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Some financial gurus argue that a credit score is really just a debt score. On one level, this perception is correct. Your credit score does have a lot to do with how well you manage debt. But the idea that you must take on debt over the long term in order to build a good credit score is, frankly, wrong.

In fact, you can start building your credit score — or improve your current score — without paying interest on debts or carrying debts over the long term. First, let’s talk about some strategies to build a credit score without taking on any debt. Then, we’ll make the argument for why taking on small amounts of debt can be a good thing for your overall financial health.


Self (formerly Self Lender) is a unique company that offers to help you build your credit score.  Instead of applying for a credit card which has high fees or a high interest rate, Self has created a way for you to increase your credit score through a self funded loan. After you’ve applied for your loan and selected a payment option, you’ll be on the path to building your credit.  Once you’ve completed your payments, the entire principal is returned to you minus the interest rate.

Read more: Self Review

1. Become an authorized user

When you open a credit card, you’re often given the option to add someone else as an authorized user on that account. This basically means that the person is allowed to make charges to your account. An authorized user typically gets their own card with their name on it, and they have basic privileges like reporting a lost or stolen card and making payments on the account.

There are a couple of advantages to being an authorized user. One is that you’re not financially responsible for the account, even though you can use it. If the account goes past due, the credit card company isn’t going to come after you for payments.

The other advantage is that the credit card’s payment record and balance will typically show up on your credit report. (This may not always be the case, though, so be sure to read the card’s terms and conditions before you decide to become an authorized user.)

As an authorized user, you can basically count someone else’s good credit as your own, which is a great way to build your credit score. Of course, the cardholder’s bad credit would also count as your own. You have to be careful here, and keep a close eye on the account. If the cardholder starts carrying a high balance or stops making payments on time, it could tank your burgeoning credit score.

Learn More: Where to Get Your Free Credit Score (Without Encountering Scams)

Your best bet here is to only become an authorized user if you know the cardholder is responsible. Then, keep tabs on the account information, including the card’s balance and payment dates. Finally, be sure you know how to remove yourself from the account in case things go south.

2. Add your rent payments to your credit file

Newer credit scoring formulas are beginning to include rental payments as a payment record. After all, if you make your rent payment on time each month, that’s very similar to responsibly handling installment debt like a mortgage.

Not all credit scoring algorithms are set up to include rent payments as part of your credit score, but it is becoming increasingly common. In fact, FICO recently started counting rental information, if available, in its FICO 9 score.

Even if you’re looking at a score that does include rental payments, though, getting that information into your credit file can take a little finagling. Most landlords don’t report on-time rent payments to credit bureaus (though many will report major delinquencies!). In order to get your rent payments counted in your credit file, you may need to use a third party rent tracking system. Check out this article for more information on the available options.

3. Pay debts you already have

You don’t necessarily have to take on more debt to increase your credit score if you’re already dealing with some debt. For instance, you might be working on paying down student loans. They’re a really common first type of debt for consumers since the majority of college students graduate with debt.

Related: How Difficult Is It to Refinance Student Loans?

When you’re already dealing with installment loans like these, your best practice is to keep paying them down, month by month. Make all your payments early or on time, and don’t miss any.

Paying down installment debts early doesn’t necessarily boost your credit score, though, so keep this in mind. However, continuing to make on-time payments and lowering your overall debt will slowly, and steadily, increase your credit score.

There is a strategy you can use that might boost your credit score if you have multiple student loans. By consolidating or refinancing several student loans into one, you’ll reduce the number of loan accounts with open balances. That will generally increase your credit score, and almost immediately.

To refinance or consolidate multiple student loans, check out Credible. It’s an online student loan marketplace where you’ll be able to get rate quotes and pre-qualifications from up to 10 different student loan lenders. That will be the best opportunity to get the lowest possible rate and monthly payment.

Learn more: Credible Review

4. Get a credit card

Now you’re probably thinking, “Wait a minute! I thought you said we were going to build credit without going into debt.” That’s absolutely right. But you can have a credit card account without actually carrying any debt.

In fact, this is the smartest way to manage a credit card. You can use the card for a few expenses each month, and pay it off at the end of the billing cycle. In this way, you’re not carrying any debt or paying any interest. (Bonus: If you choose the right card, you could rack up some serious rewards while you’re at it!)

In fact, having a credit card with no balance could be the best way to bring up your credit score without adding debt to your portfolio. Not only will you get credit for making on-time payments, but you’ll also get credit for your low debt-to-credit ratio.

Related: Best Credit Cards for Fair Credit – Credit Scores 580-669

Your debt-to-credit ratio is basically how much debt you have, compared to how much credit you have available. Carry a $0 balance on a card with a $1,000 limit, and your ratio is 0%. Carry a $500 balance on the same card, and your ratio is 50%.

Even if you have no credit history right now, you could start out with a secured credit card, which requires a deposit to open. You can get a secured card with no credit history. If you use it but pay it off in full every month, you could build your credit score relatively quickly.

Here’s are detailed guide on how to pick your first credit card.

Related: 3 Lesser Known Ways to Improve Your Credit

5. Use an Alternative Credit Score

The problem with establishing credit for the first time, as we’ve said, is that you have to get credit to create a credit score. But if you’re starting from absolute zero, that’s tough. That’s where alternative credit scoring models, including PRBC, come in.

PRBC is a consumer reporting bureau like Experian or TransUnion. But instead of tracking your credit information, it tracks your payments on things like rent and recurring bills. The score provided by PRBC ranges from 100 to 850.

To set up an account, you’ll have to manually link your utilities, phone, and other accounts. You could also consider linking a prepaid credit card to your PRBC account, so that it can track your payments to that account. Then, you can access your credit report and score.

The use of this scoring model is fairly limited, but about 8,500 companies nationwide will accept this alternative credit score when deciding whether or not to extend credit to customers. So you could get credit based on your PRBC score. That credit will then help you start building a traditional credit score.

Because it’s not widely accepted, the PRBC score is of limited value. But it can help you get to the goal of opening a credit account or two, so that you can build up your traditional credit profile.

Each of these five options gives you a way to build a credit history without paying any interest on debt. But is there a reason you might want to actually pay interest in order to build credit? Yes and no.

Why You Should (or Shouldn’t) Pay Interest to Improve Your Credit Score

Any time you’re talking about taking on a debt that you’ll pay off slowly, you’ll have to pay interest. (Unless, of course, you’re looking at a 0% APR promotional period on a credit card.) Whether it’s a low-rate, $1,500 loan or a credit card with a high balance, you’ll pay more than you took out in the first place.

That’s why it’s normally best to avoid taking on interest-bearing debt whenever possible. With that said, though, there may be a case to be made for taking on a little bit of interest-bearing debt in order to increase your credit score.

One part of the basic credit scoring model looks at how well you manage different types of debt. While it’s not generally recommended to take out new types of debt just to boost your score, sometimes it could be a good idea. For instance, if you’ve never managed an installment loan, like a student loan or a car loan, taking on a small auto or personal loan could help your credit score over time.

This is a technique to use if you need to increase your score relatively quickly, like if you’re in the market for a house in the next year or two. However, you shouldn’t take on debt you don’t really need to use on a regular basis.

Learn More: What Credit Score Do You Need to Buy a Home?

No matter where your credit stands today, there are a few basic ways to ensure that it inevitably improves. Make payments on time, don’t hold balances from month-to-month, keep your credit utilization low, and don’t rack up too many inquiries in a short period of time.

Sometimes in life, as is the case with your credit score, the best way to see growth is to stay consistent. And whatever you do, don’t take on unnecessary debt!

Next Steps

One of the first things you’ll want to do is sign up for Experian Boost™. This free service will track the on time utility and mobile phone bills you pay. Before, this information had no impact on your credit score but now it can give it a real boost. As long as you’re already in the habit of paying your bills on time, this can only have a positively impact your score. Start now for free!
Learn More: Experian Boost Full Review

Author Bio

Total Articles: 279
Abby is a freelance journalist who writes on everything from personal finance to health and wellness. She spends her spare time bargain hunting and meal planning for her family of three. She has a B.A. in English Literature from Indiana University–Purdue University Indianapolis, and lives with her husband and children in Indianapolis.

Article comments

Martha Cocke says:

Why can’t I improve my credit score without a credit card? I don’t want a credit card. I don’t have any debt. And I want to keep it that way.

Aybarrap1 says:

You don’t necessarily have to have a credit card to build credit. Your recurring bills: rent and utilities, could be used but with limits. On that note, having a credit card does not mean you have to use it. You could use it as an emergency thing. About twice a year you would want to make a small purchase and then pay it off immediately to keep the card active. Just this alone can build credit.

Jannelle Smith says:

Your article gave me some great ideas, but my particular situation I feel is much more difficult than using these tips can help.

I wonder if you could give me any insight into how I can clear up my credit and make it so I can qualify for things like credit cards, bank accounts, loans.
I had a very difficult past, during which I made a lot of really bad financial mistakes. The major ones include; opened credit cards that I maxed out and never settled on (2 I believe; with very low balances; maybe $200), i had over-drawn my bank account several hundred dollars and never paid it back, I stopped making payments on several bills I had at the time (cellphone, cable, electric) which ultimately were shut off and balances remain in collection for, and I also have student loans (I had been paying them monthly for a couple years, but I stopped paying after my payments suddenly skyrocketed and became unmanageable-now my tax return is taken by the state every year to go towards them).
All of this happened about 10 years ago and was for a duration of a few years. I currently am still receiving collection letters for these things (many of which are 5+ years old) and my phone rings off the hook from collectors every day. But what really sucks is that in the last 5 years or so I have become the antithesis of that person. I have a great job, pay my bills timely, have a stable household with my new family (my first son was born 3 months ago) and I feel that I am now very responsible. So, these mistakes of my past (which still haunt me; causing my credit to be terrible and anything I apply for I am declined) I am wondering if there is somthing I can do to rectify so that I can begin rebuilding my score and inturn open doors for myself. Am I looking at going back to each of these debts and actually paying them in full as my only means to help myself? I really don’t have the financial capability to do so and it’s not as if I really even want to. I very much would like to be able to open a bank account or start a small credit line and I am wondering what I can do with all this old mess that will help my credit without financially crippling myself so that I am able to progress now that I am in a much better, stable place.
-and I really want to fix my credit problems for the better of my baby.

SO sorry for the ridiculously long narrative there. It’s just that it’s all too much and I’m really hoping there is something that can be done.

Any advice would be very greatly appreciated.
Thank you in advance.
-Jannelle Smith

LL says:

Im in the same boat as Jannelle.. Wondering if there was a solution?