Let's say you know you want good credit, but you also know you do NOT want the most ubiquitous credit product around. No way do you want a credit card. Perhaps you follow a certain personal finance guru's advice to avoid them. Or maybe you've gotten in trouble with them before and don't want to take any chances with having one again. Whatever the reason, you don't want to go the plastic route.
But is the road to good credit paved with anything else? Good credit will be important if you hope to someday borrow money for a car, a home, cover an unexpected medical bill, or even qualify to rent an apartment.
Luckily, it's possible to get there without a credit card. You may already be doing it without knowing it.
Choosing not to use credit cards can hurt you in the "account mix" factor in your credit scores. You may not earn the maximum points there if you only have installment loans (those where you pay a set amount every month) and no revolving credit (in which your payment can change with your balance, and you can choose to pay a minimum or to pay the balance in full). But account mix is just 10 percent of your score. Far more important is a history of paying on time.
If you have no revolving credit (i.e. a credit card or line of credit), you won't have a credit "utilization" percentage, but that won't keep you from achieving an excellent score. (Also called your "debt usage ratio,' your credit utilization compares your balances on revolving accounts with your credit limits.) Credit expert Barry Paperno says you can get a score higher than 700 without a credit card. And in most cases it is better to have no utilization (as you would without credit cards) than high utilization, Paperno said. Still, "All things being equal, having some utilization, preferably in the single-digit range, will generate a higher score than if there is no utilization," he said.
Here are some non-credit card options for building credit.