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

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