How to Build Credit Without a Credit Card
Learn Money Girl’s top tip for building credit when you can’t get approved for a credit card.
Laura Adams, MBA
Money Girl reader Reggie L. asks:
“I’m currently enrolled in a debt management plan, which required me to close my credit cards in order to get out of debt. Without cards, how can I build credit and raise my credit score?”
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ANSWER:
To build credit you must have credit accounts, such as credit cards, lines of credit, and installment loans, and use them responsibly. But even if you’ve had a hardship that set you back financially, it’s always possible to rebuild your credit.
If you can’t get approved for a regular credit card—or you can’t use one while you’re working through a debt management plan—the best way to build credit is with a secured credit card.
A secured card gives you many of the same benefits as a regular credit card, but it’s a different financial tool. You can use it just like a regular card, but you’re required to make an upfront, refundable deposit to open the account.
You choose the deposit amount, which could range from $200 to $3,000. Those funds become your available credit limit and can be used by the card company to pay off your balance, if you don’t make monthly payments as agreed.
The best secured cards report your payment transactions to the credit agencies, which is the key to building credit. As you make timely payments, you’ll add positive history to your credit files each month. The card company may even give you the option to convert to a regular credit card after you demonstrate responsible use.
The following secured cards report payment information to each of the 3 nationwide credit agencies, and have very low fees:
Toraise your credit scores, you must build a history of positive information in your credit reports by having active credit accounts, making payments on time, and not maxing out credit cards.
Other Articles and Resources You Might Like:
How to Get Credit With No or Bad Credit
9 Things That Can’t Hurt Your Credit Scores
25+ Best Personal Finance Tools
How to Get Your Free Credit Score
Does Paying Off Credit Card Debt Improve Your Credit Score?
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Build Credit photo from Shutterstock
About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.