Millennial Money: life without a credit card

Credit cards facilitate building your credit history for purchasing via swift online applications and immediate approval. However, if you are not able to pay on time, or, perhaps, consider yourself a wasteful person, they also may cause sliding into the debt pit.

Consequently, some people take credit cards with a pinch of salt. As specified by a 2019 Federal Reserve report, 17% of the U.S. adults do not own them. 

It is common knowledge that there does not exist a cross-functional financial product that will suit everybody. There is a possibility to take out a loan and maintain a good credit score apart from credit cards.

On the issue of loan payments

If you make timely payments on the installment loan (e.g., a student loan), you can be sure that your actions make a big deal. The loan office receives the reports on the loan payment, enabling you to build your credit history.

According to Adam Sanders, the head of Successful Release, the easiest loans to take out for young people are student loans. Many adults have started building their credit history from them. FYI, Successful Release is a Philadelphia-based organization aiming at assisting ex-prisoners in finding employment and reaching success.

If you do not have a student loan enlisted on your name, you may apply for a credit-builder loan from a bank or a credit union. In this case, the creditor deposits the pre-established amount in the savings account. Your task is to make monthly payments until the deposit pay-off.

Meet the due date of your other bills

Other monthly invoices as cable, water, electricity, etc., do not have a direct influence on your credit reports.  However, they are relevant to your overall financial health.

As stated by Roslyn Lash, a licensed financial advisor, founder of a North Carolina-based FinCoach Consulting, and an author of “The 7 Fruits of Budgeting”, supporting immaculate nontraditional credit is under your obligation.

Default in payment of bills as utility or cell phone may ruin your credit.

Make use of your good payment history

Although the utility and cell phone bills are not usually in the credit reports, you have to be aware of the fact that now it may be different.  Experian Boost suggests you assist in raising your credit score in the credit Experian report free. If you want to join, just set up an account via Experian.

As claimed by Rod Griffin, the Senior Director of consumer education and Experian advocacy, 2 out of 3 consumers affirm that their credit scores have gained approximately 13 points. He also notes that consumers, who have less than five credit accounts, have increased their FICO 8 scores on 19 points on average. (Note: FICO 8 is one of the most commonly usable FICO score versions, used in approval considering).

However, be aware of the fact that not every lender uses Experian or scoring models by Experian Boost during the lending decisions.

One more scoring model to take account of is UltraFICO. This model is still on the trial stage, but after the official release, consumers will be able to provide access to their checking and savings account activity. The information is about the account opening date, regular and recent bank operations, testimony about sustainable cash resources, and positive account balance history.

Unfortunately, similar to Experian Boost, the UltraFICO cannot influence all of your credit scores. 

Another tool for credit story building is rental payments. Some property owners and property management companies have already started reporting the payments to the credit reporting agencies. If your lease provider has not done it yet, you have two options. First, you can approach your property owner or property management company with a request for making reports to the credit bureaus. Alternatively, you may think about taking a rent-reporting service.

It is important to emphasize that reporting rent payments timely are instrumental for you in the view of receiving a loan and may assist in renting accommodation units in the future.

Becoming an authorized user to build your credit

Becoming an authorized user is easy, as you do not need to open the account yourself or even use the credit card. You need to ask a primary account holder, who may be your relative or a close person, to add you to his or her account. Afterward, you will get your credit card. Note that the primary account holder is responsible for your accrued debts.

Make sure your primary user has a good and sustained credit history. Find out whether your card issuer reports on the authorized users to the credit-reporting agency. In this manner, you will be able to maintain your thin credit file.