Rebuilding Credit WITHOUT Credit Cards
If you’re one of the many Americans struggling with a less than ideal credit score following the credit crunch and real estate bust, you know that rebuilding credit can be a difficult process. Financial experts often recommend getting a secured credit card to rebuild. The trouble with that approach is that credits are usually the reason most people get in trouble in the first place. If you need to rebuild your credit, there are some alternative methods you can use that allow you to skip the credit cards altogether.
Rebuilding your credit is about showing that you can consistently make on-time payments, so after credit cards, the next best thing is loans. You have several different types of loans to choose from, which means you’re not tied to any specific type of loan. You can get a secured loan, car loan, federal student loans, or a personal loan. The approval process and requirements will be different for each type of loan you apply for, so check with your local bank or credit union to see which is right for you.
In 2011, Experian decided it would accept rent payments as a form of credit. If you’re paying rent for a duplex or apartment, then you can start improving your credit just by making the same payments you make every month. This is usually not through your landlord, but a third-party company who collects rent, pays your landlord, and reports your payment history to Experian. There may be fees and delays associated with the service, so be sure to check with the company so you know how much to pay, and by when.
One of the easiest ways to help build your credit is to ask a trusted friend or family member to list you as an authorized user on one of their credit cards. This doesn’t mean you need to carry the card, in fact, it’s probably best that you don’t. Simply having your name on the account is enough to benefit from your friend or family member’s good credit practices. However, be careful with this option. If your friend or family member stops making payments, not only does this ruin your credit, but it also makes you liable for payments. Make sure you trust the friend or family member implicitly.
Rebuilding credit doesn’t have to involve credit cards. It’s a matter of showing creditors that you can be responsible and make the payments you agreed to make. You will have to remember that rebuilding credit does take time. Your credit score and standing will not change overnight, so be patient and keep working toward it. Use as many of the alternative methods as you can, and make sure you check your credit reports often. You get one free credit report a year from each of the three credit bureaus. That means you can check your report every four months, which is a good amount of time to check for errors and to see how you’re doing.