How to Build Credit Responsibly Without Using Debt

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Build Credit Without Using Debt

Build Credit Without Using DebtNot everyone wants to utilize debt as a way to build credit responsibly, but most advice available on building credit relates to taking out a loan, or using credit cards to prove good payment history.

As a financially savvy and responsible spender, how are you going to establish or rebuild credit without leveraging debt to do so? Below are three smart but unconventional ways to build credit without using debt. 

Pay Your Rent

One of the main ways to build a solid credit history is to use an online service to pay your rent each month. WilliamPaid is one of the many services available that reports your payments to the top credit agencies.

As long as your monthly payments are consistently paid on time, you can use it as an alternative way to build or rebuild your credit.

Get a Secured Credit Card

Don’t worry, a secured credit card works differently from a traditional unsecured credit card. Instead of receiving a line of credit from a credit card company and having the temptation to max out the limit, a secured credit card requires an up-front deposit that becomes the card’s credit line.

Your cash is used as collateral against the purchases made on the card, so it’s more difficult to get into credit card debt. For example; if you put a cash deposit of $500 towards your secured credit card account, that’s the limit of purchases you can charge. The $500 becomes your line of credit, and any amount of over that will be denied or forced to pay high fees. 

Your account will be reported to the major credit bureaus, just like a traditional credit card, and help build credit more responsibly while avoiding accumulating debt.

Pay Bills on Time 

The most responsible way to build credit is to pay all of your bills on time. This includes things like rent (mentioned above), utilities, cell phone bill, cable/internet bill, etc. Start by getting at least one type of bill in your name and make consistent on-time monthly payments. 

A simple way to do this, and collect evidence towards your good credit, is to use a service like eCredable. They allow you to establish credit in alternative ways by simply paying your bills. Aside from the traditional utilities bills, this can include payments for medical bills, tuition, day care, and more.

They create a report that tracks payment history, which can be used when applying for a loan at a financial institution. It’s a little unconventional, but living a debt free lifestyle is worth the out-of-the-box thinking.

Build Credit Without Using Debt

You don’t always have to use debt products to build credit and establish a good history of paying bills on time, it just takes a bit of unconventional thinking.

Use these three ideas to prove a good history of credit and up your creditworthiness in a responsible manner, and watch your credit score increase the right way. When you’ve been in debt, and worked towards paying it off, the extra time and energy is definitely worth a debt free lifestyle.