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How To Build Credit Without a Credit Card

The rumor that it takes credit to build credit is our biggest pet peeve. You can totally build credit without credit, but clearly not everyone’s privy to this life-changing information. 

Yes, starting to build credit is life-changing. A good or excellent credit score can unlock new opportunities for you now and in the far future. When you start to think about your credit score, before you even have one, you’re truly setting yourself up for success. 

There are several ways to start building credit if you don’t have any. Let the Credit Wizard wave its wand and unveil a few you’ll want to look into.

Become An Authorized User

If your parent or loved one is a responsible credit card user, then you may want to ask them if they’d make you an authorized user on their account. Being an authorized user means that your name will be attached to someone else’s credit account.

As an authorized user, you can receive a card of your own or not and just be seen as someone responsible for the bank account. You’re not obliged to pay the credit card bill or debts, but the credit card activity will be accounted for on your credit report.

You’ll want to be sure of two things before you go down this route: 1. Check that the credit card issuer reports authorized users to the credit bureaus. 2. You trust the account holder to make sound financial decisions and build a good credit history. 

Being an authorized user is a great way to start building credit if you don’t have any. Just remember that if the account holder doesn’t make payments on time or goes above 30% utilization, it can reflect poorly on you. 

You’ll want to fully trust that the account holder will make sound financial decisions for both of your credit reports. Once you become an authorized user, then you’re building credit!

Use a Debit Card That Builds Credit

This option is honestly the Credit Wizard’s favorite. Extra is a debit card that helps you safely build credit without already having any.

By connecting the Extra card to your checking account, you can go about your regular spending (without a credit line) and build your credit. Here’s how it works:

Extra connects directly to your bank account. Once connected, Extra creates a spending limit based on your balance. From there on, your spending will help you earn credit and rewards. When you buy something on your Extra Card, they spot you for the purchase, then automatically pay themselves back in the next business day.

At the end of each month, Extra reports your everyday purchases to credit bureaus as credit-worthy (as they should). 

Extra allows you to build credit with a debit card; it sounds like some kind of wizardry, doesn’t it? But it’s true; Extra is one of a kind and one of the best ways to build credit. 

By allowing you to build credit without a credit card, Extra is helping you avoid credit card debt, credit checks, interest, and credit limits. If those aren’t enough perks, the Extra card also lets you earn up to 1% back in redeemable reward points.

For a complete understanding of how you can build credit with Extra, check out How Does Extra Work?

Apply For a Federal Student Loan (If You Need One)

If you plan on going to college, you might need a loan, and you might not have a co-signer. Without a co-signer or credit score, it’s going to be rather tricky to get approved for a student or personal loan.

Rather than applying for a private student loan, it’s best to secure a federal student loan. By filling out the Free Application for Federal Student Aid (FAFSA), you can access federal loans, grants, and scholarships. 

Federal loans are always the better option as they offer lower interest rates and come with income-driven repayment plans and forgiveness programs. As long as you make your monthly payments on time, you’ll start to build credit.

Use Student or Secured Credit Cards

We don’t want you to use a credit card and there are plenty of ways to build credit without one, but if you’re going to use one, consider applying for a student credit card. As a student, you’re more likely to be approved for student credit card programs, which often come without annual fees. 

Remember that being a student doesn’t guarantee you’ll be approved; it’s best to contact all of your potential card issuers and ask what requirements you’ll need to meet.

If you aren’t approved for a student card, you can also look into secured credit cards. Secured credit cards require a cash deposit and credit checks. Sort of like a gift card, you deposit a certain amount into the account, which becomes your spending limit.

Secured credit cards are good options, but the Extra debit card makes depositing funds into a separate account a thing of the past. By connecting the Extra card to your bank, you can avoid transferring funds and just swipe (plus, earn rewards points for your purchases).

Don’t believe others when they say it takes credit to build credit; they’re mistaken. Like, what do you call the Extra debit card then??

Have Your Bills Reported to the Credit Bureaus

Some of your payments automatically get reported to credit bureaus, but for others, you may have to put in a request.

You rarely have a rent payment or auto loan without a credit score, but if you do, make sure that your payments are reported to the credit bureaus. Helping your parents pay utilities or a car lease can also get reported!

If you’re a good sport about paying your bills on time, you should see if your landlord, property manager, or leasing company reports payments to the bureaus. If your payments get reported, then you’re in luck; let the credit-building begin!

Hmmm… you know who else reports subscription payments, coffee trips, and all your other everyday payments to the credit bureaus? Extra. Just saying.

Get A Credit Builder Loan

Credit builder loans are great solutions for people who have little to no credit, and most people get approved for them.

When you’re approved for a credit builder loan, the amount you borrow is held in a bank account while you make payments. Usually, the money remains untouched by you until the loan’s fully repaid.

Once fully repaid, the loan amount is transferred to your savings account. A credit builder loan is basically a way for you to systematically build credit while building savings (a water two plants with one hose kind of deal).

Even though you’re not using the money, you’re building savings and your credit simultaneously. Your loan payments are reported and considered on your credit report. Having your payments reported will help you build credit as long as you create a strong payment history.

Happy Credit Building

Now that you have lots of options to choose from, you can start shaping an excellent credit score for yourself and your future.

The next time someone tries to tell you any different, remember this list of the best ways to increase your credit score:

  • Become an authorized user
  • Use a debit card that builds credit
  • Apply for a Federal Student Loan (if need be)
  • Use student or secured credit cards
  • Have your bills reported
  • Get a credit builder loan

Whether you’re starting from scratch or trying to repair some damage you’ve already done, these methods will come in handy.

Remember that as you begin to build your credit, you will come across many different credit-building myths that may hold you back. Be sure to familiarize yourself with what credit scoring models like a FICO score and VantageScore consider.

And as always, the Credit Wizard is here to help and guide you through some magical credit-building.

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