To build credit is no piece of cake, it can get really complicated for anyone. Without a credit history, it’s tough to get a loan, a credit card, an apartment, or any such asset, you can name. With responsible repayments against your credits, you can get a good credit score, for which you need to have credit first. Yes, it is as complicated as it sounds. But let’s say you got the credit somehow but with irregular bill payments you messed up your credit score. What now? How can you rebuild it? Get more credit cards? Secured ones or maybe unsecured ones? What if you do not want a credit card anymore which made your credit history poor? Let’s see what else we have got on the table.
There is no denying that maintaining a decent credit score is inevitably important, but even the best of us can get off-track at times and fall into bad or poor credit. Obviously, credit cards are the first thing that comes into your mind when you have a less-than-ideal credit score, as you want to build a credit score. Because you can pay on time, which gets reported to the credit bureaus, and in some time you are back on track. Wow! Easy Business. Huh?
Suggested Read: Carter’s Credit Card Review 2021
Ways To Build Credit:
But what if we told you that there are other ways to get the job done too? Credit cards do help but you can end up deteriorating your score further too, as a matter of fact, it is not always convenient to pay your credit card bill on time. Here are eight ways that do not include getting a credit card to improve your credit score, doing these can help you in improving your credit score:
- Credit Builder Loan for Credit Improvement
- Get Credit for Your Rent
- Pay Current Loans on Time
- Your Federal Student Loans
- Becoming an Authorized User of Someone Else’s Card
- A Phone Plan That Reports to Credit Bureaus
- Open Credit Account at a Store
- Having a Full Time Job
Without wasting further time, let’s explore these alternatives of credit cards that can help you to build credit.
1. Credit Builder Loan to Improve Credit Score:
This is like a traditional loan that you may take out for buying a vehicle or house, but [plot twist] you do not get the money until you pay it back in full, which means you do not have the access to loaned money upfront, instead you will have to wait until it is paid. The loaned amount for this type of loan is from $300 to $1,000, which is kept in a secure account by the lender. When the loan is paid off completely you get the whole money in your account.
What’s great about this loan is that you are not spending any money from the borrowed money and also paying it off on time, major credit bureaus receive these reports, ultimately your credit score is back out of the red zone.
2. Get Credit for Your Rent:
With services and technologies like we have available today it is possible for landlords to report your payment history to the major credit bureaus. So, if you always pay your rent on time why not check with your landlord and if they are doing so, if not, you can register on “Rent Reporters” and “Rental Kharma” who required verification from your landlord and some sort of monthly fee and you are good to go. These services usually report to one or more of the major credit bureaus (TransUnion, Equifax, and Experian).
This is not a very common practice among landlords, but the ease of access and procedure is making more and more property managers and landlords opt for this.
3. Build Credit By Paying Current Loans on Time:
While trying to improve your credit score, the last thing you would want to do is paying your existing loan installments late. The credit reporting agencies want to see if you can handle and pay back your loan as per the terms and in case of doing so, your credit score can improve considerably.
If you do not have an existing loan, you can apply for a small personal loan from a bank. You can choose from various secured (ones you pay a security deposit for) loans to the unsecured ones (the least common ones, you can get without any collateral). These loans and their timely payments will be your partner in dark times and take you out of the dark caves of bad credit to the sunny and bright world of good credit.
4. Your Federal Student Loan Payment Can Build Credit Too:
If you do not already have a federal student loan, you can easily apply for one without a credit score. A parent or family member with a decent credit score can be your consignee for this loan.
Payments of these loans are reported to all three major credit bureaus (i.e. Equifax, Experian, and TransUnion) so you must avoid late payments at all costs. Notes to take from this: Always pay ON-TIME and IN-FULL.
5. Becoming an Authorized User of Someone Else’s Card:
Many of the credit companies allow cardholders to add authorized user(s), who for being authorized, receive a physical card and can use the credit line of the main cardholder, considering that you are not getting a card on your name or applying for your own credit card, it’s a great deal for getting your credit score to higher numbers.
Your parents, guardian, family member, or a trusted individual can be the possible options to share the credit card with, after all, the “improving-the-score” thing can backfire too if the original cardholder fails to make the on-time payments of the dues.
6. A Phone Plan That Reports to Credit Bureaus:
Having a phone plan in your name that also reposts to the credit bureaus is not too difficult. You might want to check your contract with the phone company for this. If you are successfully paying your bill on time this will improve your credit score just like the on-time payments of other loans.
The postpaid phone company might have dented your credit score for a short-term impact while doing your credit check at the time of your application. Your credit score can also receive a bad impact if they reject your application for the phone plan.
7. Open Credit Account at a Store to Build Credit:
One thing that’s very important before applying for a credit account at a store is that whether the store reports to the three major credit bureaus or not.
Several Stores across the United States offer a credit account, payment of these can result in a slight increase in your credit score.
8. Having a Full-Time Job:
This one doesn’t help you increase your credit score in any way, but is part of the credit file. Some creditors consider paying, full-time and stable jobs to be a reliable factor in approving a credit application. If you have a job, keep it. To simply put it, credit card issuers normally rely on consistent income.
Putting It All Together:
There are several options other than having a credit card for improving your creditworthiness. All these possibilities are practical and can help people with bad credit in getting back on track. The things to focus on are definitely on-time payments, looking for credit builder loans or personal loans, reporting alternative credit data, being a cardholder with a trusted person on their card, and keeping an eye on your debt-to-credit ratio.
Even though it is just a number, but it matters a lot for an adult. So now when you have enough information on your credit score and how to improve it, make sure to get your priorities straight and get your credit score to new heights.