How to Build Credit without Taking on Debt

By Caitlin in Credit
How to Build Credit without Taking on Debt

Building great credit often means taking on debt, while this may be a great option for some, for others it’s simply not an option. Credit is the number one most important aspect of our financial lives, and therefore should be a top priority for everyone. A good credit score can enable you to seek more credit in the form of personal loans, car loans, credit cards and mortgages. Moreover, some employers verify your credit rating while doing your background check when you apply for a job. A good credit history may additionally result in lowering interest rates for future borrowing. Therefore, it’s very important to learn how to properly manage your credit as early on in life as possible.

It’s exciting whenever we have access to capital; unfortunately, most people believe that to be able to build credit, they have to take on debt. This isn’t necessarily the truth; we’ve listed below a few ways to build your credit history without taking on debt.

  1. Borrow That Which You Can Afford

Make this an everyday habit for yourself; it will help you avoid racking up too much credit card debt. Charge to your credit card only what you’re able to afford and avoid those things that you can’t afford to pay for with cash. Sticking to this habit will show future lenders that you are a responsible borrower. Overall your financial life will be so much easier to handle if you only borrow what you can comfortably pay back in a timely manner. To have a good credit score, keep your charges at least 10% below your credit card’s limit. Say for example you have a $500 limit; your monthly charges need to be below $50 to build a good credit score.

  1. Track Your Spending and Stay on Budget Always

Tracking your spending will help you build credit without taking on too much debt. The number one problem that most people have with trying to establish a good credit history is overspending with their credit cards. Credit cards are a great way to build credit but they are also a great way to ruin it.

  1. Manage Your Credit History

Establishing a credit history is your main goal but to do so you need to manage it. Credit doesn’t build itself; you need to work on a daily basis to properly use whatever type of credit you have. Always keep an eye on you spending and your bills.

A credit rehab savings loan is a great way to start growing your credit history.

  1. Always Pay Your Bills on Time

This should be a rule; no excuses no defaulting. Ensure that your bills are all paid every month and on time. Paying your bills on time is probably the most efficient way of building your credit history without taking on debt. At times, you may be inconvenienced and feel you won’t be able to pay the full amount. Don’t use this as an excuse- it’ll lower your credit score. Ensure you pay at least the minimum payment to avoid credit card debt. But as soon as you have enough money you need to pay off the full balance of your card right away, getting stuck in the minimum payment trap will only hurt your credit.

  1. Carry a Balance on Your Card Properly

Carrying a balance isn’t always a bad situation. Every month you can charge a few things to your card and then pay them off when your bill arrives. This is a great way to build credit without racking up any debt, just make sure your make your payments on time and in full every single month. Carrying a balance on your credit cards won’t hurt your credit unless you let it.

  1. Prove Stable Employment

This may be more important to self-employed individuals or people taking part-time jobs. Boosting your income through a side business may greatly help build a solid credit profile.

Finally, Stick to Your Plan

All the ways mentioned above will help build credit without taking on debt, but one thing that will help you be as successful as possible at building your credit is to have a plan and stick to it. A plan will help you remain consistent in doing even the small things like remembering to pay for bills on time. Building your credit will help you have a more successful financial life in the future. Apply these simple credit building tricks and work on your credit history without taking on debt.


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