Build Your Credit Score Without a Credit Card

It's often said that credit cards are a necessity to get a credit score and have any chance of securing a loan, but there are ways to do it without credit cards at all.

The exact formulas for calculating your credit scores are proprietary -- and complicated. Only credit bureaus (such as Experian, EquifaxEFX and Transunion) and Fair IsaacFIC know the precise rules of the game. Regardless, the common wisdom goes, we have to play.

But do we?

Flirting with credit card debt can be dangerous. Rates and rules are often changed at lenders. Congress has recently taken renewed interest in credit card company abuses. And, for many, the temptation to overspend has left people awash in debt.

Fair Isaac says people should "apply for and open new credit accounts only as needed," not just to improve credit scores.

But, is it something people need to be worried about? Does eschewing credit cards put you at any sort of disadvantage when building your credit score?

"Not really," says Craig Watts, public relations manager for Fair Isaac Corporation, makers of the FICO score. By developing a consistent payment history on other loans, "Your score will gradually continue increasing until it reaches the ozone layer."

To get a score, you'll still need to get a loan, of course. But you can build your credit history taken out only loans you need, rather than cards you probably don't.

Here are four cardless ways to build a solid credit history.

Hit the Books

Federal student loans are probably the only unsecuritized loans you'll ever get where your credit score doesn't matter. Undergraduates can get between $3,500 and $5,500 annually, depending on their year in school. Graduate students have higher yearly limits.

The hitch, of course, is that you have to be a student to qualify. And though they're cheaper than credit cards, federal student loans still aren't free. Interest on Stafford loans runs 6.8%. So if you can pay upfront for your classes, it's a costly way to build credit history.

It may also be a time-consuming one. Some lenders may not begin reporting the loan until after you're supposed to begin paying it back, which could be years for a college freshman.

But if you need money for school, federal student loans give you a way to start building your credit score.

Borrow From Yourself

"Borrowing from yourself" is exactly what you're doing when you take out a secured loan from a bank. To take out a secured loan, you buy a Certificate of Deposit and take a loan out against it for the same amount over the same time period. You can then use the money you borrowed to pay back the loan. You'll be paying interest on the loan at the same time you're earning interest on the CD.