5 ways to improve your credit score without a credit card

Unless you have enough cash to finance your entire life, you’ll probably need credit at some point. Whether you’ll need to take out a mortgage to buy a house, take out a car loan, or borrow money to start a business, a good credit score will help you get better rates.

But a good credit score doesn’t always come easy. If you have bad credit, it often takes some time and effort to repair it. Meanwhile, having no credit at all is almost more of a hurdle. Why? Because lenders are especially fickle about loaning money to someone whose ability to repay is still unproven.

Still, everyone starts with the same clean slate when it comes to credit. And while using a credit card responsibly is a great way to build or improve your credit, it’s far from the only method that works.

Here are five ways to build your credit history and improve your score without getting a credit card:

Option #1: Take out a small loan at your bank or credit union

If you have a healthy relationship with a local bank or credit union, check with them first to see if you meet the criteria for a small, personal loan. If you do, borrow as much as you need for a large purchase you planned to make anyway — or a small amount you know you can repay over time.

Once you secure a small installment loan, you should make repayment a priority. This type of loan is likely the best way to help you build credit or improve your credit score, but only if you make your monthly payment on time, every time.

Option #2: Ask to be someone’s authorized user

If you are close with someone with good or excellent credit, you can always ask them to add you as an authorized user on their account. If you can make it work, your credit score will benefit from their monthly purchases and payments — even if you don’t make many transactions yourself.

Also: Authorized users vs. joint accounts: What’s the difference?

Just remember, the flipside is also true. If you become an authorized user and the account holder defaults for any reason, your credit score could suffer tremendously. Therefore, this strategy would probably work best with a family member or close friend you trust.

Option #3: Consider taking on a federal student loan

You could always consider taking on a federal student loan if you’re a student. Since a credit check is not required for this type of loan, you can secure one without an established credit history.

Federal student loans are considered installment loans, so paying your bills in full and on time will also help you build a credit history over time. Just make sure you’re only borrowing what you need — and what you know you can pay back.

Also: A single parent’s financial guide to returning to school

Option #4: Take out a peer-to-peer loan

If you’re unable to borrow money from your bank or credit union, you could always attempt a peer-to-peer loan through a P2P lending firm like Prosper or Lending Club.

Although these loans offer higher interest rates for borrowers with short credit histories or a low credit score, the fact that they report to the three major credit reporting agencies means that on-time payments can build your credit score over time. Just make sure you’re not borrowing more money than you need or wasting it on unnecessary purchases. 

Option #5: Self-report your rent

Although paying rent to a private landlord usually won’t improve your credit, there are ways to make your rent count each month. According to credit reporting agency Experian, you should start by contacting your rental agency or landlord to see if they report timely rent payments to the three credit reporting agencies.

If not, you can sign up on your own through a rent payment service working with the credit bureaus, like Experian RentBureau. Other options include sites like ClearNow.com, RentTrack.com, or PayYourRent.com. These sites, and others like them, process your rent payment electronically and report your payment history to the three credit reporting agencies for an added fee.

Improving your credit score, one step at a time

If you’re able to make one of these options work, you should be on your way to an improved score in no time. Just remember, it’s important to take the process seriously and pay all of your bills on time every single month — no matter what.

While it’s true that a slew of on-time payments can help your score climb, it’s also true that just a few late payments can completely wreck any progress you’ve made. And when it comes to building credit or improving your credit, the last thing you need is another mountain to climb.

[This article was first published on The Simple Dollar in 2020. It was updated in March, 2022.]