How to Build Credit Without Going Into Debt

In today’s day and age, we often find ourselves bound to our debts.  Our credit score, for instance, says very little about what kind of people we are, whether it is good or bad.  A credit score simply illustrates how much debt we have accumulated and how well we have been paying it off.  In many cases, a higher credit score just shows that massive amounts of money have been borrowed and paid back with massive amounts of interest.  So if you are trying to live debt-free, your credit score might be misleading to others.  If you don’t have a credit card or you want to avoid debt, you still need a good credit score to rent an apartment, lease a car, or even buy a phone.

Tips to stay credit-healthy

Here are some ways to build your credit score without taking on excessive debt.

  • Add your rent payments to your credit file: On any of the three standard credit bureaus, you can include your rent in the listing of debtors.  These will show up as regular payments that are made good on necessary expenses and will increase your credit score.
  • Pay your utilities: Making regular payments to your gas, light, and water bills are a great way to establish good credit.  You have to do this anyway, why not get the benefits from it?
  • Get added as an authorized user: You can use someone else’s good credit to your advantage.  By being added as an authorized user on another person’s credit card, gas card, or other services, you are gaining credit with their good standing.  Even if you never use the card!  This also works well for emergencies, such as having a gas card that you can use in a pinch.  Just be careful that problems with their money situation could drag you down as well.
  • Take out a credit-builder loan: Taking out a loan that you can assuredly pay off without a lot of interest, early payment fees or other pitfalls can also increase your credit.  Just be mindful to have the determination and focus to pay the loan off timely, so you gain the credit bump you want.
  • Make all your payments: Pay extra if possible, and always pay early or at the very least on time.  Missed or late payments are considered by credit bureaus.  Also, extra payments quickly reduce your available credit to income ratio, which also improves your credit score.
  • Get a credit card: A credit card can be a slippery slope towards more debt, but you can game the system.  Make a few expenses each month and pay it off at the end of the billing cycle, that way you are not collecting interest.  Also, you might get rewards points, which you still get to keep, even without paying interest.  Having a no annual fee card will also allow you to build credit, especially if you never use it.
  • Monitor your progress:  Keep tabs on your credit report.  This will also allow you to see any potential red flags that would indicate identity theft, which is never good for your credit rating.

Building credit score takes time

You are not your credit score, but unfortunately, sometimes you have to play the game to get what you need in life.  Through practice and patience, you can easily boost it with these tips.  Good credit should just be a reflection of financial responsibility, and if you are living debt-free, the hard part is taken care of.