How to Build a Strong Credit Score Without Using a Credit Card

Think a credit card is the only way to build credit? Think again. Whether you’ve been denied a card, are wary of going into debt, or simply prefer to steer clear of credit cards, there are alternatives for improving your credit score. In fact, there are several proven ways to show lenders you’re financially responsible. 

From credit-builder loans to rent reporting and becoming a co-signer, you can build a strong credit history without ever swiping a card. In this article, we’ll outline these strategies and offer practical steps to help you boost your credit.

1. Credit Builder Loans and Programs

If you’re looking to build credit without using a credit card, a credit builder loan is a good option. These loans don’t provide funds upfront. Instead, the money is held in a secured account while you make monthly payments. Once repaid in full, the funds are released to you. In the meantime, your on-time payments are reported to the credit bureaus, helping to establish your credit history.

While more common in the U.S., some Canadian fintechs offer these loans and programs. KOHO has a credit-building program that reports your monthly subscription payments to Equifax. Other options, like Borrowell and Nyble, offer secured installment loans designed to support credit growth. Here’s a comparison of these options:

2. Having a Co-Signer

Having a co-signer on a loan or credit application can help you build credit if you don’t yet qualify on your own. When someone with strong credit co-signs for you, their support makes it easier to get approved, and the payment activity on that account is added to both of your credit reports. As long as the loan is managed well—with on-time payments and maintaining a low balance—it can help improve your credit history over time.

However, this approach only works if the co-signer has good credit habits. If they miss payments or carry a lot of debt, it could actually harm both of your scores. A good co-signer should:

• Have a strong history of on-time payments
• Keep their credit card balance low relative to the limit (ideally 30% or below)
• Understands the impact their habits can have on your credit

3. Rent Reporting and Phone Bills

Rent and phone bill payments can both help build your credit, but they are reported differently. Rent payments are not automatically included in your credit report. To have them reported to the credit bureau, you need to use a third-party service like FrontLobby, KOHO, or Borrowell Rent Advantage. These services verify your rent payments and report them to Equifax, which can help improve your credit if you always pay on time.

Phone bills, on the other hand, may already be contributing to your credit without any extra effort. Many cell phone companies report payment activity on post-paid accounts directly to credit bureaus. Paying on time can help build a strong credit history, but missed payments may also be reported and could damage your score.

4. Secured Loans

Another option is a secured loan, such as an auto loan. With a secured loan, the item you’re buying (like the car) acts as collateral, which makes it less risky for the lender and easier for you to qualify. As long as you stay on track with payments, these loans can help you build credit. However, the lender can repossess the car if payments aren’t made.

Other Alternatives and Reporting Tips

Building credit doesn’t always mean opening new accounts—you can often start with what you already have. If you have a student loan or personal loan, making on-time payments helps establish a positive credit history. 

It’s also important to check your credit report regularly to make sure the information is accurate. Errors, like accounts that aren’t yours or incorrect payment records, can lower your score. You can pull your credit report online for free from each of Canada’s two credit bureaus (Equifax and TransUnion) once a year, and doing so won’t impact your score. You can also check your credit score and history through a third-party service, such as Credit Karma, ClearScore, or Borrowell, or your bank’s website or mobile app. For no charge, you can remove incorrect information by filing a dispute directly with the credit bureau.

To stay on top of building your credit, be sure to: 

• Review your credit reports regularly (at least twice a year)
• Look for errors like incorrect balances, missed payments, or accounts you don’t recognize.
• If you find a mistake, contact the credit bureau to start a dispute—they’ll investigate and fix any confirmed errors.
• Keep records of your payments and communication with lenders.

What You Need to Succeed

When building credit, the most important thing you can do is make all your payments on time, every time. Whether it's a credit-builder loan, your rent, or a guarantor loan, staying on top of due dates shows lenders that you're reliable. Payment history is the biggest factor in your credit score, so even one missed payment can set you back. 

If you're using any revolving credit—a type of credit that lets you borrow up to a set limit, repay what you owe, and borrow again as needed (secured credit cards, lines of credit, etc.)—try to keep your balance below 30% of your limit. This is known as credit utilization, and it can signal to lenders whether you're relying too heavily on credit. Setting up autopay or calendar reminders can help you stay organized, and checking your credit regularly lets you track your progress and catch any issues early.

Get Help from Credit Canada

There are plenty of ways to build credit without using credit cards. From credit-builder loans and rent reporting to becoming a co-signer or using a guarantor loan, each option can help you grow your credit history—as long as you make your payments on time.

Not sure which method suits you best? As a trusted non-profit offering free credit counselling, Credit Canada can help you create a personalized plan for managing debt and building credit. Contact us today by calling 1(800)267-2272 or talk to our AI Agent, Mariposa.