5 Alternatives to Credit Cards to Build Credit
Credit is an essential part of US personal finance. But for newcomers to the country, it can be challenging to build a credit history. And for those with bad credit, it can be tough to improve their credit score.
Credit cards can help build and improve credit, but they're not the only way and not a good choice for everyone. We'll explore 5 credit card alternatives to help build and improve credit.
Upwardli
Upwardli was created specifically to help those new to the US build credit. It can be challenging when you're new to the US to access the financial services and products traditionally used to build credit.
Upwardli removes those barriers. You'll get pre-approved instantly, and no credit check or deposit is required. Each Upwardli account gives you an unsecured line of credit designed to help build or improve your credit fast, and your progress is reported to credit bureaus.
2. Credit builder loans
The best way to build bad credit caused by credit card debt may not be credit cards. If you don't feel that having a credit card will put you back into debt or further into debt, it's best to use a credit-building alternative.
Credit builder loans are one alternative. If you have little or bad credit, it can be hard to be approved for a traditional loan. When approved for a credit builder loan, the lender deposits the full amount of the loan, typically between $300 and $1,000, into a secured account.
You can't access the money immediately. Rather, you make a fixed monthly payment until the loan is paid off. The payments are reported to at least one of the credit bureaus. At the end of the term, you receive the loan proceeds minus any fees.
3. Secured credit cards
A great credit card substitute for those that can't get approved for a traditional credit card is a secured credit card. Cardholders provide a deposit, typically a few hundred dollars. The amount of the deposit is usually the card's credit limit, although sometimes it can be slightly higher.
You can make charges on the card, which acts like a debit card; the cash for the charges comes from the deposit. But unlike debit cards, the card activity is reported to one or more of the credit bureaus. (Not all secured cards report to the credit bureaus, so be sure to choose one that does, preferably to all three).
Some cards allow for accounts in good standing to be upgraded to a traditional credit card after a period of time.
4. Become an authorized user
If you are close with someone who has a healthy, established credit score, they may be willing to make you an authorized user on one of their credit cards. You will receive a copy of the credit card with your name on it and can use it just as the account holder uses their card.
Some credit cards report the authorized user's activity separately from the account holder's activity. The authorized user pays their own charges, but the account holder is responsible if they fail to do so.
5. Report alternative payments
It seems pretty unfair that potential landlords check your credit and may refuse to rent to you if your score isn't good enough, but rarely report rental payments to the credit bureaus! Many payments, including rent, utilities, and telecom services, are not reported to the credit bureaus, although if you default on the accounts, that information will be reported.
There are services that will report your rent payments, and Experian Boost reports things like utilities and telecom payments.