How to Build Credit History Without a Credit Card

Published on March 26, 2019 by CreditFresh

A person looking distressed while staring at pile of credit cards in front of him

Sometimes a lack of credit may feel like a lack of options. It might be harder to get access to some of the things that good credit can help you attain, as damaged (or no) credit may keep someone from getting the home they want to own or the car they want to drive.

A lack of good credit may make some things in life a little more complicated. A potential borrower may be seen as a high risk by a lender, which means they may be paying a much higher interest rate on things like a car lease. They may end up paying BMW prices for a Honda Civic.

Not being able to get a credit card could lead to frustration when trying to do something that “everyone else” gets to do, like renting a car, booking a hotel room, or buying something online.

But don’t lose hope! The good news is that there are ways to systematically build your credit history. Here’s how to do it the right way and work towards the life you want to live.

Can You Build Credit Without A Credit Card?

Graphic image of a credit card being cut by a pair scissors

Yes, you absolutely can build credit history without a credit card:

  • You have no/damaged credit, so…
  • You can’t get a credit card, but…
  • You can’t build your credit, because…
  • Return to point #1

Rest assured, there are ways to build your credit without a credit card. You simply have to be diligent and methodical in your approach.

Building credit history or impacting your credit score is not achieved using tricks, hacks, or shortcuts. You need to rely on proven and reliable methods of impacting credit, efficiently and incrementally. You can’t fix things overnight, but if you can start doing the right things right now, your actions may pay off.

Note: Please remember that no single one of the things we’re about to discuss will necessarily impact your credit score by itself. Your credit score is extremely dynamic and complex, so you need to do a series of right things to build it, not just one good thing.

Find and Dispute Any Errors In Your Credit History

Credit Report on a clipboard with a pen

If you have no credit or no credit history, you can skip this step.

However, if you’re trying to impact your credit history positively, one of your first steps should be to ensure that your credit report is completely accurate. What if your credit standing is being impacted by something you didn’t do, or a debt you don’t actually owe?

It happens more often than you might think. In fact, it’s been reported that about 1 in 5 people have found mistakes on their credit report.

This means that credit histories of roughly 1 in 5 people would be evaluated incorrectly by lenders if these same people were to apply for a loan. These people could be unknowingly paying more than they should in interest on their car or home loans. These errors may also cost them the ability to get a home or car in the first place.

So, make sure everything on your report is accurate. And if it’s not, make sure you dispute it. How do you dispute something in your credit report? Follow the steps listed here. It can take one to six months, so the sooner you start, the better.

Stay on Top of Payment Schedules

We cannot stress the importance of this step enough, because late payments will undo progress. This is the foundation of your credit score. When you’re building up positive credit history, you need to take extreme care to make sure you’re paying all of your bills on time.

Do whatever it takes — write all of your payment due dates down, with each of the amounts due and their due dates, and then put them on a calendar. Some people prefer to put alerts and reminders on their phones, while other people still prefer sticky notes and pens. Find out what works for you and stick to it. This should be a priority when building your credit history.

Graphic image of a hand putting money in an envelope with an invoice sticking out

Does Paying My Rent Help My Credit Score?

This is a very popular question with a rather unpopular answer. The reality is that in most cases, no, your rent payments are not reported to credit agencies, so they do not help your credit standing.

This is especially true if you are renting a room, basement, or house and pay your landlord in cash or e-transfer every month. There may not be much of a paper trail and nothing gets sent to a credit bureau. In fact, less than 1% of FICO credit reports contain rent information. But this doesn’t have to be the case.

Your rent is more than likely your biggest expense, and when you are building credit, you should be rewarded for paying it on time. Fortunately, there are third-party rent reporting services that can let credit bureaus know that you’re paying your rent on time every month to incrementally help your credit score.

These services include:

  • Rent Reporters: A one-time enrolment fee of $94.95, and the service is $9.95 per month. They report to TransUnion and Equifax.
  • Rental Kharma: Enrollment is $25, and the service is $6.95 per month. It reports to TransUnion.
  • RentTrack: Their fees are lower if your landlord is a client. Without landlord participation, there is a $6.95 fee, but they report to all three major credit bureaus.
  • Rock the Score: An enrolment fee of $25, and $8.95 per month after that. It reports to TransUnion and Equifax.

Does Paying a Phone Bill Help Build Credit?

This is another very popular question, without an easy answer. In broad strokes:

  1. Paying your bills on time is always a good thing. This is true for any bill.
  2. Some cell phone companies and utility companies report your payment activities to credit bureaus, but some of them do not. So, making your payments on time may not help your score, per se, but…
  3. If you fail to pay your bill, your cell phone carrier may report the delinquent payment and/or turn it over to a collection agency. Collections are likely to be reported to credit agencies and hurt your credit rating, and paying all of your bills on time is the best way to avoid that damage.

You may also ask, “Does financing a phone build credit?” After all, they probably looked at your credit when you bought the phone and set up your plan, so they must report your payments, right?

This is the same answer as above: likely no. However, don’t take any chances, because late payments that turn into collections can hurt you far more than timely payments can help you.

What About Credit Building Loans or Lines of Credit?

Someone planted money in soil hoping for it to grow

We just talked about one area where a line of credit may help you build positive credit history. But, it can also act as a safety net for surprise expenses. One of the key challenges you face when building credit is making payments on time.

Let’s say you have been working hard to be frugal and do all the right things for a couple of months to build a positive credit history. But, one day, you get in a car accident and you’re now facing $2,500 in repairs and medical expenses.

You don’t have much money saved, so you may make the decision to pay a few bills late in order to pay for the more urgent car repairs. Those late payments can undo the work you’ve done for the last couple of months.

This is why it may be very helpful to have some sort of safety net in place during the process of trying to build your credit. However, the success of this approach relies on three absolutely crucial things:

  1. You make all of your line of credit payments on time (or early)
  2. You pay down the balance as quickly as possible
  3. You still live within your means and don’t put things you cannot afford on your line of credit

Failing to do any of those 3 things is likely to hurt your credit score and undo any of the good work you’ve done elsewhere.

We would like to stress again that building your credit history takes time and there are not quick fixes or shortcuts. However, if you build good habits and do the right things, you will be rewarded.