Money Advice: 3 Ways to Build or Improve Credit Without Credit CardsMoney Top of the List
You hear a lot of people say, “it takes money to make money.” But, it’s also true that “it takes credit to get credit.” Easier said than done if you’re just starting out, repairing damaged credit or avoiding those credit cards that gauge you on fees and interest rates. We spoke to Savings Expert Lisa Rowan from thePennyHoarder.com who’s giving us four ways to build your credit, without credit cards.
1. Credit Builder Loans
With this first method, you take out a loan and the lender puts the same amount that you take out into a CD for a year. Make your monthly payments on time, and then at the end of the year you’re able to get that money back plus any interest that accrued on that CD as well. If this sounds like a loan for the sake of having a loan, it is. But results can be dramatic.
One of Lisa’s colleagues at Penny Hoarder is five months into a 12-month credit builder loan, and his score went from 495 to 640. Be sure to shop around, however, because the interest on these loans can be high, about 10 to 15 percent.
2. Do no Harm
If a bill for a utility goes to collections, that’s when it’s going to show as a negative mark on your credit report. So, don’t let cashflow or a lousy memory be a factor in making regular payments on time. “It’s really important to pay those every-month bills on time to reduce the chance that you’re going to miss one of those bills,” Rowan explains.
3. Make Your Rent Work For You
Rent is not typically reported to credit bureaus. That’s a considerable chunk of change each month that, if you’re paying it on time, you want it to work in your favor for your credit score. But for a monthly fee, services like Rent Track, Rentler, Pinch and Cozy will report your on-time rent payments to credit bureaus. If your landlord isn’t into it, you can sign up for some of these services on your own. For instance, Rent Track’s fee is $7 a month, which might be worth it to build up your score.
With so much riding on it, building your credit score can be stressful but don’t worry. Just take it one step at a time. Credit cards can be dangerous but luckily, there are a lot of different ways you can start building your credit or repair it without having to rely on those.