How to Build Credit Without Credit Cards

April 12, 2012 by  Filed under: Credit 

Are you interested in building credit without credit cards? Are you hesitant to deposit hundreds of dollars with banks only to pay fees to use your own money? The good news is that you do have options, as some companies will allow you to establish accounts without checking your credit.

There are many types of credit accounts (trade lines) out there for consumers, but it is hard to qualify for most of them when you do not have a good history. When you have bad credit or no history at all, it can be difficult to build credit without credit cards. Individuals that are looking for credit enhancement only have a few options available, one of which are accounts that do not generate an inquiry. This type of account can help you to enhance your credit rating, and some of these accounts do not even require a deposit.

Some companies offer accounts without credit checks, which look and work just like traditional accounts, but the accounts are added to your bureau file without adding inquiries to your credit reports. They are ideal for individuals that have poor credit, or for those who simply don’t qualify for a line of credit due to lack of credit history. Once you have established a positive payment history, financial institutions are more likely to consider you creditworthy, which improves your chances of qualifying for credit cards, auto loans and other types of credit. Over time, if you pay your trade line accounts on time, lenders may offer you unsecured credit cards – which are standard credit accounts, which require no deposit and tend to have much higher limits and lower interest rates.

Just like other credit accounts, primary trade lines do have disadvantages if you do not make your payments on time. Any time your monthly payment is >30 days late, you will be reported delinquent to the credit bureaus. However, if you are prompt with your payments, you can successfully re-establish your credit, which will help you qualify for lower interest rates on future purchases made on credit.

For those who have slow payments, foreclosures, charge-offs, a bankruptcy or simply need to start building credit, primary trade line accounts are a great place to start. These accounts can help you improve your credit scores, providing you pay your bill on time. Once you have kept your trade line account in good standing for a period of time, you’ll have the satisfaction of knowing that you are taking the proper steps to enhance your credit profile.

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