5 ways to get a good credit score

Introduction

Welcome to today’s topic of creating a good credit score without the use of a credit card. Most people believe that credit cards are the means to good credit, but that is not the case. Whether you’d rather steer clear of credit cards or are not yet qualified for one, there are a number of ways to establish and sustain a healthy credit profile. Having a good credit score is the key to securing improved loan conditions, rental approvals, and even employment opportunities. Let’s look at five methods to improve your credit score without using a credit card.

Pay Your Bills on Time

One of the strongest contributors to your credit score is your payment history, which counts for approximately 35 percent of your total score. Your ability to make regular and timely payments is something lenders examine closely. While your credit card payments do play into this, other types of financial responsibilities can work towards establishing your credit.

Rent payments, provided they are reported to credit bureaus.
Utility bills, such as electricity, water, and internet.
Cell phone payments, assuming your carrier is reporting to the credit bureaus.

If these payments are sent to the credit bureaus, they can positively affect your score. Some rent-reporting companies, like RentTrack or Esusu, enable tenants to include their rent payments in their credit report. Utilities and cell phone payments can also be reported using services like Experian Boost. Enrolling in automatic payments or reminders can ensure that you never miss a payment deadline.

Take Out a Credit-Builder Loan

A credit-builder loan is a special kind of loan that allows people to build or repair their credit. Unlike a conventional loan, no money is provided in advance. The loan sum, however, is deposited in a secured account and you repay it by monthly installments. Upon full repayment of the loan, the money is released.

These loans are commonly provided by online lenders and credit unions.
You report monthly payments to the credit bureaus, which help develop your credit profile.
Successful payment of the loan shows you handle money responsibly.

The main objective of a credit-builder loan is to create a good payment history. Although you do not access the money directly, every payment on time will help you create a strong foundation for credit.

Become an Authorized User

Another good method of establishing credit without a credit card is by becoming an authorized user on another person’s credit account. If you have a family member or close friend with a well-managed credit card, they can make you an authorized user.

Their payment history, including timely payments, will be reported on your credit report.
You reap the benefits of their good credit practices without having to use the card yourself.
This can help improve your credit history if the primary cardholder pays in full and keeps balances low.

Nonetheless, make sure that the primary cardholder is responsible with the credit. Any adverse activity, including late payments or high usage, could also hurt your credit score.

Report Alternative Credit Data

Over the last few years, financial technology has made it simpler for consumers to report alternative credit data to the three major credit bureaus. This is particularly helpful for individuals who don’t have traditional credit accounts but need to show their financial responsibility.

Companies such as Experian Boost enable you to report payment of utility, internet, and streaming services.
Rent payment websites such as LevelCredit and RentTrack can report your regular monthly rent payments.
Certain telecom operators permit customers to have their payment history included on their credit reports.

By using these services, you can have your regular payments reflected, so that your good credit record improves. These alternate data points enable lenders to know more about your spending and creditworthiness.

Pay Off Existing Debt Wisely

If you currently have installment loans, like student loans, auto loans, or personal loans, taking care of them can contribute to a healthy credit score. Lenders will consider how responsibly you manage existing debt, so showing good management can do a lot to improve your credit profile.

Pay on time each month to prevent late charges and bad marks.
Avoid unnecessary borrowing and keep debt at manageable levels.
Look into refinancing or consolidating loans if it decreases monthly payments.

Paying off installment debt not only improves your payment history but also your credit utilization ratio, which can increase your credit score in the long run.

Use a Secured Loan to Build Credit

Secured loan is another alternative to establishing credit without a credit card. The loan asks you to pledge collateral, for example, a savings account or certificate of deposit, that guarantees the loan amount.

The lender takes the collateral as security until the loan is repaid.
The lender reports on-time payments to the credit bureaus.
Secured loans are simpler to qualify for, even if you don’t have a credit history or little one.

Responsible use of a secured loan demonstrates to lenders that you can handle debt, and it builds a good credit history in the long run.

Conclusion

It is possible to have a good credit score without ever using a credit card. By making payments on time, utilizing credit-builder loans, becoming an authorized user, reporting alternative credit information, and being responsible with existing debt, you are able to build and sustain good credit. All these measures give a strong foundation for financial prosperity and lead to greater opportunities in the future. Establishing credit is a matter of patience and perseverance, but with proper planning, you can have a good credit rating without having to use a credit card.

5 ways to get a good credit score without a credit card