How to Rebuild Your Credit Without Using Credit Cards

By Steven Shaw on 11/24/2014

Credit Score

How to Rebuild Your Credit Without Using Credit Cards

Comments 0 Comments

Credit cards can be a polarizing subject. Many Americans love them for their security and convenience, but these very same qualities lead many cardholders into debt. After becoming overextended, cardholders may miss payments and find themselves with ruined credit.

So the last thing these people need is to try to rebuild their credit by using more plastic. Thankfully, there are several ways to improve your credit profile without using credit cards.

1. Use charge cards. 

A charge card is like a credit card, but cardholders are expected to pay off their balances in full each month. But like credit cards, charge cards report cardholders’ payments to the three major consumer credit bureaus, which can improve cardholders’ credit when they make timely payments. Charge cards are often issued by individual retailers to shoppers with average or even below-average credit.

2. Utilize other types of loans. 

Credit cards are just one type of loan that is included in a consumer’s credit report, but it is not the only one. Timely payments on home mortgages, car loans, student loans and lines of credit are also ways to improve one’s credit history. So while you should not deliberately incur more debt to improve your credit history, having even a small loan on your credit report can go a long way.

3. Credit builder loans. 

There is another type of loan that is specifically designed to help individuals rebuild their credit histories. Credit builder loans are small loans offered by some credit unions and banks to those who are trying to rebuild their credit, but the trick is that the borrower essentially makes the loan. First, the borrower deposits a small amount with the lender, which goes into an interest-bearing account. Then the lender uses this deposit as security against a small loan it offers. Once the loan is paid off, the borrower receives his or her deposit back. In the meantime, the borrower’s payments are reported to the major consumer credit bureaus, just like any other loan.

4. Pay off as much debt as possible. 

Consumers should never underestimate the beneficial effect of paying off their debts, especially when they have a high ratio of debt to available credit. In these cases, paying off debt helps their credit score without using credit cards.

5. Keep accounts open. 

You don’t have to use a credit card to have an open account help your credit history. Rather than closing a credit card account, simply pay off any remaining balance and destroy the card. Of course, there is always the risk the issuer will close the account if you don’t use it, but if that does not happen, the credit line will continue being reported with a zero balance toward your available credit.

There are two “catches” to this one that you should be sure to watch out for. First, make sure that you continue to monitor these accounts for signs of fraud. And also, if your credit card has an annual fee, this may not be worthwhile.

6. Examine your credit report. 

Many credit reports contain errors. Because credit scores are derived from information in your credit reports, an error could result in a lower score than you would otherwise have. All Americans are entitled to a free copy of their credit report each year, and are given the opportunity to dispute any errors. (You can also see your credit scores for free at, and the scores are updated monthly.)

7. Have rent payments reported.

Those who rent their primary residence will miss out on the benefit of having their mortgage loan payments reported to the credit bureaus, but it is still possible to have rent payments reported. Landlords can opt in to systems that collect rental payment data. Just make sure you pay on time and in full every month.

More on Credit Reports & Credit Scores:

Image: iStock

Sign up for our weekly newsletter.

Get the latest tips & advice from our team of 30+ credit & money experts, delivered to you via email each week. Sign up now.

Jason Steele has worked as a computer systems administrator, a commercial pilot, and a contributor to several of the top personal finance sites as an expert on credit cards and travel. He is a graduate of the University of Delaware with a degree in History. More by Jason Steele

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

credit report
Credit builder loans
credit cards
rebuild credit
rebuilding credit