9 ways to build credit without cards

Your credit cards are a big factor in your overall credit rating, but they're not the only factor. You can have good credit without the plastic.

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VIDEO ON MSN MONEY

27Comments
Mar 8, 2014 5:58AM
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Money management should be taught in the home when kids are entering their teen years. Learning the value of money and understanding how much things cost are important lessons. Our four kids (2 boys and 2 girls) had part time jobs when they were in high school and worked about 12 hours a week. We opened bank accounts with them and they put about 25% of earnings into the bank. Having money they earned in their wallets made them think before spending. Another important factor was opening secured credit cards of $500.00. It taught them how to budget spending and to pay the monthly bill in full. It helped them build a good credit rating at a young age. There are pros and cons on managing money however learning to spend what you can afford is a good habit.
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One thing that really gets my goat is that when you are trying to get a loan and the company you are working with contacts the credit bureaus to find out your credit ratings you get penalized for that. For instance if your credit rating is 820 and the company you are working with checks your credit rating it is considered a hard inquiry and your credit is reduced so many points. It might end up to be 790 with just one hard inquiry. I had three a couple of months ago and it dropped my rating 68 points, just for inquiring. This is not fair that we should work to get our credit rating up high just to get penalized for inquiries. There has to be some way to get around this. Its just not fair.
Mar 8, 2014 9:57AM
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I guess we older people were trained  financial responsibility differently as children . It's really pretty basic ; Live within your means , borrow only when you really need to , and if you do , pay it back on time as agreed . Your credit will take care of itself . Credit cards CAN be a great tool for day to day living , but use them wisely and pay the whole balance every month .  Having a budget and staying within it is a must .
Mar 8, 2014 10:22AM
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Most of these suggestions are common sense.  The one that has caused me the most trouble was trying to do a favor for my children.  A favor that can be the hardest thing to turn down, but do yourself a favor and never co-sigh any loans.  It may seem cold but its your credit that gets hurt, and who winds up paying the loan when payments are not made?  YOU.  I speak from experience and now will never co-sign any type of loan for anyone.  Now retired and having had decades of credit built up I cant have it destroyed, living on a fixed income with a comfortable income doesn't mean I am an easy touch for funds because I was aware of my financial limits and understood the meaning why credit is so important in today's life styles. 
Mar 8, 2014 9:57AM
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 Anyone who can't live by these basic financial rules, in reality, doesn't earn enough money to pay for the things they believe they are entitled to. These folks will ALWAYS be in  financial trouble, and will always blame credit cards  and banks for their debt.
Mar 8, 2014 10:23AM
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Never forget that credit is expensive. You pay dearly for all money that you borrow. If you can't pay cash for something, you can't afford it. Pay cash and you don't need a credit score. Buying a home may be an exception to the all-cash rule but even that is doubtful: Rent instead and save  to buy a house at a time when they are cheap, i.e., when a housing bubble bursts. 
Mar 8, 2014 10:40AM
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In the grand scheme of things, one of the main objectives is to keep the working person and especially the poor, constantly indebted to somebody.
Mar 8, 2014 11:13AM
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Getting a secured credit card and paying on it is how I started building my credit. In the beginning I paid an annual fee and interest but I kept the amount low and over a year I might have paid between $50.00 and $100.00 combined in fees and interest. After that I started getting 0% for a year pre approvals. I got one and figured out how much I could pay off making the minimum payments in a year and bought myself a new TV. I continued to get preapprovals but only after I paid the debt down on the first 0% card did I get another. I linked my first card to a bill I have every month and set the card to auto pay to keep it active and building credit and did the same thing with my second card I did with my first, Christmas this time. I have 5 now and haven't paid interest or annual fees, actually earn money through rewards programs, since my first card. I know finance Christmas every year at 0%. Credit is only bad if you use it to buy things you can't afford and use it as a blank check. The only things you should ever finance and pay interest on are things you need, car, home, school, that will pay you back later. A car is a necessity for most. A home will cut costs in the long run and you can count not having to pay for it every month as profit after you pay it off. School will help your earning potential and therefor pay you in the long run. Never pay interest on wants, only needs and things that will pay you back.
Mar 8, 2014 10:53AM
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Pay your bills on time and do not borrow too much money.  The key to the credit bureaus is your personal debt load.  They do not want to see you carrying a lot of debt, but they want some.  It is a delicate balance between the two.
Mar 8, 2014 12:08PM
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In my younger days, an old farmer gave me this advise;

 

"Pay cash for everything, except maybe your home.  Big purchases should use this guideline, 50% of your annual wages for a new car (cash if you can), and no more than three times your annual wages for a new home!" 

 

Do the math and it works out about right.

Mar 8, 2014 11:23AM
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I have good credit and pay nothing for it. I actually make money through rewards programs. The secret is to get a 0% for a period of time card and only put what you can pay off during the 0% period. Then link that card to a bill you have to pay anyways and pay it off every month in full like you would the bill. Then get another 0% card and do the same thing. Do this until you have a card for every bill you have and then stop.
Mar 8, 2014 3:57PM
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Taking responsibility for your credit (score) by maintaining a disciplined approach to your credit is foremost.  I learned all the above rules over the years practicing what my parents taught me and simply being  conscientious about borrowing and paying back.  For me, I always considered "borrowing" a privilege and not a right.  It was something to work toward and earn over time.  Too many young people today look at credit as an entitlement and if they simply make "token" payments on their accounts, that should be good enough.  Or, if they think they are being billed unfairly (i.e., medical, utilities, service charges, rent, etc.) they have done their part and do not need to follow through.  It is like the have the attitude that all they have to do is prove for a time that they CAN make the payments, not that they WILL make the payments.  Big mistake and they pay for it.  Unfortunately, too many don't learn from it.  Thus, we see debts in collections and bankruptcies.
Mar 8, 2014 3:04PM
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When your American Express is overdue
And your Discover Card is way too large
Get a loan on your Visa Card
And pay it off with your Master Charge

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You can create private credit without letting any 3rd party agencies compromise your financial and personal security. Work direct with sellers for sellers to carry debt and receive payments directly over time. It's win-win.
Mar 8, 2014 1:57PM
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I pay all bills, except taxes, exactly on the due date. That lets me keep my money in my bank account, and earning interest as long as possible. I pay taxes a week early so the payment will be acknowledged before the due date. That way I have time to take remedial action if my payment goes astray, thus avoiding confrontations with the IRS.
Mar 8, 2014 11:45AM
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I always pay on time. One time I paid. Then a couple months later I paid again. I even paid one time about 4 months later. I have no idea why the creditors were getting upset if I was paying on time.
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