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 March 1, 2023

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 on their credit reports. 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 can cause debt and credit issues.

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 build 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 Billi Boost

Billi Boost is a feature of the Billi financial app that is aimed at building credit through rent payments. It offers an alternative method for building credit that does not rely on credit cards or loan payments. The Billi app has a monthly fee of $4.99, and it is designed to provide users with a snapshot of their finances by connecting credit card and bank accounts all in one place. The goal of Billi Boost is to allow customers to start building credit through consistent and on-time rent payments, which are reported to a Canadian credit bureau.

How Does Billi Boost  Work?

1. First you need to create an account with Billi. You can do so by clicking the button “ Boost Your Credit” on their website. To create an account, you’ll have to provide basic information regarding your identity and address. Here you will also be asked to fill out the ‘Boost’ form, for further details on your rental payments.

After that, you’ll need to link certain financial accounts and set up payment. Then you’ll be set up to pay rent with Billi. Do note, Billi may take additional verification steps before reporting your rent payments. This includes verifying that your lease matches the address at the credit bureau. 

2. Billi Boost will automatically start reporting your rent payments to a Canadian credit bureau which can help you build your payment history. Billi Boost accepts multiple payment methods, such as withdrawals from a bank account, cheques, cash, and e-Transfers. 

3. Continue to make your rent payments on time and you will hopefully see your credit score start to increase. Within 4-6 months you may be able to increase your credit score by up to 150 points. Keep in mind that all credit scores react differently, there is no guarantee that one action will help improve your credit score.

Use A Personal Loan

Credit cards aren’t the only credit account 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 they usually have a longer term 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.

Try KOHO’s Credit Building Program

Instead of using a credit card to help rebuild your credit, you can use KOHO’s credit building program. You can subscribe to the program for a monthly fee. When you subscribe, KOHO will open a line of credit for you and report your subscription fee payments to one of the major credit bureaus. This will help you build a positive payment history which can help you build your credit. 

The program lasts for 6 months, but you can reapply if you’d like to continue building your credit.  To be eligible for this credit building program, you’ll need to first open a KOHO account. KOHO will use this account to automatically withdraw your subscription fee. 

Get A Guarantor Loan

If you can’t qualify for a regular personal loan, you can opt for a guarantor loan. This can be particularly helpful for newcomers to Canada and students who haven’t built their credit yet.  

When you get a guarantor or cosigner to co-sign a loan with you, they’ll be agreeing to take responsibility for the loan in the event you (the primary borrower) default on the loan. This greatly reduces the risk for the lender and can help you qualify for a loan. Moreover, a guarantor can help you qualify for larger loans, lower interest rates and overall better terms. 

If you pay the guarantor loan as agreed, it can help you build credit. 

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 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 the card provider 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 add 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.

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. 

Best Secured Credit Cards To Build Credit 

 Annual FeeInterest RatesMin. Deposit
Neo CardTM (Secured)0%19.99% to 26.99%$50
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)
Vancity enviro Secured Visa Card$0 – $39511.25% to 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 a credit bureau, 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. 

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.

Tips On Borrowing To Improve Your Credit

  • 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 keep up with payments, 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. 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 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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