Six Ways to Get a Loan Without a Credit Card
Having a good credit history is essential to qualifying for a loan, getting approved for a lease, and even getting hired for some jobs. However, getting a loan can feel like a catch-22: you need credit to get credit. Credit cards are a common way to get started, but this may not be suitable for you for a number of reasons.
The good news is that there are several strategies you can use to build a strong credit history without relying on having your own credit cards. Here are some tips:
Get a construction loan
With a credit building loan , you borrow an amount, such as $500 or $1,000, and make fixed payments over 6 to 24 months. The lender places the borrowed amount in a locked savings account, and once you complete your loan payments, the money is released and transferred to you. These loans are intended solely for building a credit history.
Become an authorized user
See if a family member or spouse with good credit adds you as an authorized user on their credit card account. Account history may be reflected on your credit report, helping you build a track record.
Get co-signer
Having a creditworthy co-signer on an installment loan, such as an auto loan, personal loan or student loan, allows you to leverage their good credit when building yours. Just remember to make all payments on time.
Report rent and utilities
There are services that allow you to choose to have your rent payments and utility bills reported to the major credit bureaus. This helps create a record of timely payments. Consider having your landlord sign up for a rent reporting service like Piñata (which is free to use). Otherwise, here’s my guide on how to report your rent to the credit bureaus.
Apply for a secured credit card
With a secured card , you pay a refundable security deposit, which typically becomes your credit limit. Make small payments and pay on time to build a positive payment history.
It takes time
Establishing good credit takes time, so don’t get discouraged. Make all minimum payments in advance or on time, keep your credit utilization low, and avoid situations that create negative credit events. Consistently practicing good financial habits is the key to building an excellent credit score.
Getting a loan without credit cards requires some creativity, but it is definitely possible. By managing your credit, accounts, and low credit limits responsibly, you can build a strong credit profile over time.