Build Your Credit Score Without a Credit Card

Alas, this strategy isn't free. Interest paid on the loan will almost certainly cost more than interest earned on the CD.

New York certified financial planner Cary Carbonaro doesn't encourage secured loans instead of credit cards, but, she says, it's been a successful way for her clients who can't get cards to turn around their financial situation.

Get a Co-Signer

Turning to mom, dad or another relative as a loan co-signer can help you bypass the credit card stage and take out only debt you actually need. Since the co-signer is also legally responsible for the loan, lenders can bank on being paid back, and you get to build your credit history by making timely payments. With a solid payment history, you'll eventually be able to sign on your own.

Be a Co-Signer

Alright, so you're gaming the system. But if you know of anyone with a high credit score who's taking out a loan, you can ask them if they'll allow you to be a co-signer. The loan -- and their payments -- will show up on your credit report, building your credit.

Beware, though, if they default on the loan, you're legally responsible. So be sure you're confident in their ability to pay the loan before taking on the risk.

If a Bank Says "No"...

Consider trying a credit union.

"Every lender is going to take a look at your risk and your credit history, whether a credit union or a bank," says Jim Hanson, vice president of the Credit Union National Association's Center for Personal Finance. "But credit unions are known for taking [a] character element more into consideration."

Hanson says that in addition to the traditional factors that everyone looks at, credit unions may consider solid payment histories of items that don't show up on your credit report, take the length of time you've banked with them into consideration or give a member credit for attending a financial literacy class.

Michelle Dosher, a senior editor at CPF, says you can build a solid relationship with your credit union by opening a checking and savings account with a debit card, taking out a securitized loan and then taking out an un-securitized loan.

The path to creditworthiness need not be lined with plastic. But all the same rules of financial responsibility apply: Pay on time, don't overextend yourself, don't let bills go into collection and be sure not to get a judgment on your report. And be conservative. The mark of a good credit risk, says Fair Isaac's Watts, is someone who "is very resistant to the temptations that most of the rest of us succumb to on occasion."

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