How to Build Credit Without a Credit Card

Building your credit history and bolstering your credit score can help you borrow money from a lender, qualify for some jobs or even rent an apartment.

Applying for a credit card and using it responsibly is one way to help get you there — but it isn’t the only way to build good credit.

Why is credit history important to lenders?

Your credit history and credit score are key factors financial institutions and other lenders consider when deciding whether to lend you money, as well as the interest rate to charge you. Other individuals, such as landlords and some employers, may also request to access your credit report when assessing your job or rental application.

Ultimately, your credit score and history of paying loans and bills on time will show prospective lenders and others that you are financially responsible.

“Banks or financial institutions, when they’re looking to lend us money, they don’t know us like a friend or a family member,” says Amanda Martin, partnership and education specialist with the Credit Counselling Society in Hamilton, Ontario. “They need to be able to rely on something to give them some insights as to whether or not you’re a trustworthy and responsible person they should lend money to — and that’s where our credit report comes in and the credit score.”

» MORE: What credit score do you need to get a credit card?

How to build credit without relying on credit cards

While using credit cards might be an effective way to build credit history, Martin says they aren’t an option for everyone. For example, some people may be wary of the temptation to spend that comes with having available credit. Others may have trouble qualifying for a credit card because of their past financial habits.

Whether you’re unable to access a credit card or you’d prefer not to use one, there are other ways to start building credit. Here are a few products that, if used responsibly, may help you strengthen your credit score and build your credit history over time:

Credit builder loan: Some financial institutions offer loans designed to encourage consumers to make regular payments, plus interest, to establish their credit history. Some of the funds are put in a term deposit, which you can redeem at maturity and after the loan is paid off.

Secured personal loan: A secured personal loan is backed and guaranteed by an asset you already own — a property or your vehicle, for example — making the loan less risky for the lender, but your payments still count towards your credit history.

Bill payments: Certain other payments, like cell phone and internet bills, may also be reported to the credit bureaus. As Martin says, it’s important to do your research before you enter into a plan or membership, and to ensure the vendor reports to a credit bureau, so that your on-time monthly payments count towards your credit rating.

Rent reporting services: Rent payments can count towards your credit score if your landlord is signed up to report payments to an agency like the Landlord Credit Bureau, which sends this data to Equifax.

Co-signed loan: Another way to start building credit is to obtain a loan with a co-signer. If you’re looking to fortify your credit score, the other borrower would likely need to be creditworthy and willing to vouch for you and your ability to make payments. Both co-signers are responsible for repaying the loan. “If you manage that loan properly, it will report on your credit report as positive,” says Martin.
Credit-building programs: These programs can build credit history by requiring regular monthly payments on a loan or secured line of credit, plus potential fees or interest. These payments are then reported to the credit bureaus to help build credit. With some credit-building programs, a portion of each payment may be set aside as savings. Regular payments may also eventually unlock access to other loan products.

Secured credit cards: A secured credit card works a bit differently from a regular unsecured credit card, as it’s backed by a security deposit, which determines your credit limit. The deposit acts as collateral in the event that you don’t pay your bill. Secured credit cards contribute to your credit history and over time, impact your credit.

How can I check my credit report?

If you’re interested in monitoring the progress of your credit-building efforts, there are a few ways you can check your credit report and credit score:

Canadian credit-reporting agencies. Through Equifax or TransUnion you can access your credit report for free online or by mail. You can also sign up for paid subscription services that provide daily access to your credit score along with other features.
Financial institutions. Alternatively, some financial institutions provide account holders with free access to their credit scores via online or mobile banking platforms.
Third-party providers. You can also access your credit score by creating a free account with companies like Borrowell and Clearscore.