Can You Build Credit Without Credit Cards or Loans?

Do One Thing: Don’t know if you have a credit score? Go online and check for free with VantageScore, a commercially available score provided at no cost to consumers.

When it comes to building credit, it can be a lot like landing your very first job. Most employers want to hire someone with experience. When you are just starting out in the working world, experience is often the one thing you don’t have yet.

The same can be true about a credit file. For young adults just entering the job market or those who have relied on a partner for full-time financial support in the past, building a solid credit history when you don’t have a credit card in your name or a loan can be a challenge. 

Credit Invisible

According to the Consumer Financial Protection Bureau, an estimated 45 million U.S. adults are without a credit score. That means those Americans – sometimes referred to as credit invisible – typically don’t have enough information on file with at least one of the three major credit reporting bureaus to be scored. 

Remember, your credit score is a three-digit number from 300 to 850 (the higher the better) that helps lenders determine if they should loan you money and how much you’ll pay in interest. So not having a score can be a problem, of course, for someone who wants to access credit – to get auto insurance or rent an apartment on their own – but isn’t able to. 

Ways to Build Your Score

For those with little credit history and even those who have made some financial mistakes in the past, take heart. There are ways to build or boost your score even if you don’t have a credit card or loan right now. Consider these options to build your credit score.

1. Pay a Service to Report Payments

You can use a service, such as PayYourRent to help get credit for paying bills such as streaming services, utilities, and cell phones. All three of the major credit bureaus – Equifax, Experian, and TransUnion – will include this type of payment information in credit reports if they receive it, according to VantageScore.

Note: You typically have to pay these bills using a checking account – not a credit card – to receive credit for the payments.

2. Pay Your Student Loans

For those who take out federal student loans to pay for college, you can build credit by making on-time loan payments. While you shouldn’t take out an additional loan to pay for your education if you don’t need to, those who already have these types of loans can see the added benefit of credit building as the loan is repaid.  

3. Ask to be an Authorized User

You can ask your parents – if they have good credit – to add you to a credit card account as an authorized user, which can help you build credit.

What are the Steps to Become an Authorized User? If your parent agrees to add you as an authorized user:

• They should contact their credit card issuer and check to make sure the lender will report an additional user – you – to the three major credit reporting bureaus.
• If they don’t, it’s time to try another card.
• A word of caution: if payments aren’t made on time, it will negatively impact the credit scores of everyone attached to the account.

4. Seek a Secured (or Student) Credit Card

Have you been turned down for a traditional credit card? It happens more than you might think. If that’s the case, don’t sweat it. You can apply for a secured credit card, which is a credit card for someone with no (or low) credit. While they look like a regular credit card, this financial tool requires users to pay a security deposit.

How a Secured Card Works

• You pay the issuer (a credit union, bank, or other financial institution) a specific amount, such as $500.
• You can charge up to a specific amount each month.
• If you use and pay off your secured card on time each month for a year or so, the issuer may allow you to transition your account to a traditional credit card.

Tip: Just like with the authorized user scenario, select a secured card that reports to the three major credit bureaus.

With reporting by Casandra Andrews