How to Establish Credit Without a Credit Card

Establishing credit is something that everyone wants and needs to do at some point in their lives. Many people jump into getting several credit cards when they turn 18 and are eligible for credit cards; however, this is not the smartest choice for young adults, or even adults, to make. Individuals are able to establish credit without a credit card and can learn what it means to be financially responsible.

Individuals, especially those just turning 18, can’t afford to purchase new things but they assume that with a credit card they can afford it. This isn’t the case. They end up getting a credit card, maxing it out immediately, and then not being able to make the minimum payments each month. This immediately starts destroying your credit.

There are ways to establish your credit without applying for a credit card. Let’s take a look at a few of these ways below.

One of the first things you need to do is to order a credit report – you can do this free once a year. The reason you need to do this is to ensure that you don’t have anything on your credit that shouldn’t be there.

Once you’ve checked out your credit report, checking and savings account are probably the first priority for young adults seeking to establish credit from scratch without a credit card. Bank accounts are a sign of stability for lenders so open one up and keep it in good standing.

Another great way to establish a credit history is to have someone co-sign a loan for you. However, first things first, make certain you can make the payment. If you can’t make the payment, make sure there will be someone else that can help you out and make the payment on time for you until you can pay them back. This will show up on their credit report as well as yours and is probably one of the simplest methods of establishing credit quickly.

There are pre-paid debit/credit cards that you can purchase. You may also know them as secured credit cards. You are practically lending the funds to yourself. You can simply add funds to the card and you don’t ever have to worry about going over and spending too much because you’ll only be permitted to spend the amount that you funded to the card to begin with, which is known as your spending limit. This is an easy way to establish credit (make sure they report to the credit bureaus though as some may not) and keep your head above water.

If you are on your own, in your own apartment or house, make sure you make your rental payment on time as well as your utility bills. More often than not, these places will report the information to the credit bureaus.

One final tip to help you establish your credit score rather than hurt it, do not keep applying for credit cards and other credit accounts as each time you apply, your credit score dwindles just a little bit. If you are trying to establish a good credit score without the use of a credit card, then you definitely don’t want to hurt it in any way during the process.

Above all, just remember to be patient – it takes time to establish credit.