How To Build Your Credit Without A Credit Card

While responsible credit card use builds up your credit history, reckless plastic spending can ruin your finances. If you don’t trust yourself with credit cards, you can opt for other ways to prove to financial institutions that you’re responsible with money and worthy of loans with reasonable rates.

A Credit Card Forum post tells you how to build credit without using cards.

Methods include setting up a certificate of deposit, then borrowing money from the account and repaying it.

A solid history of making student loan payments on time will also build your credit (and non-payment can really mess with your credit).

Even without much of a credit history, you have a chance of getting a car loan. But be aware that short histories often mean higher interest rates. So keep the loan size small and maybe delay your dreams of buying wheels your friends will envy.

The post also notes payments that won’t help your credit, including rent and utilities, as well as prepaid debit cards — not even Suze Orman’s.

If you’re concerned about spending your way into debt but still want to enjoy the benefits of plastic, opt for a secured credit card, in which you pay a deposit to a card company and use your card to access those funds.

How To Build Credit Without a Credit Card [Credit Card Forum]


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  1. Bsamm09 says:

    “Methods include setting up a certificate of deposit, then borrowing money from the account and repaying it.”


    • sirwired says:

      I was wondering the same thing… I’ve never seen this product offered.

      • Sudonum says:

        You purchase a CD, you then take the CD to the bank and pledge it as security against a loan. In almost every instance the interest on the loan will be 2% above the yield on the CD.

        I have used this method to “liquify” a CD for short term investment needs.

        • webweazel says:

          That’s what we did to buy a car a while back. We had the cash to buy it outright, (around $4,000) but we put the money into a 3-year CD and the loan was a 3-year loan. The guy at our bank set the whole thing up for us, loan and CD on the same day. We ended up paying 4% on the loan, and got 2% on the CD, so we only paid 2% interest on the loan. Once the loan was paid off, we cashed in the CD, and stuck the funds in our savings account. That was a really good feeling day.

    • sirwired says:

      Gas cards, FTW. Just about anybody with a pulse can get approved for a gas card. Pay that sucker off in full every month, and you are in good shape. You don’t even need a car… just buy a pack of gum or a box of soda, whatever, once a month, and you’ll be building your credit history.

  2. kidstechno says:

    I’ve had a couple credit cards through my history. However I’m not sure how people justify holding a large balance and only paying the minimum. I’ve always paid my balance off during the month, so I don’t enact large interest charges. The good thing about this is you can still rack up rewards points, so it’s like getting free money every couple months (depending on your spending habits). Credit cards aren’t the devil like some people make them out to be. As long as you have self control, they’re really just an advanced debit card. I’ve taken advantage of a couple no-interest charges until 20xx cards too when purchasing my TV and other electronics and have paid off the balance before the ending period to avoid huge charges.

    It’s all about planning and control.

    • Such an Interesting Monster says:

      Actually, if you’re trying to build your credit paying off any credit cards you have in full every month is the wrong way to go. You’ll get a larger credit score boost if you carry a balance. Not only does it show that a bank can make some scratch off you, but it also shows you’re capable of managing and outstanding debt and can make regular and consistent monthly payments.

      • 401k says:

        Correct. That just shows that you make your regular purchases with a credit card and then use cash to pay off the card. This shows you really don’t need the credit, but it does demonstrate financial responsibility. The reason it doesn’t help as much is because if you need to use your cards above your monthly budget you aren’t showing how you would manage an account you can’t pay in full right away. Banks would consider someone who carries a balance and makes regular payments to be someone who is responsibly using credit. About 25% of your available credit is what you should carry as a balance to really help your credit.

      • Nigerian prince looking for business partner says:

        “You’ll get a larger credit score boost if you carry a balance.”

        You really don’t need to carry much of a balance to get those bonus FICO points. I believe the trick is to carry somewhere between 1 – 9% of available revolving credit. When we were applying for mortgages, I found the only way I could break 800 was to carry around $100 in debt when the credit card statement was cut.

  3. Mr. Fix-It says: "Canadian Bacon is best bacon!" says:

    I don’t think CD’s work that way…

    • KyBash says:

      It depends on the bank and the financial climate.

      In the early 1970s, I wanted to put about 40% down on a new car and borrow the rest. The loan officer ran the numbers and showed me how putting only 5% down, sticking the rest into a CD and taking out a personal loan against that at 1/2 percent more, and borrowing the rest at standard car-loan rates would save me a bundle in interest.

      I tried to do something similar at a different bank in the late 90s, and they looked at me like I was trying to run a scam.

  4. Cat says:

    This ruse used to work back in the ’80s, but I’m not sure if it will anymore. You will need to borrow $1000 for about a week – no risk. (Tax refund time is great for this.) All it will cost you out of pocket is some interest.

    Go to some local banks, and ask what their minimum loan is. Tell them you want to borrow $1000, and you’ll secure it with $1000 in a savings account. You’ll deposit the $1000, get the loan, and repay the person that loaned you $1000. You now have $1000 in the bank, which you use to pay back the loan. Pay it back as scheduled, but pay off the balance early. You now have a limited, but good, credit record. That should get you enough credibility to at least get a store credit card – which you use ONCE for a small purchase, and pay it off in two payments.

    It can help to explain to the bank exactly what you’re attempting to do. They may require you to put your money in a CD, and you’ll have to pay the loan back out-of-pocket before you can cash out your CD.

    • Mr. Fix-It says: "Canadian Bacon is best bacon!" says:

      The critical element in this equation, I think, is having an account at a bank that is either a) interested in helping you, and b) isn’t run by complete bastards.

    • Bob Lu says:

      Isn’t it basically the same idea as the secured credit card, minus all the convenience of a secured credit card?

      • Cat says:

        Well, yea, kinda – except that for a good credit score, you need more credit history than just a credit card.

  5. Fast Eddie Eats Bagels says:

    I thought I once heard that P2P or Peer to Peer loans are good for rebuilding credit. Anyone here have experience with p2p loans?

    • nrich239 says:

      I have one through Prosper. They do report on time payments to the credit agencies BUT your interest rate is also determined through them so if you have no credit or bad, your rate can be as high as, if not higher than a credit card cash advance (20+%)

      The other big problem I have is that (at least with prosper) the due date is not adjustable ever. So I’m stuck with the 9th as my due date.

    • TasteyCat says:

      I had one with Lending Club. They report to all three credit bureaus. I’m not sure I would use them if I had bad/no credit, but it’s just a soft pull, so nothing to lose applying. With good credit, the rate was pretty competitive with other loans and below credit card rates.

  6. dulcinea47 says:

    There really needs to stop being something that’s just a “credit report” and something more like a “fiscal responsibility report”. Actual credit is part of it, but I think paying your rent and utilities on time should count for something. If you can’t be bothered to pay your electric bill on time, you probably won’t make credit or loan payments either, and vice-versa.

  7. BerlinSwing says:

    “A solid history of making student loan payments on time will also build your credit”.

    This was the only thing I had on my credit after graduating from college, and I was repeatedly told while trying to buy my first car that it “didn’t count”. I don’t know if they were just pulling my chain to get me to agree to a higher interest rate, but I wish I’d known that it could be an issue beforehand.

  8. JeremieNX says:

    “If you’re concerned about spending your way into debt but still want to enjoy the benefits of plastic, opt for a secured credit card, in which you pay a deposit to a card company and use your card to access those funds.”

    Um, no. Secured cards do NOT work that way. That deposit is used as COLLATERAL – to be “repossessed” in the event you fail to make your payments. It is not a pool of funds you get to access.

    • JeremieNX says:

      I just the full article and it seems Phil did a poor job paraphrasing the part about secured cards. The article does not say “use the card to access those funds” the way Phil phrases it.

  9. Bob Lu says:

    If you need that loan, fine. But taking any loan just for building credit history is foolish. A no/low fee secured credit card is much better. Use it regularly and pay the full balance every month. Even if you just arrive to US and get the SSN today, with six months you wil start receiving prescrened credit card offer. Take every no fee card offer. Use each of them once and pay the full balance each month. Within one year you will have low 700 FICO score and high 700 FICO in two years.

    • Lucky225 says:

      Myth #1 “SSN required to build credit” — Correction sir, even if you JUST ARRIVED TO THE US AND DO NOT HAVE AN SSN, you can STILL build credit. The bureaus go off your name, dob and address, you don’t even need an itin, you just fill out a w8 or w9 with the words ‘applied for’

  10. Lucky225 says:

    borrowing against a CD certainly is one way, a less riskier way is to open a passbook savings account at a credit union and open a secured loan with the passbook as collateral.

  11. TasteyCat says:

    Actually, more property managers are reporting rental payment histories, good or bad.

    Secured card should be good. Store/gas cards as well. Down on the bottom of the list would be the credit cards that anyone, even dead people who vote for Chicago politicians, can qualify for, such as First Premier and Orchard.