Rebuilding Credit WITHOUT Credit Cards
If you’re one of the many Americans struggling with a less than ideal credit score, 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 credit cards 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. Loans are a way you can also help rebuild credit. 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 loan, 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.
Look into adding an overdraft line of credit to your checking account
Everyone forgets about a bill or a charge coming through on their bank account from time to time. For this reason, a line of credit should be set up to protect against those high overdraft fees. So, instead of bouncing that check or declining that charge, the bank will draw from this overdraft account. Depending on your bank, they may report this line of credit to the bureaus.
Try Out An Alternative Credit Service
Alternative credit services can be helpful for generating a credit score based on your payments for things like utilities and rent. The scores range from 100 to 850 and if you can rack up a score over 750, you will show you can be responsible with money.
Now, most lenders will really only consider a traditional credit score when it comes to whether to give you a loan. With that being said, there are about 8,500 lenders nationwide that will take an alternative credit score into consideration. In addition, it can be helpful when it comes to financing a car or purchasing something like furniture. If you plan on renting, landlords will also typically consider looking at an alternative score.
In 2011, Experian decided it would accept rent payments as a form of credit. If you’re paying rent, you can start improving your credit 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. Here are some companies that will report your rent payments for you.
Look Into a Credit-Builder Loan
Credit builder loans can be helpful if you don’t have an established credit rating. It’s called a credit-builder loan. When you apply, the amount of money you choose to borrow will go into a savings account. Each month you will make a fixed payment and once paid off, the lender returns the balance to you. The benefit of this loan as opposed to just putting the money into a savings account, is that they payments will be reported to the credit bureau. Not all banks offer this type of loan. Credit unions and community banks will be your best bet.
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 any debt. 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 each year from each of the three credit bureaus (Equifax, Experian, and TransUnion). 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.