The extent that your credit score is tied into your life is staggering. Here is a list of people who make it a habit of checking your credit score before offering their services and sometimes before determining what rates to offer their service at:
- Mortgage lenders, car loan lenders, lenders of any sort
- Credit Cards
- Auto Insurance
- Home Insurers
- Bank Accounts
- Utility Companies
- Cell Phone Plans
I’ve read many stories on financial blogs about people who applied for a credit card knowing that they needed to establish credit only to find themselves in horrible debt for years afterwards because of a year of spending for an inflated lifestyle.
After I graduated college, I also thought that getting a credit card was the only way to build up a good credit history, something I knew I would need in the next stage of my life. My credit card usage has been very disciplined (I have only ever paid one finance charge of $39 in four years because I shut down a bank account and forgot that my credit card bill was automatically debited from this account), so I would certainly have not chosen a different path to a good credit score and history for myself, but it is interesting to me to find other ways that people can build up a score that means so much in our day and age.
Here are ways to build up your credit score—whether you are just starting out with no credit history, or needing to repair your existing credit history—without using a credit card:
- Open up a checking and savings account
- Pay recurring bills on time
- Self report on-time payments of recurring bills: “Fair Isaac, the firm that created the FICO score, has developed the FICO Expansion score to measure the creditworthiness of people who have little or no information on file with the three major credit bureaus.” You can track your payment history for things like water and electricity bills at Payment Reporting Builds Credit. You can also self report to the three credit bureaus; collect 12 months or more of on-time bills, and contact each of the three main credit bureaus in order to find out how to report these (fax or mail).
As you can see, even if you are determined to live your life without credit—a worthy goal—your credit score or lack thereof may still hold you back or cost you more for services. But it is nice to know that getting credit does not always revolve around having and using credit.