How To Build Credit Without A Credit Card?

How To Build Credit Without A Credit Card?

Written by Priyanka Correia
Fact-checked by Caitlin Wood
Last Updated May 27, 2022

Credit cards are often the first credit-building products that borrowers interact with. In fact, it’s common for Canadians to have at least two active credit card accounts listed in their credit report. When managed responsibly, a credit card can be a simple and effective tool for creating a solid credit history and raising your credit scores. The higher your credit scores are, the better your chances will be of receiving approval and favourable interest rates for your future credit products. Then again, when handled irresponsibly, your credit card bills can get out of hand, leading to a pile of unmanageable debt. 

So, you might be wondering if there’s a way of increasing your credit scores without using your credit cards.

How To Build Credit Without A Credit Card?

Credit cards are often used to help rebuild credit scores but if you feel like this is in fact not the best option for you we’ve compiled a list of other options to help you build or rebuild your credit without a credit card. 

Use A Personal Loan

Credit cards aren’t the only kind of loan that shows up on your credit report. Credit activity involving personal loans can also be reported on your credit report. Your personal loan payments can help you build your credit history which could help build your credit scores.

A personal loan is also a good option as it usually has longer terms and lower interest rates than credit cards, making payments more affordable. Moreover, if you’re having a hard time qualifying for an unsecured personal loan, you can opt to secure it with some form of collateral.

Be A Guarantor

If you know someone who can’t qualify for a regular personal loan, they can opt for a guarantor loan. This can be particularly helpful for newcomers and students who haven’t yet gotten a chance to build their credit.  

As a guarantor, you’ll be agreeing to take responsibility for the loan if the primary borrower fails to make payments. However, if the primary borrower pays the loan as agreed, it can help you build credit. All payments the primary borrower makes will also show up on your credit report, which could have a positive effect on your credit scores. However, do note, that to be a guarantor, you’ll need to have good credit and finances. 

Lookout Watch Out For Hidden Fees In Personal Loan Contracts

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Ask Someone to Add Your Name To Their Credit Card Account

If you don’t want to apply for your own credit card, you can ask to become an “authorized user” on someone else’s account instead. Your name can usually be added to the primary cardholder’s account via online banking, by request at the bank, or by phone directly through the credit card company. 

Afterward, you can either use their credit card or you can be issued one of your own. While the primary cardholder is solely responsible for paying the total monthly balance, you yourself can pay your portion of the bill depending on what you’ve agreed upon. Every payment that the primary holder then makes, will then be reported on both your credit reports which can help build your credit. 

However, it’s important to note that not all creditors report the information for authorized users, so it’s important to speak with your creditor and confirm whether they do. 

Have Your Rent Payments Reported 

People who have a mortgage benefit from having it appear on their credit reports. Mortgages are a different kind of loan that adds to a person’s payment history, which is usually the most significant factor that affects credit. 

Similarly, if you have your rent payments reported, it will add to your payment history which can help build your credit. As such, if you rent a house or an apartment then you definitely want to look into having your rent payments reported to the credit bureaus. While options to have your rent payments reported are limited, you can do so through The Landlord Credit Bureau (LCB); a rent payment reporting agency that recently came about in Canada. 

Both you and your landlord must be a member of the LCB to have your rent payments reported to Equifax. Once your rent payments start being reported to the credit bureau make sure you always pay on time and in full.

Find out if you can pay your rent with your credit card.

Secured Credit Card

If you’re having trouble qualifying for credit in general, a secured credit card is a good way to get your foot in the door. They are easy to qualify for, all you really need is enough cash to make a security deposit which will also act as your credit limit. 

Due to their flexible requirements, these make great resources for those with bad credit. Each payment you make will be reported to the credit bureaus, which will help build your payment history. 

Learn how to switch from a secured credit card to a regular credit card.

Best Secured Credit Cards To Build Credit 

Annual Fee Interest Rates Min. Deposit
Refresh Financial Secured Visa $12.9517.99%$200
Plastk Secured Visa Credit Card $48 (+$6 monthly fee)17.99%$300
Home Trust Secured Visa Card0$ or $59- 19.99% (no annual fee)
- 14.9% (with annual fee)
$500
Vancity enviro Secured Visa Card$0 - $395- 11.25%
- 19.50 %
$500
TD Secured Credit Card$2919.9%$500
Capital One Guaranteed Secured Mastercard $5919.8%$75

Credit Builder Loans

A credit builder loan or a savings loan is a product to help individuals improve their credit and save money. When you apply for a credit builder loan, you’ll be given a loan that is held in a secured trust account. To access the funds, you’ll need to make payments until the loan is paid off. While you make payments, each one will be reported to the credit bureaus, thereby improving your payment history. Once you’ve “paid off” the loan, you’ll be able to release the funds and use them to make a purchase, pay off debt or put it towards your savings. 

This product is best for those who are unable to qualify for regular credit products due to bad credit. If you’ve gone through a consumer proposal or bankruptcy, a credit builder loan is a good option as there usually aren’t any credit checks. Moreover, if you’re new to Canada and don’t have a credit score yet, this is a good way to start building your credit. 

Are you new to Canada? Check out how to establish credit as a newcomer.

Disputing Errors In Your Credit Report

This option only applies to those who already have an established credit report, but it is technically a way of increasing your credit scores without actually using a credit card. Your credit score is directly calculated from the information in your credit report so any errors could potentially have a negative impact on your credit score. Make a habit of checking your credit report at least once a year. That way you’ll be able to catch any errors and dispute them before they affect your scores too much.

Lookout Is Credit Monitoring A Good Way To Protect Your Identity?

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Tips On Borrowing 

  • Borrow That Which You Can Afford – No matter which credit product you’re using, be sure to only borrow how much you can comfortably afford. This will make it easier for you to make your payments and avoid racking up debt. 
  • Track Your Spending And Stay On Budget – Many people have trouble with overspending and staying on budget. This can make it difficult to pay your bills and debts, which can make it hard to establish a good credit history. Credit cards are a great way to build credit but they are also a great way to ruin it.
  • Always Pay Your Bills On Time – Paying your bills on time is probably the most efficient way of building your credit. Ensure you pay at least the minimum payment to avoid any penalty fees which can add to your debt. 

Building Credit FAQs

What’s the difference between a credit card and a secured credit card? 

Essentially, both a credit card and a secured credit card work the same way. The main difference between them is that a secured credit card is secured with a deposit which also acts as a credit limit for the card. They also often have lower interest rates and fees. Another major difference between a credit card and a secured credit card is that regular credit cards often have additional perks travel insurance, purchase protection and a rewards system. 

Should I use a credit card or a personal loan for a big purchase? 

The answer to this highly depends on the cost of the purchase and your financial situation. For major purchases like a car, appliances and other high costs, a personal loan can often give you more time and lower monthly payments than a credit card. On the other hand, if you’re financially able to pay off a major purchase within the credit card billing cycle, then a credit card can be a good option as you’ll be able to earn reward points. 

How long will it take to improve my credit scores? 

Your credit scores are a direct reflection of your credit report, which is updated every 30 – 45 days. As you make payments, it will start to appear on your credit report which can help improve your credit. 

Bottom Line

Credit cards can be a great way to help rebuild your credit but they aren’t your only option. If you feel that using your credit card to build your credit scores is too much of a risk or you’re looking for a different option then you should consider one of the above alternatives. They’ll be just as effective and you’ll have peace of mind that you won’t rack up too much credit card debt.


Rating of 5/5 based on 2 votes.

Priyanka Correia is a Marketing Coordinator and personal finance expert at Loans Canada. Priyanka completed her Bachelor's degree in Marketing at Concordia University and has published work that has been mentioned in various news media. She is passionate about money management and educating Canadian consumers about how to take control of their financial lives.

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