Proving Your Credit Worthy Without Touching Plastic
Whether you have bad credit, no credit, or simply don’t want to use a credit card, here are five ways to establish a strong credit history without using plastic.
Open a Bank Account
Opening a bank account is the first step to creating a financial history. Banks don’t check your credit score to open an account, and your account won’t get reported to the credit bureaus, but this simple step could serve as an important factor when lenders consider giving you a credit card or loan. Consider opening an account at a credit union. Just like a traditional bank, credit unions offer checking accounts, mortgages, student loans, car loans and personal loans to individuals, but they tend to offer better rates and terms on the loans.
Consider a Certificate of Deposit Loan
A certificate of deposit loans and CD lines of credit are federally insured, and allow you to deposit a set amount as an investment for a fixed time (often monthly, three months, six months or one to five years). You can withdraw a loan for up to the full value of the CD amount, and because it is secured by the cash in the account, the interest rate to the borrower is low.
Pay Every Bill on Time
If your utility company reports you to a collection agency for not paying your invoices, and the agency then passes along this information to the credit bureaus you can tarnish your credit reputation. Even though it may not be widely accepted in the credit industry, you can consider reporting your utility payments to alternative credit scoring companies for a monthly fee.
Become an Authorized User
Becoming an authorized user on a credit card means you can swipe a card without opening your own line of credit. With that said, choose who you decide to become a user with wisely, even though you are not financially responsible for the card, your information gets reported to the credit companies along with the primary account holder’s details.
Bad credit can impact your future finances and prevent you from getting loans for big-ticket purchases like a house or car. While maintaining a credit card can help improve your score, there are other ways to establish a strong history.