Home > Credit Score > How to Rebuild Your Credit Without Using Credit Cards

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Credit cards can be a polarizing subject. Many Americans love them for their security and convenience, but these very same qualities lead many cardholders into debt. After becoming overextended, cardholders may miss payments and find themselves with ruined credit.

So the last thing these people need is to try to rebuild their credit by using more plastic. Thankfully, there are several ways to improve your credit profile without using credit cards.

1. Use charge cards. 

A charge card is like a credit card, but cardholders are expected to pay off their balances in full each month. But like credit cards, charge cards report cardholders’ payments to the three major consumer credit bureaus, which can improve cardholders’ credit when they make timely payments. Charge cards are often issued by individual retailers to shoppers with average or even below-average credit.

2. Utilize other types of loans. 

Credit cards are just one type of loan that is included in a consumer’s credit report, but it is not the only one. Timely payments on home mortgages, car loans, student loans and lines of credit are also ways to improve one’s credit history. So while you should not deliberately incur more debt to improve your credit history, having even a small loan on your credit report can go a long way.

3. Credit builder loans. 

There is another type of loan that is specifically designed to help individuals rebuild their credit histories. Credit builder loans are small loans offered by some credit unions and banks to those who are trying to rebuild their credit, but the trick is that the borrower essentially makes the loan. First, the borrower deposits a small amount with the lender, which goes into an interest-bearing account. Then the lender uses this deposit as security against a small loan it offers. Once the loan is paid off, the borrower receives his or her deposit back. In the meantime, the borrower’s payments are reported to the major consumer credit bureaus, just like any other loan.

4. Pay off as much debt as possible. 

Consumers should never underestimate the beneficial effect of paying off their debts, especially when they have a high ratio of debt to available credit. In these cases, paying off debt helps their credit score without using credit cards.

5. Keep accounts open. 

You don’t have to use a credit card to have an open account help your credit history. Rather than closing a credit card account, simply pay off any remaining balance and destroy the card. Of course, there is always the risk the issuer will close the account if you don’t use it, but if that does not happen, the credit line will continue being reported with a zero balance toward your available credit.

There are two “catches” to this one that you should be sure to watch out for. First, make sure that you continue to monitor these accounts for signs of fraud. And also, if your credit card has an annual fee, this may not be worthwhile.

6. Examine your credit report. 

Many credit reports contain errors. Because credit scores are derived from information in your credit reports, an error could result in a lower score than you would otherwise have. All Americans are entitled to a free copy of their credit report each year, and are given the opportunity to dispute any errors. (You can also see your credit scores for free at Credit.com, and the scores are updated every 14 days.)

7. Have rent payments reported.

Those who rent their primary residence will miss out on the benefit of having their mortgage loan payments reported to the credit bureaus, but it is still possible to have rent payments reported. Landlords can opt in to systems that collect rental payment data. Just make sure you pay on time and in full every month.

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  • Whitney

    Try a credit builder loan, secured loan or secured credit card to build credit history in your own name.

  • Whitney

    I would start with a credit builder loan they open an account at the bank with their money and you make payments at the end of the loan term the money is yours and if you made payments on time your credit score is better. You can also do a secured loan and a secured credit card, it’s better to do it with a credit union because rates are better and usually their is no annual fee or over the limit fee for the credit card. You put up your own money for these and make sure you make your payment on time. I would do all 3 starting within a week apart that way while you are making your payments on time you are receiving 3 good payment reports and making your credit score increase quicker. I would take about $300 and open the secured loan first and when they give you the money back from that I would use that same money to open my secured card.

  • http://www.Credit.com/ Gerri Detweiler

    The lender is right. They can’t just change the name of the borrower to your name. In order to have the mortgage in your name you will have to qualify for the refinance. It’s complicated, but they aren’t giving him bad advice.

    Does he have a credit card he can add you to so you can get credit a different way?

  • http://www.credit.com/ Credit.com Credit Experts

    Did you have a question?

  • Desk of Lori


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