3 Ways To Build Credit Without Credit Cards
Credit cards can be a useful tool, when properly taken advantage of. However, many people are becoming more and more skeptical of using them, while others have decided to avoid them altogether. Avoiding debt by not using credit cards is an admirable goal, but using them is one of the primary ways for individuals to build credit.
If you want to build credit, which you’ll need for all sorts of reasons, but don’t want to use credit cards to it, there are a few solid options.
1) Repay Your Student Loans
If you’re able, you can start repaying federal student loans while you’re still in college to begin building your credit history. If you need to wait until after you graduate, that’s fine too. The most important part is to make sure that when you do start payments, they’re always on time and you don’t miss any.
Private student loans are an option as well, but you may find getting one a challenge with little or no pre-existing credit history.
2) Used A Credit-Builder Loan
Credit-builder loans are relatively unknown, and not often advertised, but they’re a great way to build new credit, or repair credit if you’ve had trouble in the past.
Basically, if you’re approved for a credit-builder loan, the loan funds go into a savings account or CD until you’ve repaid the loan. Once repaid, the money is yours to keep. The whole point is simply to get your loan payment history included on your credit report. A good place to look for this type of loan is at any local credit union.
3) Repay A Mortgage Or Car Loan
Mortgage and/or car loan payments both get reported to the major credit bureaus, so either one can help you build your credit history and score.
The challenge, of course, is getting either type of loan if you don’t have an existing credit history. The solution here is often to have a big cash down payment available, and that might even qualify you for more favorable loan terms.
While getting someone to cosign a loan (typically a friend or family member with good credit) is also an option, you should consider it as a last resort.
How To Choose
Your age, income (or lack thereof), debt, and any existing credit history will largely affect which options will be available to you. Whenever possible, start with repaying existing debt before taking on new debt just to build credit.
If you need help figuring out what makes sense for your budget, consider speaking with an experienced financial planner who can help assess your situation and make recommendations that will work for you.
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