Can You Build Credit History Without a Credit Card?
Yes, you absolutely can impact your credit history without a credit card. Maybe you feel like:
- You have no/damaged credit, so…
- You can’t get a credit card, but…
- You can’t build your credit, because…
- Return to point #1
Building credit history or impacting your credit score isn’t done using hacks or shortcuts. You need to rely on proven and reliable methods of impacting credit efficiently and over time. You can’t fix things overnight, but if you can start doing the right things right now, your actions may pay off.
Remember that no single one of the things we’re about to discuss will necessarily impact your credit score by itself. Your credit score is dynamic and complex, so you need to keep up with a lot of different good financial habits to have a chance of impacting your score.
How to Potentially Impact your Credit History
Find and Dispute Any Errors in Your Credit History
If you have no credit or no credit history, you can skip this step. But if that’s not the case, one of your first steps should be to make sure that your credit report is completely accurate. What if your credit standing is being impacted by something you didn’t do, or a debt you don’t actually owe?
It happens more often than you might think. If you’re someone with errors on your credit report, this means that your credit history would be evaluated incorrectly by lenders if you were to apply for a personal loan. You could be unknowingly paying more than you should in interest on your car or home loans. These errors may also cost you the ability to qualify for a home or car in the first place.
So, make sure everything on your report is accurate. And if it’s not, make sure you dispute it[1].
Stay on Top of Payment Schedules
We cannot stress the importance of this step enough, because late payments will undo progress. This is the foundation of your credit score. When you’re building up credit history, you need to take extreme care to make sure you’re paying all of your bills on time.
Do whatever it takes — write all of your payment due dates down, with each of the amounts due and their due dates, and then put them on a calendar. Some people prefer to put alerts and reminders on their phones, while other people still prefer sticky notes and pens. Find out what works for you and stick to it. This should be a priority when building your credit history.
Does Paying My Rent Help My Credit Score?
The reality is that in most cases, no, your rent payments are not reported to credit agencies, so they won’t help your credit standing.
This is especially true if you’re renting a room, basement, or house and pay your landlord in cash or e-transfer every month. There may not be much of a paper trail, and nothing gets sent to a credit bureau. But this doesn’t have to be the case.
Your rent is more than likely your biggest expense, and when you’re building credit, you should be rewarded for paying it on time. Fortunately, there are third-party rent reporting services that can let credit bureaus know that you’re paying your rent on time every month to incrementally impact your credit score. Make sure to do thorough research on any rent reporting services you might be considering working with.
Does Paying a Phone Bill Help Build Credit?
There is no easy answer. In broad strokes:
- Paying your bills on time is always a good thing. This is true for any bill.
- Some cell phone companies and utility companies report your payment activities to credit bureaus, but some of them don’t. So, making your payments on time may not help your score, per se, but,
- If you fail to pay your bill, your cell phone carrier may report the delinquent payment and/or turn it over to a collection agency. Collections are likely to be reported to credit agencies and hurt your credit rating, and paying all of your bills on time is the best way to avoid that damage.
Will a Personal Loan or Line of Credit Impact my Credit History?
If the payments you make on your credit card, installment loan, or line of credit are reported to a credit bureau, they can have an impact on your credit score.
Click here to learn more about the differences between credit cards and lines of credit!
One of the main challenges you might face when building credit history is making payments on time.
Example
Let’s say you have been working hard to be frugal and do all the right things for a couple of months to build your credit history. But, one day, you get in a car accident and you’re now facing $2,500 in repairs and medical expenses. You don’t have much money saved, so you may make the decision to pay a few bills late in order to pay for the more urgent car repairs. Those late payments can undo the work you’ve done for the last couple of months.
This is why it’s important to build an emergency fund to help you out in these types of situations. If you run into an emergency and need a little financial help, it might be worth looking into a personal loan like an emergency line of credit. This approach relies on three important things:
- You make all of your line of credit payments on time.
- You pay down the balance as quickly as possible.
- You still live within your means and don’t put things you cannot afford on your line of credit.
Failing to do any of those 3 things is likely to hurt your credit score and undo any of the good work you’ve done elsewhere.
Like we said earlier, building your credit history takes time and there are no quick fixes or shortcuts. Having said that, if you build good habits and do the right things, you can work towards healthy credit over time!
Disclaimer: The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only, and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through FreshStart Blog or CreditFresh website.
[1] https://www.consumer.ftc.gov/articles/0151-disputing-errors-credit-reports
