advice but it can be troublesome if that card holder utilizes too much of their available credit or if they have issues paying on time in the future. Having a maxed out authorized user card is just as bad as having a maxed out card of your own. Also in the future Fair Isaac might decide to kill the score impact of authorized user cards. So, for now and in FICO08 it works but for how long that will remain who knows.
    My tips:
    Don’t over utilize your credit cards even if you pay them off every month! The bureaus typically get reported the statement balance and not the fact that you paid it off in full. So over utilization can make you look like you’re always near max.
    Be knowledgeable about what’s on your credit by checking your report at annualcreditreport.com you don’t need to know the score as long as you’re aware what’s on it in most cases.
    If you have a collection on your report treat them as a business would. Quid pro quo, you’ll pay them if they agree to delete it from the report. Don’t pay them out of any feelings of moral obligation. The collector bought the debt knowing it was bad debt and in default. They made their bed let them lay in it (unless they’ll delete). Plus a paid collection impacts the score as much as a non-paid one. Now this advice doesn’t apply if they go to sue you…
    If you have a 30 day late on a long established and otherwise positive account give the creditor a call and see if they will do you a courtesy and remove the late.

  4. sirwired says:

    This article was horribly wrong…

    - Most (if not all) of the credit scoring companies have modified their algorithms so Authorized Users don’t actually receive any benefit to their credit score, even if the account appears on their report. (This was the result of firms actually SELLING authorized user “slots” of complete strangers.) This change happened a couple of years ago, so the writer should have known it.
    - No! Do NOT get an installment loan when you have no credit; this will cost you a fortune! Instead, get something trivial like a gas or store card (they have lax approval standards), charge a little bit to it every month or two, and pay it off in full every month. This is WAY cheaper than paying off a sub-prime installment loan gradually.
    - You may have to get a secured card; shop around for one that will charge the lowest fees for the privilege of holding on to your money.
    - Barring a secured card, you may have to get a co-signer if you are a student with insignificant income, especially with the CARD act reforms in effect.

    • Me - now with more humidity says:

      If you’re with a credit union, getting a secured card is easy. Deposit what you can, even $500 and use the card sparingly, but regularly. Let a small (SMALL) amount carry over every month so you pay a tiny bit of interest. My CU does them for 12% to 17% depending on the amount of money you put up against the card.

      • Me - now with more humidity says:

        The idea behind paying a bit of interest every month is that they’ll be more likely to convert to an unsecured card if they make something off of you to offset the interest they’re paying on your savings deposit.

      • huadpe says:

        What CU do you use? Mine offers no secured cards whatsoever and declined me for an unsecured card. They actually outsourced the credit card division to an inter-credit-union association, but the name escapes me at the moment.

        By the way, my CU (Bethpage FCU) is the 23rd largest in the country, so it’s not like it’s a terribly small outfit that it couldn’t do this.

      • lilyHaze says:

        I agree. You don’t have to pay the interest. After a year of regularly paying it off every month, they will probably give you back your deposit.

        If you quality for a bank account (some people don’t), go with the bank’s credit card. They’ll be more likely to give you one (even if it’s secured).

    • Ziggie says:

      sirwired is right.

      Throughout college, my parents had a card that just had my mom and I on it so that they could cover things like textbooks for me. I was the “authorized user” on the account. When I graduated and went to get my own credit card, I had absolutely no credit history as just an “authorized user”

      Ultimately, the only way I could get a card after college was taking the alumni credit card offered through the alumni association. Once you get that first card and use it responsibly for a year or two, it gets a lot easier to get a new card.

    • azntg says:

      I could’ve sworn I’ve read that FICO continued to allow for piggybacking in their latest scoring models provided that the owner of the tradeline is a relative.

      Nevertheless, credit scores are overrated. It’s the credit file itself (coupled with other factors that determine creditworthiness – e.g.: income, assets, etc.) that is much more important.

      However, since every lender uses different criteria for approval, there’s no predicting whether being placed as an AU or not will help in the process.

      • theyoungandthebetrayed says:

        Correct. FICO 08 was originally designed to not give any benefit to authorized users but the outcry was enough that they modified it so that it counts if they can prove a link to the cardholder, such as being family.

        What came as a surprise to me was that my wife couldn’t be on our mortgage because, while she has a great credit score, she doesn’t have at least 3 recent lines of credit. She is an authorized user on our joint accounts (most I had before we married) but apparently those don’t count as an open line of credit for her.

    • watch me boogie says:

      “- No! Do NOT get an installment loan when you have no credit; this will cost you a fortune! Instead, get something trivial like a gas or store card (they have lax approval standards), charge a little bit to it every month or two, and pay it off in full every month. This is WAY cheaper than paying off a sub-prime installment loan gradually.”

      This. As long as you pay the balance in full every month, this is how you start. If you can’t pay the balance in full every month, well, it’s probably a toss-up. These “starter cards” have insanely high interest rates, so use them wisely.

  5. energynotsaved says:

    When my son graduated from college, I bought him a car as his gift. (I know. I’m a wonderful mom.) I put us both on the loan. While I actually qualified for and paid the loan off, he gained a credit history. When the loan was paid off, I removed my name from his title. (The loan company required both names on the title.) He then had a job, a great credit history and a paid off car.

    While this won’t work for many, it is an option for some families.

    • tbax929 says:

      You think you’re a wonderful mom because you bought your kid a car? Is someone who didn’t buy their kid a car a terrible mom, then?

      • Sarah Black says:

        nope. it makes that person just a mom who is NOT AS wonderful.

        • energynotsaved says:

          Actually, it makes that mom a mom who, had she promised a car, an untruthful person. I, on the other hand, was willing to work at WalMart to honor my promise. That would make me a person who honors my word.

          When you have a child, you will do anything to help them in life. Sometimes that means working the night shift at Walmart. Sometimes that is saying “no, I won’t post bail.”. Being a mom, good or bad, (since I only have two colors of crayons) isn’t easy.

      • George4478 says:

        Yes, because the only possibilities in mom quality are wonderful and terrible. Buying/not buying a car is THE deciding factor between the two qualities.

        Your crayola box didn’t have more than 2 colors, did it?

      • aliasmisskat says:

        I believe it’s called sarcasm. Sadly, it doesn’t come across well in text form.

      • energynotsaved says:

        No.

    • energynotsaved says:

      Gosh, this is a tough neighborhood!

      My kid grew up in a rich neighborhood. When he was 16 and his friends were getting new cars–and all I could offered was new tires for his bike–I said, “When you graduate from college, I’ll buy you a car.” He did. I did.

      Stuff it.

      • Cantras says:

        I support this, depending on the car. ;) Difference in acceptability between getting a new escalade for a 2.5GPA and getting an off-lease Civic for a 4.0, eh?
        Without knowing details, I can’t say OMG AWESOME MOM, but it’s a little harsh for everyone to go OMG BAD MOM (also without knowing all the details)

        My parents held the car over our heads to get (and keep) a scholarship. My mom blurted that out as a throwaway thing when I was in 8th grade, and I said that sounded like a plan. She laid some rules (4-year, academic, full-ride scholarship), and she kept reminding me of it when it came time for finals, PSATs, SATs, ACTs…

        I *like* my car. And I think it was a pretty nice trade, considering it cost less than a year’s tuition. ;)

    • watch me boogie says:

      Can you retroactively adopt me please?

    • Awesome McAwesomeness says:

      Get a grip and some human decency. She obviously wasn’t making judgments against people who don’t buy their kids a car.

  6. Michaela says:

    This does not help me at all. :/

    My parents are in horrible debt, so I want NOTHING to do with their credit. Sorry.

    I have a bank account, so I can’t really do much else there…

    I don’t need anything, so why would I take on debt yet?! I have a new car (that I got paid in full), and I did not need student loans (scholarships rock!).

    I understand that I will someday need a good credit score to get a home, but nobody has ever given me a really safe, effective way to do it. :/

    • colorisnteverything says:

      Get a store card and just pay it off. That will build your credit enough after a bit and you can get a “real” card.

      Getting a car loan will still be pretty $$$ and I know nothing about a house, but perhaps you have a grandparent who would co-sign on a car loan that has good credit if/when you need it?

      • ShadowFalls says:

        They have to be alive first… Not really a solution for everyone…

      • Michaela says:

        I have a brand new car….my grandparents paid for it in cash and gave it to me as a surprise present. I won’t need another car for another 10 years…

        • colorisnteverything says:

          That’s great and very nice of them. However, a car loan is an easy way to earn credit for a house. Student loans are another way (if you ever need them). However, since you have neither, it becomes important to consider ways in which you can build credit outside. It is definitely going to be more difficult to get a loan with a decent rate without a cosigner – even with GREAT credit if you have never had one. My credit score at 22 was just as good as the EXCELLENT score of many “adults”. However, when I went to buy my first car, that wasn’t enough. Thus, mom has cosigned on the loan. She’ll be taken off in a few months when it has been a year, but without her, I wouldn’t have gotten the 2.9% rate I got.

          • Michaela says:

            Maybe I will take out a small student loan when I start grad school (just enough to cover tuition). Would that help?

            • WagTheDog says:

              I’d get a department store card. (this is what I did in the 70′s, and no darling, you may not call me a hag!). I’d buy some socks or underwear at one register, then walk to another register and write a check. After a few years of this, I had enough credit to get a VISA card, then a car loan, and then a home loan. You don’t need great credit right away, you’ll need it in 10 years, so start “saving up” for it now. Slow and steady wins the race every time.

          • jessjj347 says:

            How would you/anyone else suggest paying off student loans if one has the money to pay it all off? Does it look good to pay it off all at once when they’re due or is it better to do monthly payments for many months?

    • Verucalise (Est.February2008) says:

      You could always apply for a personal loan at your bank, say $2000. Give them an excuse about going on vacation, fixing the car, whatever. Take that $2,000 and deposit it into a savings account. Use that account to pay the payments, and instead of paying it off in 1 year, pay it off in 6 months, doubling the payments. You still will end up paying minor interest fees, but your credit shows a loan paid off in full. Having an installment loan paid in full reflects better than an open-ended revolving loan like a credit card. And also, just something to think about- credit cards are great for using during the month, then paying it off in full. But when you decide to close the card for whatever reason, it could damage your credit a little down the line. With an installment loan, at least the payments cease and you only get better credit when the account is paid in full plus it’s a great precursor for banks to see how you would manage a mortgage.

      • ShadowFalls says:

        Most banks doesn’t give out loans like that with no collateral and little to no credit history. Especially not during this economy.

        • Michaela says:

          This is totally off topic, but is your icon a zoid?

        • Verucalise (Est.February2008) says:

          My local credit union gives people a chance with a small loan, as long as their paychecks are direct deposited with their bank and a good employment history.

    • Alvis says:

      You don’t NEED good credit to get a home, only to borrow money for a home if you haven’t earned enough to deserve one yet.

      • Michaela says:

        Hmmm…it is math time!

        Say I want a 350 k home. Honestly, that is about the average where I live for a home that suits my needs.

        If I save 150 dollars a week, it will take me nearly 45 years to get a home with cash…and I will be 65.
        Also, in my area, rent would cost me about 600 a month. In 45 years, that is 324k.

        So, really, I should wait?!

        • huadpe says:

          First off, if you can only afford $600/month for housing, you cannot afford a $350k house by any means whatsoever apart from winning the lottery.

          It’s not that you should wait, but rather that you should be working very hard to increase your income. Even without a credit history, a good income history and a large down payment will help you get a mortgage. If you can put 30% down, banks will fall over themselves to lend to you. So you need to save about $105,000 to get to 30% down on a $350k mortgage. Assuming you do a 30% fixed rate at current rates, your payment would be approx $1600.

          If you did 20% down, you would need to save $70,000, and have a monthly payment of approx $1750.

          • huadpe says:

            That should read a 30 year fixed rate, not a 30% fixed rate.

          • Michaela says:

            I understand that i have to work for a decent sized down payment. The problem I had with their comment was that I should save for a home until I am retiring. I am not foolish; I understand that I need to work hard to have a wonderful down payment for when I do decide to get a home.

            Also, I never said that 600 was all I could afford. That is just the monthly rent I know I can get for a studio apt in my area (possibly a one bed, one bath if I played my cards right).

        • Alvis says:

          Yes, darling. You should not get something you haven’t earned yet, no batter how bad you want it or think you’re entitled to it. Work, save, THEN enjoy.

          • Michaela says:

            I do understand that it is important to earn what I desire in life. However, I see saving up completely in the manner I described to not be the most cost effective means of getting a home (however, for any other purchase, it does make sense to wait until I can pay in full). Purchasing property when I KNOW I can afford it (which will be when I have secured a decent down payment and a stable income that will allow me to make monthly payments), and making all monthly payments seems like a better option.

            P.S. Please do not call me “darling.” It made your comment come off very condescending, and therefore made me think a little less of you as a person. I may be young, but that does not excuse you from treating me with a basic level of respect (how would you feel if I called you “hag”?!).

            • Alvis says:

              Good luck finding employment with a guaranteed 30-year income.

              • Michaela says:

                meh. Actuarial Science is a pretty stable field. It hasn’t had any real issues with the recession (even time called the occupation “recession-proof”), and it pays pretty well. As long as I keep my grades up, ace my first two exams, and get a decent summer internship, I won’t be too worried about landing a job.

          • pecan 3.14159265 says:

            I guess you don’t realize how absolutely outrageous it is to suggest that one should either have enough cash in pocket to buy a home outright….or not buy one at all, ever, because it would be nearly impossible to save hundreds of thousands of dollars before one gets to be of retirement age. Your comments have often tread this line of irrationality. I suppose this means you’ll be renting until you die.

  7. Macgyver says:

    How about prepaid credit card. Will that help you build credit or not?

    • flyingember says:

      No, it’s not in your name

      • chadraytay says:

        Yes, prepaid cards are in your name. They require name and social security to get the permanent prepaid card.

    • wrjohnston91283 says:

      as flying ember stated, its not in your name so there’s nothing tying that specific card and its history to you. Additionally, a prepaid credit card really works the same way as a debit card. A Visa $100 prepaid card is the same as having a debit card with $100 in the bank. There is no extension of credit on the issuing banks part.

    • TasteyCat says:

      Prepaid wouldn’t do any good, but a secured credit card would.

    • Smiling says:

      The pre-paid ones you buy at the 7-11 or Wal-Mart won’t – a secured card (they’re not all rip offs – Capital One has one for about $25/year) will report to the bureaus and start to build your credit.

  8. Marlin says:

    I found that JC Penney, sears, etc… are much easier to get a CC from. My first was JC Penney and I charged about $20 worth of small stuff. Paid it off and then got a regular CC later.

    • TasteyCat says:

      JCPenney was my first card, which I got when I had no history. It had a $200 limit. Definitely a good idea to get a card from a store or gas station you go to a lot.

  9. rosemary says:

    Here are a few tips:
    1. Make sure you have a checking and savings account. When you have had these for awhile, apply for a credit card at the same bank. You are already a customer.
    2. If you are a student and at least one parent has decent credit, get a student credit card which is guaranteed up to a certain amount by your parent, about $500. Use it and pay it off each month.
    3. Apply with a smaller store like Sears or Penny’s, maybe even Amazon.
    4. If you rent an apartment, pay the rent, electric, telephone, even cell phone, by check. Keep a record for a minimum of 12 months. These accounts are all considered alternative credit when applying for a loan.

    I have done many loans where people had zero credit scores but had these alternative accounts. As long as these accounts are paid on time, they can be used as credit. These companies and landlords are used to giving out this information to banks.

    Hope this helps.

  10. NydiaGeben says:

    Credit cards? Run. Run fast.

    • davidc says:

      No, run fast from people like you that give terrible advise.

      There is nothing wrong with “credit cards” and there is EVERYTHING right about building a good credit history.

      What is bad is incurring long term unsecured debt. Short term debt for things like gas / food / necessities you would buy anyways is smart. Just pay off your card every month.

    • watch me boogie says:

      I wish! Credit is a necessary evil now. The key is to use credit cards wisely – as a payment method, not as a means of being able to afford something.

  11. TasteyCat says:

    Available credit does not equal debt. Trying to build credit without credit cards is silly. Even if somebody can’t handle the temptation of using credit cards as an additional income source, there are places where you can get a couple hundred dollar limits, and lenders will happily slash your limits if you ask.

  12. copious28 says:

    Another, safer method is to put up $1,000 CD, and take a loan out on it. When you are done, start another one. Low risk, low interest.

    • Smiling says:

      I moved to the US in 2000 and went from being established credit-wise elsewhere to not existing here. I had 3 $500 CDs, staggered over about a year, which I borrowed against – total cost of interest about $30 each … credit went from non-existent to 720 in a year. Not sure if it would work as fast these days, but these loans along with a couple of low dollar secured credit cards ($200-$300 each) did the trick for me. Cheap, low risk ways to build good credit.

  13. sven.kirk says:

    A good credit score is not just a number, it IS a key and tool TOWARDS financial nirvana.
    Low number, higher interest on loans, higher insurance rates, equals less money being saved (duh).
    I know the article is building credit card WITHOUT CCs, be secured cards are much cheaper and easier than doing a car/mortgage/loan with no history.
    If you can’t responsibly pay off your secured card, you are sure obviously not responsible enough to pay off a car/mortgage/loan.

  14. Alvis says:

    You shouldn’t be -trying- to build credit. That’s disgusting. Plan your savings so that you won’t need to borrow money; don’t borrow money just so you can more easily borrow money later.

    If you do end up building credit it should be accidental, like from paying your utility bills on time.

    • frank64 says:

      If you want a mortgage you need to have a credit history. All you need is a few cards for a few years paid on time and not run up. Having credit cards also makes it easy to travel and rent cards. It is also more convenient than carrying cash all the time. Just having cards does not mean you need to carry a balance.

      • Alvis says:

        Well, you shouldn’t be getting a mortgage in the FIRST place. Save, THEN reap the rewards of your years of hard work.

        • Benjamin says:

          When did you buy your house, out of curiosity, if you own one?

          Even with house prices having gone down recently, most people won’t be able to afford to pay for one out of pocket until they have a foot in the grave already, and that’s ignoring the likelihood of prices rising again.

          • Alvis says:

            Yeah, well, saving money takes time. There’s no right to home ownership – it’s a luxury few of us should be able to afford.

            • Awesome McAwesomeness says:

              Agreed. Not everyone has the ultimate goal of owning a home. Homeownership is a not a good investment when you consider that you end up paying double the amount that the loan is for, plus repairs and upkeep. It is also not a right.

              People’s obsession with owning a home plus banks capitalizing on that rabid desire is what got our economy into this mess. Yet people are still obsessed with it. We need to learn from our mistakes and stop our obsession with houses and stuff.

    • athensguy says:

      You’re funny.

      Just because you can’t handle any kind of leverage doesn’t mean that it isn’t sometimes a good financial decision. Often, short term leverage has a no finance charge period, which I use all of the time. Combining rewards with no finance charges yields a negative APR loan.

      I do, however, agree that it is a terrible financial decision to purchase a house. Not everything is couched in terms of optimal finance, so people may still want to buy a house. Housing generally results in some of the most favorable loan terms for buyers with good credit.

  15. Pax says:

    How to build credit without a credit card? AND maybe build your savings amount, at the same time?

    Step 1: Open a savings account.
    Step 2: Decide how much you can save per week. $25 would be good, $50 would be awesome.
    Step 3: After 20 weeks, you should be at $500 (mybe a tiny bit more, if the account bears interest).
    Step 4: Secure a personal loan for $500 from your bank, using the savings account as collateral. This should keep the interest rates very low. Aim for a $50/month payment schedule.
    Step 5: Deposit the money from your new loan into your savings account. You should have $1,000 in there, now.
    Step 6: Pay more than the regular payment amount. Make it in two separate payments, the “extra” amount marked to go directly to principle. Depending on the interest rate you get from your bank, and how much you can actually save, you should be done repaying well ahead of schedule.
    Step 7: Lather, rinse, repeat. Keep taking out $500 loans from your bank, keep paying them off ahead of schedule.

    If you can only save $25/week, you will manage $425 in savings (or payments) every 4 months (there are 4.334 weeks in each calendar month, 52 weeks in a year). Even with interest, it should take no more than 6 months to repay that $500 loan – that’s 26 weeks, or $650 worth of savings.

    A $50/week savings will, naturally, double this. You could take out a loan, and repay it, probably every 3 months ($600 worth of savings).

    Now, that might sound like you’re throwing money away – but what you’re really doing is, buying a good credit history with that one, particular bank. You are teaching them that, no matter your credit score, at least with them you have a demonstrated willingness and ability to pay your loans off in a timely manner.

    You can then use this as a springboard to secure things like Auto loans, credit cards, and other such things from that bank.

    And, in the event of an financial emergency … you have that savings account as a safetynet, with which to pay off the loan right there on the spot, rather than facing the credit-rating hit of defaulting.

    Perhaps more importantly … in the process, you’re also getting yourself in the habit of saving money, which a is damned good habit to be in. Saving $25/week is putting $1300/year into the bank. That may not sound like much, but when you have enough to redirect it all into an IRA or the equivalent, and if you start young enough, you will have a very good, sizeable nest egg when you retire.

    Or it could form a good down payment on a house, when you’re in your thirties (even without compound interest, 15 years of saving $1300/year is nearly $20K – not a bad nest egg for a 35-year-old)

    ^_^ All of this is advice I wish I’d been given when I was 16 or 18.

  16. heart.shaped.rock says:

    Personally, I would never co-sign a loan for anyone…ever… never.. .nope… not even my own precious bundle. Even if I could afford to pay it off myself, by the time it got to the point where I’d have to, my credit would already be muddied. Nope. No stinkin’ way.

    • perkonkrusts says:

      The way to keep your credit from getting muddied is to have your son/daughter pay you, and you pay the bank. That way you’ll always know if the loan is current. Plus, that way you always get the truth, not “I swear I sent it, the post office must have lost it” or “my money order flew out the car window and I couldn’t find it”.

      • Rain says:

        After I graduated high school and got my very first job I wanted a cell phone. Unfortunately I was still 18 and you have to be 19 to sign a contract in British Columbia. My Mother very reluctantly signed her name to the contract and when my bill came each month she would open it, check to see what was owed, and then stand behind me as I paid the bill. The day after my 19th birthday we transferred everything to my name.

        When my younger brother turned 19 he decided to get a credit card so he could shop online. He had no credit history and got turned down so he asked my Mom to cosign with him. She laughed and told him to get a secured card.

        There is no way she is going to let any of us ruin her credit score.

  17. mr.obvious says:

    “How do you build credit without credit cards? The first step is to be added as an authorized user on your parents credit card account.”

    Okay … that’s not “without credit cards” — that’s with someone ELSE’s credit cards.

  18. catastrophegirl chooses not to fly says:

    how i built credit: put money in a savings account and then took out a secured loan on that amount. the credit union locked the savings account and i paid installments.
    then when i was ready for something bigger, i had a credit history and got a lower interest rate than i might have otherwise and didn’t need a co-signer.

  19. djshinyo says:

    Does paying those SallieMae shark every month build my credit?

  20. davidc says:

    “more credit card marketers talk about how it’s important that students start building credit early”

    Absolutely true. You don’t have to incur “debt” to build a credit score. Students should have Credit Cards .. and they should use them instead of cash.

    Just pay them off every month. It’s not a big deal really. Buy stuff you would normally buy … like food and gas and what not, then pay the bill at the end of the month. If you mess up a month and run short, fix it next month.

    That is not only how you build credit history, but also learn to manage your credit as both are important

    • humphrmi says:

      For a responsible person, that’s great advice. The trap that most fall into is not paying off the CC bill each month. It’s easy, when finances are tight, to just pay the minimums.

      I’m overly anal about accounting (ever since I took a class in college.) I keep a spreadsheet that breaks down my bank balance into “accounts”, each with a dollar amount added each month from my budget, and dollar amounts subtracted when I spend. Then I have a few “transfer” accounts, where I keep money that I spent on my credit cards (and take offsetting subtractions from other budget categories, like food, fun, and gas etc.) So a gas purchase looks like this:

      Gas account: +100 monthly budget
      Gas account: -35 gas on the 2nd
      Visa account: +35 from Gas account

      At the end of the month, I pay the Visa account off from the money I “saved up” when I didn’t spend cash on gas. This ensures that I always have the money to pay off the credit card bill.

      But, of course, it’s very anal and takes a lot of work. Most students aren’t going to put that much effort into their finances (although if they did, they’d be much better off.)

  21. MedicallyNeedy says:

    Great question for Elizabeth Warren: How do I get great credit score without a credit card and I have no intention of ever owning an ef’n credit card! Debit card is just fine for me.

    • ap0 says:

      Debit cards don’t offer the same protections as credit cards. I started making big purchases on credit cards and then paying them off in full, rather than using my debit card — sometimes authorizations and other such bank nonsense can really do a number on your bank account. The trick is to be responsible and not let that balance set idle or grow.

    • AustinTXProgrammer says:

      I don’t understand the hatred of credit cards. Use them as charge cards (Must pay in full) and you can accumulate rewards, get protections, have an easier time on car rentals, etc.

      Sure irresponsible lending and spending got us into a huge mess, but that doesn’t mean the concept of a credit card is to blame.

      • Extractor says:

        If it wasn’t for my credit card, I wouldn’t have the notebook I have now. My nephew destroyed it in NYC at the tender age of 14 months. The original warranty was 12 months. VISA covered it for another 12 months just by charging it with their signature card. The shop in NY estimated the damage to be well over its original cost and credited my account by that amount. Best part is visa lets you keep the damaged unit which I wanted. I figured the kid destroyed the hard drive by improperly shutting it off. 2 years ago i spent $120 on 4 GB ram and a 160GB HD. I did upgrade to a 500 GB but its runs win 7 pro perfectly 24/7.
        We also had a problem with a mover and VISA intervened upon filing of a dispute.
        Just too many protections in a credit card to not use them.

    • watch me boogie says:

      Like ap0 said, credit cards have much better protections than debit cards, the most basic of which is the amount you’re liable for if your card is stolen. Car rentals, hotel reservations, and other purchases that require a “hold” are much better put on a credit card (and most of the time you can’t rent a car at all without a card, if that’s a concern for you). Just treat a credit card the same as a debit card – if you have the money in your account, you can use the card; if you don’t, you can’t. There’s just the extra step of paying the bill each month, and it’s worth it.

  22. FrugalFreak says:

    Screw the credit. Go CASH Savings! Don’t be at the mercy of financials that greedly wield power over you.

    Cold hard cash talks as much as credit.

  23. Akuma Matata says:

    When I was a freshman in college I had signed up for a CC in order to get a t-shirt. I don’t know what ever happened to the card, but I had never activated it. Fast forward 4 years and when I look at my credit report while in the process of purchasing a car, I see Discover having reported credit in good standing for the previous 4 years. I had gotten all the benefit of good credit with no potential of risk. That was a big help when I went to open my first real credit card as well.

  24. coldfire409 says:

    I’d recommend going with a credit union and see if they have a secured loan. My credit union has a loan that you can get with a $500 deposit and they will then loan you $500. Make timely payments on that loan and you’ll earn good credit and the credit union will overlook some items that may not be so favorable.

  25. veg-o-matic says:

    Well that title promised a whole lot that the article didn’t deliver.

    “Hey, you can build credit without nasty credit cards! Hooray! First step: get someone else’s credit card and get authorized on it. Then, open another kind of account that has no effect on your credit. But to really build your credit, you need a credit card. The end.”

    Awesome job. Very informative.

  26. FinancialPeace says:

    What a bunch of ridiculous comments. You all talk like bankers. Borrowing money, going into debt, staying into debt and hoping that it will lead to wealth and salvation. OMG.

    Stop borrowing money. Save up the cash and pay with cash. It is yours then.

    Pay cash for a car. Save more and buy a better one.

    Credit scores are a fallacy. Stop praying at its altar.

    • athensguy says:

      It’s funny how those that are too irresponsible to use financial tools lambast those of us with enough personal responsibility to use those tools.

      I don’t care whether you use credit, but acting like my use of it makes me worse off is laughable.

    • mannyvel says:

      Nothing is ever yours. Paying in full is a fool’s game. Use someone else’s money to buy, and pay them. That way, they hold the risk, not you.

      Credit doesn’t mean buying what you can’t afford. Credit means that you have better tools when you need them.

  27. Johnny Longtorso says:

    You can have credit cards without running up debt if you have a modicum of common sense and personal responsibility. Get a credit card and don’t use it except to make small charges every few months to keep it active. Or use it for your daily expenses (what you’d pay cash for otherwise) and pay it in full each month. It’s not that hard, as long as you don’t act like an irresponsible spendthrift.

  28. rosemary says:

    Although there is a lot said about paying cash and abandoning credit, remember that you must have credit for auto insurance, home insurance, health insurance, employment, etc. Unbelievable but true.

    Having credit does not mean that you must be debt.

    P.S. Sallie Mae and all student loans do appear on credit reports and affect credit. Default on these and your credit will be affected forever.