4 ways to build credit without a credit card

Credit cards offer users a great way to build credit, but if not managed wisely can lead to overspending and long payoff periods. There are four other—and possibly better— ways to build credit worth considering. (iStock)

Opening a credit card can be an excellent way to build credit. But it’s not the only way, and not always the best way. Most credit cards carry high-interest rates. Credit cards can make it easy to overspend, and if you only make the minimum monthly payments, you can be paying for your purchases for years.

On the plus side, credit cards can help you build a good credit score if managed wisely. They are much more secure than carrying cash, many cards come with awards and points, and they are fairly easy to qualify for. Besides opening a credit card, there are several other ways to build credit over time.

Do you want to build your credit but are unsure of where you fit on the credit score spectrum? Then you should start using a credit monitoring service to track changes to your credit score. Credible can get you set up with a free service today.

Take out a personal loan

A personal loan is usually unsecured, which means you don’t need collateral to qualify. It is a fixed amount of money that is given in one lump sum and can be used for almost anything. Generally, interest rates are fixed, which means your rate won’t change during the repayment period. When consistently making payments on time, this can be a great way to boost your credit.


But personal loans aren’t for everyone. If your credit score is lower than 600, you may pay higher rates than those advertised by lenders, or not qualify at all. There can also be hidden fees and penalties. Find your best rate by visiting Credible and using its personal loan calculator.

At the same time, interest rates on personal loans are decent compared to the rates on credit cards and start at about 4.99% APR. Check rates from multiple lenders all in one place in as little as two minutes at Credible.

Make on-time payments for installment loans

Car loans, mortgages and student loans are installment loans. Some are secured with collateral, while others are unsecured. Although personal loans are considered installment loans, you won’t receive a lump sum of money with an installment loan. Instead, the amount you borrow goes to the lender.

Most installment loans come with lower interest rates than many credit cards. That can mean lower monthly payments. Installment loans are also good for building credit if payments are made on time until repaid in full.


Opt for a credit builder loan

If you have poor credit or no credit at all, opting for a credit builder loan may be an option to help build your credit score over time. Unlike a personal loan, you make an initial deposit into a bank account held by a lender.

You won’t gain access to the money you borrow until the loan is paid in full. But you’ll build a positive credit history by making monthly principal and interest payments, which are reported to credit bureaus over the term of the loan.

Get a secured credit card

Technically a credit card, secured cards are a lot like a credit builder loan, except you get immediate access to your money. You make a deposit to the card, equal to the set credit limit. The more funds you deposit, the more money you have available, which is paid back in monthly installments.

It is fairly easy to qualify for a secured credit card, and as payments are reported to credit bureaus, you can build a positive credit history.

Choose instead a standard credit card

If instead, you choose to stick with a standard credit card to build credit, you can shop and compare multiple credit cards at an online marketplace like Credible. But before you apply, understand the pros and cons of opening a credit card to find the best options for you.


Low introductory rates. Many credit cards offer low or 0% introductory interest rates on purchases and balance transfers for a limited time—usually no less than 6 months.

Rewards and perks. Many credit card companies offer rewards, perks, miles, and other incentives. The more you spend, the more you earn. Rewards and points can also be redeemed for cash or to go toward paying your bill.


Pay over time. Credit cards offer the convenience to pay over time, which can help borrowers with poor credit build good credit and can help users with good credit strengthen their credit history.

Save and secure. Credit cards are much safer than carrying cash or using a debit card. If someone steals your card, federal law limits your liability to $50 in purchases. Some cards even offer zero liability.

Quick access to funds. Because credit cards give you immediate access to funds, they are good to have around for those unexpected emergencies.


Risk of overspending. Because credit cards give you immediate access to cash, it is very easy to pile up debt. Make only the minimum monthly payments, and you’ll pay compounding interest. Plus, it can take years to pay off your balance.


High-interest rates. The average interest rate on credit cards was 16.9% at the end of 2019, according to the Federal Reserve Board of Governors' consumer credit data.

Fees and penalties. Most credit cards charge fees on top of interest. These fees can add up quickly. When added to your balance, it can add to the time it takes to pay off your balance.

Credit cards offer the illusion of wealth. When you have quick access to cash, overspending is tempting. If you’ve got a high credit limit, you may overspend simply because you can. Midway through 2020, credit card debt amounted to nearly $820 billion according to Statista.

If used wisely, however, credit cards can help you build credit. If you’re set on a credit card, visit an ​online marketplace like Credible​ to find the right credit card today.