Being that I have a credit card blog, it may sound ironic for me to talk about how to build your credit without a credit card. Does that make any sense?

Yes, actually it does.

I understand credit cards aren’t appropriate for everyone. For me and vast majority of the forum members, we use them in a very disciplined matter. So for us they’re great, but for you they might not be if you overspend with them.

And you know what? If you don’t have the full self-control to use them the right way, then I commend you for admitting that! Most people won’t admit problems, so to acknowledge credit cards are not for you shows you’re being realistic about your strengths and weaknesses.

What won’t build credit?

• Phone/utilities do NOT build credit – I can’t even tell you how many people I talk to who believe that their cell phone, power, and gas bills build credit. Unfortunately they don’t. You see the reason the cable or phone company check your credit when you open a new account is because they want to make sure you will pay your bill. If your credit comes back as sketchy, then they probably will ask for a security deposit. What they won’t do is report your accounts to the credit bureaus… unless you stop paying. When that happens, they will report your account as a delinquent/bad debt. So in short, these bills can hurt your credit, but they can’t help it.

• Having no credit = bad credit – I’ve heard some people say they go without a credit card because they wrongly believe it actually helps them. Well if you’re going to screw up your credit cards – in that case – it is better to have none at all. But whether it’s credit cards or another type of credit… the bottom line is you need some sort of credit accounts to build credit history.

• Debit & prepaid cards don’t help – The same usually holds true for those rent-to-own places, too. Sorry, but these things won’t do diddly-squat for your credit. And if you’re wondering why they asked for your Social Security number when you got a card? That’s because of the Patriot Act – banks are required by law to verify your identity. They were not asking that for credit reporting purposes.

• Rent is useless – Just like utility bills, rent generally won’t be reported unless you break your lease and flake on paying.

What will build credit?

Building credit scores and history without credit cards isn’t always the easiest, but that’s only because it’s using the road less traveled. And what road is that? Well I’m going to tell you about 5 different ways you can go. In no particular order, here they are…

1. CD Loans

Do you have some money held in a CD at a bank? You might be able to “borrow” the money and help your credit in the process.

In short, you are borrowing money from yourself. The bank uses your CD as collateral and loans you the money. Typically the rates are low since you are essentially assuming all the risk – i.e. borrowing $2k from a $2k CD.

Not every bank and credit union offers these, so you may have to hunt around. When you find one that does, make sure they actually report your loan to the credit bureaus (otherwise it will be pointless for building credit).

2. Car Loans

Auto loans are probably one of the most common ways to build credit without a credit card. The good news? Even if you have limited credit history, you may be able to still get approved.

The bad news? The less credit you have, the higher interest rate you will pay. For this reason, you really need to be careful.

Plus let’s not forget… it’s sometimes just as easy to rake up debt on a car as it is on a credit card. Don’t let the salesman sweet talk you into buying more than you need.

And most important of all, pay attention to the price you are paying, not the monthly payment. The amount of your monthly payment can be manipulated to seem high or low, based on the length of the loan.

3. Student Loans

The price of tuition sucks, big time. But on the brightside, at least the loan will show up on your credit report.

However I should point out you can’t use that as justification to get bigger loans. Whether you have $10,000 or $50,000 in student loans, the impact it will have on your FICO score will probably be exactly the same. What matters is how you manage it, not how high or low the amount is.

4. Secured Cards

Obviously this article is about building credit without a credit card. So why the heck am I talking about secured credit cards then? Because they aren’t your normal credit card.

A secured credit card works on the same principle as the CD loan mentioned above. You give money to the credit card company, which becomes a security deposit. You are only allowed to spend up to that amount. Then when you decide to close your account, you get your deposit refunded.

Since a secured credit card builds credit, it is a good option to consider. But keep in mind that even though you won’t be able to spend more than your deposit, if you don’t pay your bill each month then you will be charged interest.

5. Parent’s Account

This is not a route I recommend (will explain why in a moment). But regardless, it’s still a way how you can build credit so I will talk about it and let you decide. Yes, it still involves a credit card, but it’s without a credit card of your own (sort of).

If a parent adds you to their credit card account, then that will show up on your credit report. That is, assuming they add your Social Security and not just request a secondary card in your name.

There are a couple reasons I don’t like this:

• What happens if your parents screw up? If they make late payments or otherwise experience financial problems in the future paying their account, then it will screw up your credit too!
• Money is one of the biggest causes of arguments, right?

For other reasons I am against this, you can see my post about adding an authorized user to a credit card.

I’ve received quite a few questions about the Visa Infinite credit card so I thought it was time to explain what’s fact and what’s fiction.

What is it?

So what is Visa Infinite? Well as you know, Visa issues cards in different tiers. While most of us know the Classic, Gold, and Platinum levels. On Visa’s website they categorize these into 3 different types:

• Traditional Cards
• Traditional Cards With Rewards
• Premium Rewards Cards

In the US, that last category is a synonym for the Visa Signature cards. However not every country uses the “Signature” branding. In some countries, the top credit cards are Visa Infinite instead.

Either way, both the Signature and Infinite have comparable benefits.

Where can you get it?

Here is a list of all the countries that use the Infinite name for their top-tier of Visa cards.

As you will notice, absent from the list is the United States and United Kingdom, yet interestingly enough you can still find the branding used in neighboring countries.

For example, even though the US doesn’t have them, there is Visa Infinite in Canada (from CIBC, TD Bank, RBC, and Scotiabank).

How exclusive is it?

Most of the emails I receive about this card are people asking if it’s uber-exclusive, like an American Express black card.

The truth is just because a card is Infinite, it doesn’t mean it’s exclusive. Now there are some that are exclusive, like the one from Canada’s RBC for private banking clients, but there are plenty which are relatively easy to qualify for.

For example, the CIBC Dividend Visa Infinite Card (Canada) has minimum income requirements of $60k per year and the annual fee is modest at $79.

So will you at least have to be middle-class to get approved? Yes. But to make a blanket statement and say all of the Infinite cards are prestigious or exclusive would be incorrect.

Just like the Visa Signature cards here in the US, some are exclusive while others are extremely common. In short, the tier of the Visa doesn’t determine its exclusivity. Rather, it’s the issuing bank who determines what a card’s requirements are.

What are the benefits?

Like I said if you’re familiar with the Signature, that’s more or less what you can expect on the Infinite. The benefits do vary a bit by country but on average here’s what you will probably find:

• Phone concierge service
• No pre-set spending limit –or– a preset limit of $20k or higher
• Privileges and perks through the Visa Infinite Luxury Hotel Collection
• Invites to food/wine events
• Various insurance benefits for rental cars, common carrier travel, lost/stolen luggage, etc.
• Emergency replacement for lost/stolen cards
• Emergency cash (it’s not free money, the amount gets charged to your account)
• Hotline to assist you in finding emergency medical or legal help

As you see, most of the benefits aren’t too exacting, with the exception of the Visa Infinite Luxury Hotel Collection. It gives you some extra bells and whistles at participating hotels. As an example, here’s what Canadian cardmembers get:

• Best available rate
• Automatic room upgrade when available
• Free valet – or – internet
• 3 pm check-out if available
• Continental breakfast for free
• $25 certificate for food/beverage

Good benefits, but keep in mind you aren’t going to get them staying at the Holiday Inn. The participating hotels are places like Montreal’s St. Paul Hotel, Vancouver’s Sangri-La, and other high-end places. There are hotels all over the world that are part of this program.

Conclusion?

In the US, Visa Infinite credit cards would basically be on par with our Signature tier. You definitely get some nice advantages, but those who think that all Infinite cards are super exclusive is sorely mistaken.

If you live in the U.S. and want something comparable, my recommendation would be the Chase Sapphire Visa Signature.

Is it possible to apply for a credit card with a soft pull inquiry? This is a question I get asked a lot. Obviously the fewer hard inquiries you have on your credit report, the better. But can you really get a new card using only a soft credit check?

Usually not, but sometimes you can.

There are no hard and steadfast rules when it comes to this. More often than not, a hard pull will be done. But here a few times it might not always be the case…

1. Multiple account applications within a short period

Last spring I applied for two different cards from Chase within a short period of time (if I recall correctly, it was within a 30 or 45 day window). And guess what? Only one hard pull from them showed up on my account. So I basically got a 2 for 1 special.

Let me be clear your experience with Chase may differ. I’m not claiming this will happen if you try the same thing, but at least that one time for me that’s how it worked out.

2. The American Express card offer pre-selector

American Express has a new feature that lets people check which card offers they are pre-selected for. Using this to check does not affect your credit because only a soft pull is performed.

However if you choose to apply for an offer that you are pre-selected for, then there likely will be a hard pull. But the good news is that since you were already pre-selected for it, the chances of getting approved are pretty darn good.

I’ve had people test this with varying levels of credit (awful, moderate, good, etc) and what AmEx spits back seems to be dead-on. My friend with bad credit had no results available, but then my other friend with great credit was given 2 pages of offers.

Anyone can use this feature – both existing cardmembers and those who want to become one. If you are existing member and one of your pre-selected offers is for an upgrade (i.e. Blue Cash Everyday to Preferred) then it’s possible there might not be a hard inquiry. At least, that’s based on feedback I have gotten so far. But to be safe, you should assume that if you submit an actual application for an offer you were pre-selected for, there will probably be a hard pull.

Go here to check your AmEx preselection using a soft pull

3. Orchard Bank card pre-selector (for bad/fair credit)

If you’re looking for soft pull credit cards, I’m going to go out on a limb and say there’s a good chance that the reason for that is because you think you might get turned down (due to bad credit or just lack of credit history). And that’s smart thinking, because you don’t want to use a credit inquiry only to have your application declined, right?

If your credit is borderline, then my recommendation would be Orchard Bank and their soft credit check credit cards:

Check for MasterCard (4 cards avail)
Check for Visa (4 cards avail)

Technically speaking there are not 8 cards, but rather 4, since the only difference between each group is the MasterCard or Visa affiliation. After you check pre-qualification, if you choose to apply for one of the offers then a hard check will be done. But the correlation between pre-qualification and actual approval typically should be spot on, so hopefully the inquiry won’t be used in vain.

Do you know of any other applications for credit cards with soft pulls for pre-qualifying? If so, share in the comments below!

Q: I am 5 months post-bankruptcy and want to get my credit back on track. Can you tell me why the PNC Bank credit card application is not available on their website, at least from what I see? Do I need to apply in-person for it?

A: I didn’t see it up there either, but I did use the search function on their website. Using “secured credit card” this is what it will show you:

The first one is talking about secured business loans (obviously not what you want). If you click on the second one it takes you to a page linking to 3 credit card agreements; Standard, Visa Signature, and Secured. The last of which shows…

Underneath that table it talks about the $36 annual fee, the minimum security deposit ($250), the interest rates, and other information for the PNC secured credit card. But how do you apply? Well, watch out because you might get the wrong answer depending on the source.

So is it cancelled or not?

Upon doing a little Googling, I see a number of websites (such as Yahoo Answers) which say that PNC Bank no longer offers this card. Some even go so far in their answers/reviews as to say the reasoning is “probably” because National City cancelled their secured card program, so when PNC bank acquired them a few years ago they also axed the card. That information is incorrect.

I went straight to the horse’s mouth to find out what the deal was by calling customer support. They confirmed the card is still available. To get it though you will have to fill out the application in person at a branch.

How does it compare?

A $36 annual fee is very reasonable. The minimum security deposit is $250 and the max is $2,500. However there is one potential drawback to be aware of:

• These accounts do not graduate to unsecured on their own. If you ever want to try and get an unsecured card, you will have to try applying for a new account.

But that aside, this secured Visa card appears to be a great option to start with. Get that and perhaps one other good secured credit card and start using them to rebuid.

In fact, PNC is one of the few major retail banks that still offers these. The Chase secured credit card was discontinued and several of the other big guys have done the same with theirs. So it’s nice to see PNC hasn’t put there’s on the chopping block yet. It’s too bad they don’t advertise it because this is one of the better deals out there.

While talking credit cards over the weekend with an old friend of mine from Michigan, she mentioned that she was going to apply for a Peebles credit card (if you’re not familiar with them, they’re a department store).

Unless you have subpar credit that won’t qualify you for a normal credit card, I see little reason to get a card like this…

Problem #1: You need to earn 750 points for the extra benefits

There’s the Peebles VIP Gold card, Silver card, and Bronze card. However, you don’t start off at any of these levels.

So it’s not until after you’ve earned 750 points with their credit card that you start getting the perks.

• VIP Bronze card – To get this you must have earned 750 or more points within a single year
• VIP Silver card – Have to earn 1,000 or more points annually to get this
• VIP Gold card – Requirement of 1,500 points or higher

Since there’s only 1 point earned per dollar and you only start off with 250 points, that means after you apply for the credit card you will typically need to spend $500+ annually to get the other benefits.

Problem #2: The rewards and benefits suck

So what do you get for these points? Not much.

There will be chances to earn double or triple points during some “special events.” But whether you accumulate a little or a lot of points, the benefits are pretty boring and seem to fall under these two main categories:

(a) Peebles coupons and sales
(b) Discounted or free gift wrapping

With most credit cards, points are converted into cash back or reward certificates. For example at department stores the Blue Cash Preferred earns you 3% rewards.

However that’s not the case with the Peebles credit card. Instead, the number of points just dictates what tier the account is at. There’s no cash back or gift certificate coming your way for all that spending.

Problem #3: The card is of little use

Forget using this thing to finance a purchase. Why? Because the interest rates are way up there at 24.99%.

And because it can only be used for purchases at a Peebles department stores (and affiliated stores) it’s a card that will be taking up real estate in your wallet, while serving little purpose.

And don’t even get me going on the issuing bank’s customer service and how applying for unneeded cards can affect your credit score…

Written or last updated January 2012