Money Crashers: 6 Ways to Build Credit Without a Credit Card

When I first arrived at college, over (gosh) 25 years ago now, there were a lot of vendors offering products and services to the incoming students—including credit cards. I smugly bypassed those, telling myself that I was too smart to get lured into that trap. I assumed, probably correctly, that having a credit card when you don't have a steady source of income is a good way to get in over your head with spending and graduate with a lot of debt.

However, I also knew that I probably would eventually need a credit card after I graduated, and that I'd have to build up a credit rating somehow to get one. I'd heard that a good way to do this was to have a regular bill, such as a phone bill, and pay it on time every month. So, for the next four years, I made a point of getting the phone line in all the dorms where I lived set up in my name and paying the bill promptly and fully.

Imagine my surprise, then, when I applied for my first credit card after graduation and was told that I didn't qualify because I had no credit history. What I hadn't realized was that bills like a phone bill aren't always reported to the credit bureaus; you have to call up the providers specially and ask them to report the payments. All my careful planning had been wasted, and I had to ask my dad to co-sign for a credit card with me so I could start building some credit in my own name.

This story came back to mind recently when I read about how a majority of Millennials—about two out of three—are opting to go without credit cards completely. That's easier to do nowadays, since it's possible to pay for stuff with debit cards and payment apps instead—but it also means these cautious Millennials are in the same position I was after college. Since they've never used credit, they have no credit history, and when they finally need to borrow money—say, to buy a house—they'll have trouble doing it.

So my latest Money Crashers article is all about strategies for building credit without having a credit card. It covers the method I tried to use in college (and explains how to do it right), as well as newer methods like using an alternative credit service, reporting your rent, or paying off student loans (which all too many graduating students have).

Read it here: 6 Ways to Build Credit Without a Credit Card