Building credit without cards

How to create a credit history without using a credit card

Credit cards make it easy to build your credit history. But they can also make it easy to fall into debt.

As a result, some people regard credit cards with skepticism: 17% of U.S. adults don’t have one, according to a 2019 Federal Reserve report.

No financial product is one-size-fits-all, and it’s OK if credit cards aren’t for you. There are other ways to establish credit — and keep your scores high — that don’t involve a credit card.

1 Loan payments Payments on installment loans, such as student loans, are reported to credit bureaus. So over time, this can build your credit history.

No student loan in your name? A credit-builder loan from a bank or credit union may be an option. With this product, the lender deposits a preset amount into a savings account, and you make monthly payments until the deposit is repaid.

2 Utility bills Other bills that you pay on time each month — cable, water, electric — don’t generally have a direct effect on your credit reports, but that doesn’t mean they’re not important to your overall financial health.

“You must maintain impeccable nontraditional credit,” says Roslyn Lash, a financial counselor in Winston-Salem, North Carolina.

Skipping out on things like utility and cell phone bills could send those accounts into collections, which definitely can harm your credit.

3 Other good habits It’s worth noting that some traditions are changing.

Experian Boost offers a free way to add positive bill payment information for those kinds of expenses to your Experian credit report. Participants must create an account through Experian.

The company said that two out of three consumers see an improvement in their credit scores, with an average increase of about 13 points.

The catch? Not all lenders use Experian or the scoring models affected by Experian Boost when making lending decisions.

Another scoring model, known as UltraFICO, is still in the pilot phase. Once it becomes publicly available, consumers can opt in to allow access to their checking and savings account activity, including how long accounts have been open, frequency of bank transactions, evidence of consistent cash on hand and a history of positive account balances. Like Experian Boost, however, opting into UltraFICO won’t have an impact on all of your credit scores.

Paying your rent, too, can help build your credit history. Some landlords and property management companies already report payments to credit bureaus, but if yours doesn’t, ask if they would be willing to start. Or consider signing up for a rent-reporting service. A record of on-time rent payments not only helps your credit, but it also makes it easier to qualify for other rental homes in the future.