3 Ways to Build Credit Without a Credit Card
I am vehemently anti-credit cards. I always have been, even though I relied on my Dad’s card to buy me food and gas in college. Keeping track of every transaction and then having to pay for them seemed too stressful for me. I know credit cards are useful in building credit so I can buy a house one day, but I’ve seen how easily it can go awry. Instead of relying on a credit card to build credit, I’ve been relying on other methods.
These methods are much easier to handle, and still build credit based on your ability to pay bills on time. If you’re uncomfortable with the idea of having a credit card, then these methods can be a better option for you. Although these methods aren’t as scary as the big credit card monster, that doesn’t mean you shouldn’t treat them with the same responsibility.
Pay Your Bills
Credit card and loan debt aren’t the only bills you pay every month. You also pay for your utilities, insurance, phone, rent, and car payment. Your payment history on these bills can be used to show how reliable you are with your financial obligations. The PRBC tracks monthly payments to determine a special PRBC credit score. Larger credit bureaus don’t typically consider the information from PRBC, but smaller banks often will.
PRBC is a free website where you can register your monthly bills. You’re required to register at least three, like rent, utilities, and phone, but the more you register, the better your score will be. You want to register all of the monthly bills you pay to have an accurate representation of your payment history. Think of every bill you pay on a regular basis and register it. Even the small things, like gym memberships or subscription boxes, because it all adds up. All of these things are representative of how reliable you are as a bill payer, and can be used to help you obtain loans from a bank.
You’re (hopefully) already paying all of your bills on time to avoid a late fee, so why not capitalize on your responsible payment history to bolster your credit?
Gas it Up
If you don’t want to apply for a credit card from one of the big names (with the big credit limits), but still want to build credit in a more traditional way, consider applying for a store credit card or a gas card. These cards have small limits and, since you can only use them a few places, can be a stepping stone into the world of credit cards.
If you frequently go to a store like Target, then a store card could be a good option for you. That way you can build credit by purchasing necessary items like food and toothpaste. Gas cards are also a good option since you always have to buy gas. As long as you’re diligent about paying the bill in full every month, you’ll be able to build your credit score with them easily.
Need a New Couch?
Another way you can build your credit is by financing certain large purchases that you can’t pay for outright. Many people choose to put things like TVs, furniture, and appliances on a credit card, but you can choose to finance these items with the store instead. Financing something like a new couch on a monthly payment plan can be a good way to build credit without getting involved with a credit card company. If you need, and I do mean NEED, to make a big purchase like that, then it makes sense to use it to your credit advantage.
You’ll still be paying a monthly bill and the longer it takes you to pay off then the higher your interest, but this is only for a certain period of time. You make one purchase and then work to pay it off until it’s gone. With a credit card, you can still use the card and add more debt to it whenever. You can’t add more debt when you finance one purchase. The amount won’t increase or get out of hand.
The most important thing to do when you choose to finance a large purchase is to make sure that the financing company will report to the credit bureaus so your good payment history is on record. If the financing company won’t do that, then you’ll be making payments (with interest) without it reflecting in your credit score.
These methods might not work as quickly as paying off credit card debt, but that are just as effective in the long run. In fact, you should use them even if you have a credit card. The most important thing is that you’re responsible with your finances and make it a priority to always pay your bills, all of them, on time.