How to Build Credit Without A Credit Card

Written by Banks Editorial Team
5 min. read
Written by Banks Editorial Team
5 min. read

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Some people view credit cards as the only way to help build credit because most credit card companies send payment history to the three major credit bureaus. Credit cards work great for many people, but it is possible to incur debt and pay interest with a credit card, and you shouldn’t feel pressured to use a credit card solely to build credit. 

We will discuss alternatives for people who prefer to stay away from credit card debt without losing out on helping their credit score grow.

MoneyLion Credit Builder Plus - Save & Build Credit
Access Credit Builder Loans through Finance, Mobile Banking, Cash Advance & Auto Investing MoneyLion App. Save Money and Build or Improve Your Credit.

Is Your Credit Score Important? 

Your credit score is an important number. This score can impact loan amounts, interest rates, and monthly expenses. Lenders may look at your credit score and other information before giving you a mortgage or auto loan. So, a high credit score may increase your chances of getting approved.

Borrowers with poor credit may resort to payday and title loans to cover emergency expenses. These loans may have high-interest rates which means if you make minimum payments, you will be paying back more than you would with a lower interest rate. A high credit score can give you better opportunities and you could get a better interest rate.

A credit score can impact your finances even if you do not seek a loan. Landlords may look at your credit score before letting you live on their property. Credit scores help landlords gauge each applicant’s level of risk. Insurance companies may view your credit scores the same way. 

Why Is Credit Building Important?

Credit building improves your credit score through various actions, such as paying debts on time. Consumers build credit to get more attractive interest rates and possibly higher loan amounts. Raising your credit score could put you in a better position to secure a mortgage or auto loan.

Credit Card Alternatives to Build Credit

Credit card companies report your payment history and debt to the credit bureaus. On-time payment history helps improve your credit score, but you could risk racking up serious debt. The debt can become unbearable and if you are no longer able to make payments or pay it down, you could damage your credit score. Some people prefer to stay away from credit cards to avoid this scenario.

If you still want to help build your credit score, you’re in luck. It’s possible to build a credit score even if you don’t have a credit card. You can demonstrate a strong on-time payment history and responsible debt management without using a credit card.

Ways to Build Your Credit Without a Credit Card

Credit cards aren’t the only way to help boost your credit score. We have highlighted some strategies to help build credit without a credit card.

Consider a Personal or a Car Loan

Taking out loans and ensuring that you pay them on time strengthens your payment history. Payment history is the most critical credit category since it makes up 35% of your score. Most lenders will report your payment history and debt to credit bureaus. You might pay a higher interest rate on these loans if you have a lower credit score. Be sure to do your research and ask the lender what your estimated rate might be before applying. However, you may be able to refinance these loans in the future to continue building up your score with on-time payments.

MoneyLion Credit Builder Plus - Save & Build Credit
Access Credit Builder Loans through Finance, Mobile Banking, Cash Advance & Auto Investing MoneyLion App. Save Money and Build or Improve Your Credit.

Become an Authorized User

Even when you don’t want responsibility for your own credit card, if you think it’s the best way for you to improve your credit score, you can become an authorized user of a friend or family member’s credit card, if the terms allow this. The cardholder’s activity may impact your credit score, helping you reap the benefits of a credit card without owning one. It is always best to make sure you read the terms or ask questions to make sure that it could benefit your credit as well. Some people use this strategy to help build their credit and qualify for a credit card later.

The authorized user strategy only works if the primary cardholder is financially disciplined. If the cardholder makes on-time payments, your credit score could increase. However, a primary cardholder’s late payments and higher debt might hurt an authorized user’s credit score. Your credit score’s movement typically depends on the primary cardholder’s actions. So only become an authorized user if you trust the primary cardholder’s financial judgment.

Get a Credit Builder Loan

A credit builder loan is exactly what it sounds like: a loan that can help build your credit. The lender reports your payment history to the major credit bureaus. Credit builder loans differ, but typically you receive some of the loan’s proceeds immediately, and the remaining funds get stored in a reserve account. After paying off the loan, you’ll get access to the money sitting in the reserve account.

MoneyLion offers access to a Credit Builder loan (3) through their Credit Builder Plus membership (2) to help you improve your score. More than half of MoneyLion’s members have raised their scores by 42+ points within 60 days (1) . The Credit Builder loan (3) is one part of the MoneyLion mobile app’s ecosystem. They also offer products and services that can help you bank, invest, and grow.

Get a Phone Plan

Most people use a smartphone and are on a phone plan. The fees you pay for this plan could improve your credit score as well. When assessing your score, if reported, credit reporting companies will consider your phone plan payment history.

Continue to Repay Existing Loans

Any loan repayments could help improve your credit score. Each repayment demonstrates your ability to manage debt. If you fall behind on payments, come up with a plan to catch up, or call the loan originator to discuss alternate arrangements. Lowering expenses and picking up a side hustle could also help close the gap on your obligations. You don’t want to take on more debt than you can handle. Effective budgeting and on-time loan repayments could help strengthen your credit score.

Report Alternate Payments and Rent Payments

Monthly rent payments are similar to monthly mortgage payments. They both show your ability to make consistent payments and stay on top of your expenses. You can ask your landlord to see if they could report your rent payments to the three credit bureaus. If the landlord does not report your rent payments, you can contact credit agencies and report your rent payment history. You can follow the same approach with alternate payments. Creditors have been recognizing more types of payments, such as student loans, TV bill payments, and more.

Keep Your Credit Utilization Rate Low

Your credit utilization ratio makes up 30% of your credit score. This rate measures the percentage of credit you are currently using. For example, if you have a $10,000 line of credit and are sitting on a $1,000 debt, your utilization ratio is 10%. A ratio under 10% is ideal, but a credit utilization ratio below 30% should still improve your credit score. If you pay off debts on time and don’t spend more than you can afford, your credit utilization rate will decline. A decreasing credit utilization rate paves the way for a higher credit score.

Build Your Credit with MoneyLion

MoneyLion’s Credit Builder Plus membership (2) gives you access to a Credit Builder loan (3) that can help you boost your score, even if you don’t have a credit card or good credit history. MoneyLion will report payments to the credit bureaus, which if on time, will demonstrate that you have a good payment history. Please keep in mind, that you have to meet certain requirements to take out a Credit Builder loan (3) , but you can find out all about that on their FAQ page on their website.

MoneyLion has several perks beyond their Credit Builder loans (3) . You can monitor your finances, invest in thematic portfolios (5) , borrow up to $250 in cash advances at 0% APR (6) , and more. Want access to Credit Builder loan (3) and the other perks? Take the first step and Download the MoneyLion app today. (4)

MoneyLion Credit Builder Plus - Save & Build Credit
Access Credit Builder Loans through Finance, Mobile Banking, Cash Advance & Auto Investing MoneyLion App. Save Money and Build or Improve Your Credit.

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Credit Reserve Accounts Are Not FDIC Insured • No Bank Guarantee • Investments May Lose Value. For important information and disclaimers relating to the MoneyLion Credit Reserve Account, see Investment Account FAQs and FORM ADV.

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This optional offer is not a MetaBank® product or service. Credit Builder Plus membership ($19.99/mo) unlocks eligibility for Credit Builder Plus loans and other exclusive services. A soft credit pull will be conducted which has no impact to your credit score. Credit Builder Plus loans have an annual percentage rate (APR) ranging from 5.99% APR to 29.99% APR, are made by either exempt or state-licensed subsidiaries of MoneyLion Inc., and require a loan payment in addition to the membership payment. The Credit Builder Plus loan may, at the lender’s discretion, require a portion of the loan proceeds to be deposited into a reserve account maintained by ML Wealth LLC and held by DriveWealth LLC, member SIPC and FINRA. The funds in this account will be placed into money market and/or cash sweep vehicles and may generate interest at prevailing market rates. You will not be able to access the portion of your loan proceeds held in the credit reserve account until you have paid off your loan, and until your Credit Builder Plus membership payments are current. If you default on your loan, your credit reserve account may be liquidated by the lender to partially or fully satisfy your outstanding indebtedness. May not be available in all states.

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Credit score improvement is not guaranteed. A soft credit pull will be conducted that has no impact to your credit score. Credit scores are independently determined by credit bureaus. Data was sourced from credit score data from over 74,000 Credit Builder Plus members with an active loan between August 7, 2019, and February 18, 2021. Credit score improvement is not guaranteed. Credit scores are independently determined by credit bureaus. MoneyLion is not a Credit Services Organization. Credit Builder Plus is an optional service offered by MoneyLion.

×

Credit Reserve Accounts Are Not FDIC Insured • No Bank Guarantee • Investments May Lose Value. For important information and disclaimers relating to the MoneyLion Credit Reserve Account, see Investment Account FAQs and FORM ADV.

×

This optional offer is not a MetaBank® product or service. Credit Builder Plus membership ($19.99/mo) unlocks eligibility for Credit Builder Plus loans and other exclusive services. A soft credit pull will be conducted which has no impact to your credit score. Credit Builder Plus loans have an annual percentage rate (APR) ranging from 5.99% APR to 29.99% APR, are made by either exempt or state-licensed subsidiaries of MoneyLion Inc., and require a loan payment in addition to the membership payment. The Credit Builder Plus loan may, at the lender’s discretion, require a portion of the loan proceeds to be deposited into a reserve account maintained by ML Wealth LLC and held by DriveWealth LLC, member SIPC and FINRA. The funds in this account will be placed into money market and/or cash sweep vehicles and may generate interest at prevailing market rates. You will not be able to access the portion of your loan proceeds held in the credit reserve account until you have paid off your loan, and until your Credit Builder Plus membership payments are current. If you default on your loan, your credit reserve account may be liquidated by the lender to partially or fully satisfy your outstanding indebtedness. May not be available in all states.

×

Credit Reserve Accounts Are Not FDIC Insured • No Bank Guarantee • Investments May Lose Value. For important information and disclaimers relating to the MoneyLion Credit Reserve Account, see Investment Account FAQs and FORM ADV.

×

Credit Reserve Accounts Are Not FDIC Insured • No Bank Guarantee • Investments May Lose Value. For important information and disclaimers relating to the MoneyLion Credit Reserve Account, see Investment Account FAQs and FORM ADV.

×

Credit Reserve Accounts Are Not FDIC Insured • No Bank Guarantee • Investments May Lose Value. For important information and disclaimers relating to the MoneyLion Credit Reserve Account, see Investment Account FAQs and FORM ADV.

×

Investment advisory services provided by ML Wealth LLC. Investment Accounts Are Not FDIC Insured • No Bank Guarantee • Investments May Lose Value. For important information and disclosures relating to the MoneyLion Investment Account, see Investment FAQs, Form ADV Brochure, and moneylion.com/investing. Accounts are subject to a monthly account fee of $1, $3 (accounts valued over $5,000), or $5 (accounts valued over $25,000).

×

This optional offer is not a MetaBank® product or service. Credit Builder Plus membership ($19.99/mo) unlocks eligibility for Credit Builder Plus loans and other exclusive services. A soft credit pull will be conducted which has no impact to your credit score. Credit Builder Plus loans have an annual percentage rate (APR) ranging from 5.99% APR to 29.99% APR, are made by either exempt or state-licensed subsidiaries of MoneyLion Inc., and require a loan payment in addition to the membership payment. The Credit Builder Plus loan may, at the lender’s discretion, require a portion of the loan proceeds to be deposited into a reserve account maintained by ML Wealth LLC and held by DriveWealth LLC, member SIPC and FINRA. The funds in this account will be placed into money market and/or cash sweep vehicles and may generate interest at prevailing market rates. You will not be able to access the portion of your loan proceeds held in the credit reserve account until you have paid off your loan, and until your Credit Builder Plus membership payments are current. If you default on your loan, your credit reserve account may be liquidated by the lender to partially or fully satisfy your outstanding indebtedness. May not be available in all states.

×

Credit Reserve Accounts Are Not FDIC Insured • No Bank Guarantee • Investments May Lose Value. For important information and disclaimers relating to the MoneyLion Credit Reserve Account, see Investment Account FAQs and FORM ADV.

×

Credit score improvement is not guaranteed. A soft credit pull will be conducted that has no impact to your credit score. Credit scores are independently determined by credit bureaus. Data was sourced from credit score data from over 74,000 Credit Builder Plus members with an active loan between August 7, 2019, and February 18, 2021. Credit score improvement is not guaranteed. Credit scores are independently determined by credit bureaus. MoneyLion is not a Credit Services Organization. Credit Builder Plus is an optional service offered by MoneyLion.

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