Build credit without credit card

Building credit 101..

How can I build credit without a credit card is a question that many teenagers and young adults find themselves asking after listening to the advice of many adults and finacial advisors.  Many people will tell you how important it is to have good credit if you want to buy a house or car or take out a loan for any reason. If your goal is to one day do things by taking out a mortage or car loan or some other type of loan then you will need to have good credit to get the best interest rate possible. If you are interested in builing your credit there a few things that you can do to establish credit if you are told that you have no credit history.


1. Secured Credit Cards

You can sign up for a secured credit card. A secured credit card acts just like a "regular" credit card except for you put down a cash deposit. The amoung of the deposit is the amount of "credit" that you are allowed to have on that card. For example, if you put down a $200 deposit, that is your credit limit. Once you put down your deposit you can use your secured card just as you would any other kind of card. At the end of the month you are sent a bill which you are responsible for paying. Your deposit is only accessed if you default after non-payment. This is a good tool for those trying to establish credit or for folks that are trying to rebuild because many secured cards report to the three credit reporting agencies.

One of the things to watch out for is the annual rate on secured credit cards. Make sure that you are getting the best annual rate possible. One final word of note about secured cards is to keep in mind that many secured cards have high interest rates. This shouldn't worry you too much since you should commit yourself to paying off the balance of your secured card as soon as the payment is due. After all, your goal is to build credit, not get into debt. On time payments and zero balances are one of the most important practices in this process.


2. Get a Department Store Credit Card

The great thing about department store credit cards is that they are one of the easiest types of credit card to obtain. The bad thing about depart store cards is that have extremely high interest rates. Perhaps this is why department stores are so eagar to help young people that ask, 'how can I build my credit?' If you decided to get a department store credit card then make the commimtment to buy only one item per montht that you could easily afford and have the cash in hand to pay for. Once you purchase that item immediately place that amount of cash in your cookie jar or wherever you keep your "mad money" cash. When its time to pay the bill you'll be sure to have enough to pay off the balance and you are step closer to builing good credit.

A word of note for department store credit cards. These types of cards are very enticing because the various sales and promotions that might become available. Also online shopping is a big draw for many people. If you feel that you will be tempted to make these types of purchases then don't carry your card with you except to make your one monthly pre-planned purchase.


3. Join a Credit Union

Credit unions are good places to join if you want to build or repair  damaged credit. Credit unions are similar to banks except that they unlike banks they are operate as non-profit organizations. They generally have fewer service fees than banks, and these fees are usually less than what banks typically charge. For this reason credit unions are great places to go get secured credit cards. You will probably get the cheapest annual rates and the lowest interest rate on your card from these institutions.


These three little tips are all things that have been reccommend by some of the most well-known finincial advisors in the U.S. Hopefully this advice will help you the next time you find yourself asking, ' how can I build credit without a credit card? '