You may have heard that it’s pretty much impossible to build your credit without a credit card.
This may seem like a hard one to break. You may not be able to get a credit card because you have damaged/no credit, and yet, you can’t build your credit without a credit card.
Fortunately, there are ways to build your credit without a credit card and live well while you’re doing it.
Here are a few strategies you might try.
Report Your Rent Payments
In most cases, your rent payments aren’t reported to credit agencies. In fact, less than 1% of FICO reports contain rent information. This means you’re likely not being rewarded for paying your biggest expense online.
However, you can work with rent reporting services that will work with your landlords to get your rent payments reported to the major credit agencies. These services include Rock the Score, Rent Reporters, RentTrack, or Rental Kharma.
They’ll charge you some sort of up-front cost and a monthly charge after that. However, if you’re trying to build your credit, this may be money well spent.
Prepare a Financial Safety Net
One of the problems you face when you don’t have a credit card is not having a safety net when life’s expensive surprises pop up. You may have no way to pay for a $300 dental bill or a $500 car repair without missing a few bill payments now and trying to catch up next month.
It doesn’t have to be this way, as there other ways of creating a safety net with revolving credit. For example, you could get a line of credit. Like a credit card, it gives you access to revolving credit and you’re free to borrow and pay back as you see fit.
However, you may think you can’t get a line of credit because you have no credit or damaged credit. Correction: You may not be able to get a line of credit from a major bank. But there are some lenders like CreditFresh that borrows to people with subprime scores.
If you have low credit, you might consider applying online for something like a Credit Fresh Line of Credit by CBW Bank. Their lending criteria are not as heavily regulated as the major banks, so you may have a better chance of getting approved.
With a line of credit in place as a safety net in case of financial emergencies, you don’t have to miss bill payments to cope with sudden or unexpected expenses.
Pay Your Bills with a Secured Credit Card
You may not be able to get a traditional major credit card, but you can probably get a secure credit card from a major credit card company.
Secured cards work almost exactly like traditional credit cards, except you’re paying an amount of money upfront to secure the card, and those funds act as your credit limit.
Your activity on this secured card is reported to credit agencies. This means that making regular payments on this card and keeping a low balance are two good things that will be reported to credit agencies, which may help your credit score.
Some people have had success in building their credit by putting some monthly bills on their credit cards, then paying down the balance right away.
However, it is crucial to pay your balance down quickly. Missing payments and carrying a high balance month-to-month will end up hurting your credit score instead of helping it.
Anytime you’re trying to build your credit (with a credit card or without), always remember that your credit score is made up of a number of factors. You need to do the right things in all of these areas, at all times. You may be doing the right things 80% of the time, but that 20% can undo all of your good work elsewhere.
Develop a proven plan and stay dedicated to it!
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