When you are looking to build credit, the first thing most people suggest is to get a credit card. This is understandable, as credit cards are one of the best tools to building credit and they are easy to use, offer flexibility, rewards, and can directly affect many aspects of your credit score. However, credit cards are not the be all and end all to building credit. Many people are not ready for the responsibility that comes with managing credit cards and require other alternatives to build a strong credit history. That being said, let’s take a look at some of the other ways you can build your credit without owning a credit card.


Passbook/CD Loans

Sometimes banks will offer their existing customers passbook or CD loans. These loans are secured using the balance already in your CD or savings account. So, as you pay down the loan, you begin to build credit and can access your balance once you have paid off the loan. Now, this might be a difficult path to take for the average American who has not build up any savings. However, if you are able to acquire such a loan, it can help increase your credit score over time.


Student Loan Payments

Your federal student loans also show up on your credit report. So, if you pay on time, it can help you build a positive payment history. Student loans can affect your credit score just as much as any other loan so if you frequently miss your payments, it can have the opposite effect and damage your credit. However, if you have been responsibly paying your student loans for years, you might have a really good credit score without knowing it.


Peer-to-Peer Loans

Peer-to-peer loans are created by individual investors rather than a traditional financial institution, with the growing interest going back to the investor. Peer-to-peer (P2P) loans are completely legitimate and you can set them up through a reputable P2P service like Lending Club and Prosper. The terms of the loan will depend on your current credit standing, however, their guidelines are not as stringent as that of banks or credit unions. So, even if your bank turns you down for a loan, you might still get approved for a P2P loan.


Personal Loans

Some banks may also offer unsecured personal loans where you borrow a fixed amount of money and make fixed payments each month. The reason they are referred to as “unsecured” is because it is not backed by any collateral like a car or a house. Because the loan is unsecured, financial institutions often charge a higher interest rate to borrowers. These loans can be used for almost anything, however, you should be sure to use it for something that will lead you closer to financial freedom.