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Credit cards, interest rates, loans, even where you live—these all depend on your credit score. If you have a good credit score, you’re more likely to get better financial offers. But if you have a low or nonexistent score, the chances of getting prime financial offers are pretty slim.
If you have low or nonexistent credit, improving your credit can seem almost impossible. Because you don’t qualify for the best financial offers, you can’t get the opportunities you need to bump up your credit. Plus, you’ll probably find yourself paying a lot more interest than you’d like.
This might feel like a no-win situation. But there’s good news—there are alternatives to building credit besides credit cards. Those with poor or nonexistent credit can have the opportunity to build up their scores. Learn about good credit scores and how you can work to get your rating in that range.
What Is a Good Credit Score?
If you’re completely unfamiliar with credit, it’s time to learn where your credit score stands. Here’s the breakdown—credit scores range between 300 and 850. According to Experian, an average credit score for Americans is around 675.
Credit scores are ranked as bad, poor, fair, good or excellent. Experian’s numbers are based on a model called VantageScore. The VantageScore model is broken down to the following:
- Excellent: 750-850
- Good: 700-749
- Fair: 650-699
- Poor: 600-649
- Bad: 300-599
FICO scores are based on a slightly different model with a range of 300 to 850. The average FICO score in 2018 was 704. For FICO ratings, a good or excellent score is above 740. Here’s the breakdown of FICO Score ratings:
- Exceptional: 800-850
- Very good: 740-799
- Good: 670-739
- Fair: 580-669
- Very Poor: 300-579
How to Build Low or Nonexistent Credit
It is possible to get a credit card for bad credit. But you’ll find that they’ll either have no rewards, higher interest rates or both. These are worth looking into, but you might want to consider other methods before you commit to a credit card. Here are some great options for building your credit score—that aren’t getting a credit card.
1. Get a CreditStrong Account
In a frustrating turn of events, building or rebuilding credit often requires that you have some credit to begin with. That’s where credit builder loans, such as the ones provided by CreditStrong, come in handy. Credit builder loans allow you to take out a loan without a hard credit pull. The money is placed in a locked savings account to secure the loan.
Once you make the required payments, the savings account is unlocked and you gain access to the funds. In the meantime, you get up to 24 months of positive payment reports to the credit bureaus, helping to build your score.
Each loan payment you make will be reported to all three credit bureaus each month, which will help build your credit history. Because 35% of your credit score is based on payment history, making on-time payments towards a CreditStrong account can improve your score.
2. Try Experian Boost
You already know that payment history makes up 35% of your credit score. Experian knows that, too. That’s why they launched Experian Boost earlier this year. This program allows you to include both your cell phone and utility payments in the calculation of your credit score.
Worried that you’ll miss a payment or two? Missed payments will typically harm your credit score, but Experian only counts the payments you’ve made on time. That means that any bill you don’t pay on time won’t harm your score. While you should try to pay your bills on time, this is a life-saver if you accidentally slip up on a payment or two.
3. Improve Your Credit with Rent Track
When you have a low credit score, any payment you continually make on time helps. RentTrack is a great rent reporting tool that will track your rent payments, therefore helping you build your score. RentTrack is often used by property management companies, letting their tenants pay rent online.
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How does this help your credit score? When you pay your rent, RentTrack offers to report your payments to all three major credit bureaus. If you choose to do, every payment you make will show up on your credit report. Make your payments on time, and you’ll watch your credit score increase over time.