Most consumers know that the easiest way to build your credit is by getting a credit card. Credit cards are the easiest way simply because they do not require much to get approved. For the most part, even a consumer that doesn’t have the best credit can get approved for credit card with a reputable bank. There are also those few consumers who would rather go a different route outside of getting a credit card. I will quickly go over the best 2 ways to build credit without a credit card.
1. Become An Authorized User – Free For Most Credit Cards (AMEX – $30-$50/Year Per Authorized User)
The first easy way to build credit without a credit card is to become an Authorized User (AU) is someone that is added to an account, normally a credit card account, and receives all account history including payment history, utilization, and etc. Assuming that the primary account holder has great payment history and utilization, the AU on the account will generate or improve a credit score. To add an AU to an account, the primary account holder can either access their online account management or simply call the credit card company and add them over the phone. This concept has been around for years and is a great way to help your children build their credit when they are 18 years or older. Keep in mind, as an AU, you can also decrease your credit score by showing late payments or high utilization on the account. Even though the activity may not be yours, by you being an AU, you are liable for all actions on the account. Be sure to choose wisely where you decide to become an AU. If you don’t like the risk of becoming an AU, there is another easy way to build credit without a credit card.
2. Add Your Rental History To Your Credit Report
Another easy way to build credit without a credit card is by adding Rental History to a credit report is becoming more popular and it should be as FICO has now approved it in its new FICO 9 Scoring Algorithm. The Vantage 3.0 model, used by Credit Karma and many others, also included this history in the scoring algorithm. This is phenomenal news for consumers who have mixed feelings about credit cards and also consumers who may not be able to obtain a credit cards for themselves. There are many companies who offer this service but the most cost effective is Rental Kharma. As of now, you can go back as far as 24 months of rental history and add it to your credit report. You must go through a third party company to report rent as most consumers would always report 100% on time payments each month and year. By the way, Rental Kharma can only add to Transunion and they are currently wrapping up agreements with Equifax and Experian. Transunion is the only bureau that I have seen used the most; especially with dealerships, and most collection companies.
The Bottom Line
As you can see, building credit without a credit card isn’t impossible at all. There are a few other methods as well. For example, auto and personal loan accounts but that would technically be a co-signer or joint account holder which is not the same. An AU wouldn’t be financially liable for any negative items for payment and such.