How to Raise Your Credit Score When You Can’t Get a Credit Card

Holly Johnson

June 29, 2018  •  4 Minute Read

Financial Tips

Your credit score may be little more than the numeric manifestation of your credit health, but it can play a much larger role in your financial future than many people realize. If you have poor credit or no credit, for example, you may struggle to get approved for your own apartment or car loan.

You may also have trouble getting a mortgage with poor credit. Even if you do get a home loan, you may have to pay higher interest rates than you would if your credit was in good shape.

Your credit score can also play a role in how much you pay for car insurance. With poor credit, insurance companies may see you as a risk and boost your rates. But, it gets worse. Since employers can see a summary of your credit report with your permission before they hire you, really bad credit could even cost you a job. With all these issues at play, it’s smart to look for ways to improve your credit in the short term.

4 Ways to Improve Your Credit Without a Credit Card

Unfortunately, it can be difficult to get a chance to prove yourself when you have poor credit already. You may not be approved for a new credit card if your credit profile is thin or you have negative marks on your credit report, after all.

Still, you’ll want to take steps to improve your credit whether you can get a new credit card or not. Here are four strategies that can make the biggest impact in the shortest amount of time:

Apply for a secured credit card

While it can be difficult to get approved for an unsecured credit card when your credit isn’t great, most people can get approved for a secured credit card. This type of card requires a cash deposit as collateral to get started, then helps you build credit by reporting your credit movements to the three credit reporting agencies — Experian, Equifax, and TransUnion.

The downside with secured cards is the fact that you don’t get much of a line of credit to work with. If you put down a $500 deposit as collateral, for example, your credit line will be in the $500 range. In that sense, you’re really just borrowing against your own money.

But since your payments will be reported the credit bureaus, using this type of card should help your credit over time. Ideally, you’ll use your secured card until your credit is good enough to qualify for an unsecured credit card. At that point, you can cancel or upgrade your secured card and get your deposit back.

Get a credit builder loan

Another option to consider is a credit builder loan. These loans aren’t traditional loans, however, since they don’t come with a line of credit at all.

With a credit builder loan offered through a platform like SelfLender.com, you will agree to a “loan term” of up to two years. During that time, you will make monthly payments that will be held into a Certificate of Deposit (CD). While your loan is in progress, your monthly payments will be reported to the three credit reporting agencies, Experian, Equifax, and TransUnion. At the end of the term, you will receive all the money you paid in minus any setup fees and interest charges.

Credit builder loans can be advantageous since nearly anyone can get approved and they help you build a positive credit history. They are also a form of forced savings since you get all your payments returned to you in the end. For these reasons, credit builder loans are an alternative to secured credit cards that can help you accomplish the same set of goals.

Pay your existing bills on time

When it comes to your credit score, the one factor that makes the biggest difference is your payment history. According to myFICO.com, this factor makes up a full 35 percent of your FICO score.

With this in mind, one of the most important things you can do is pay all your bills early or on time. If you have any debts that are late, you will also want to pay them to get them current right away. Since your payment history makes up such a huge chunk of your credit score, this single move can make a huge difference and help improve your score in a hurry.

Pay down as much debt as you can

Last but not least, don’t underestimate the power of paying off debt. Your credit utilization makes up 30 percent of your FICO score, paying off debt can have a huge impact right away. The less debt you have, the lower your utilization will go. As you continue chipping away at your debts over time, your utilization should only improve.

Of course, there are other benefits that come with paying off debt. With less debt, you’ll have smaller interest payments. With less money going to interest, you can keep making the same monthly payments and get out of debt faster.

The Bottom Line

While it’s easy to believe your credit score doesn’t matter, there are plenty of situations where poor credit can ruin your dreams. If you ever want to own your own home, for example, you'll need a positive credit history and a decent score. The same can be said if you ever hope to borrow money to start a business as well.

Instead of letting past mistakes stand in the way of your future goals, take steps to improve your credit today. Your future self will thank you if you do.