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!

Is 730 a good credit score? Yes but it’s not “excellent” as many of the self-proclaimed “leading” credit card websites claim.

Sorry to burst your bubble, but if you have a 730 credit score you are not in the “excellent” category like this top ranking credit card site claims:

In fact, I can’t remember any time when a score of 730 was considered excellent. I remember several years ago (back in ’06 and ‘07 before the crash) my FICO was 729 and even with that, I still had difficulty qualifying for the Citi Dividend and the other best credit cards during that time.

And obviously, approval for credit isn’t any easier these days.

So why is it that so many credit websites and even a few financial pundits still believe 730 is top tier credit?

What 730 can (and cannot) do for you

First of all you should keep in mind that your score is not the only determining factor in whether or not you will get approved for a credit card or loan. Some of the other factors which are weighed heavily are:

• Income: No, I’m not saying you need to be raking it in, but rather you just need to be employed with at least an average income. If you submit an application and put some low figure like $10k for your annual earnings, you will almost certainly get rejected for any half-way decent card (exceptions can be made though for those who have significant assets – i.e. retired or rich).
• Debt: How much debt do you have? How do your debt levels compare to your total available credit? Even if you really do have a high score, a high debt to credit ratio might trigger a denial.
• History: It’s actually possible (and rather easy) to achieve a credit score of 730 at a relatively young age. When you’re 18 if you get a few credit accounts (cards and/or loans) and maintain a perfect payment history and low credit utilization on the card(s), then it’s not unusual to hit 730 by the time you are 20 years old. However you can bet that a 730 score coming from a 2 year old credit file will be scrutinized much more closely by the banks than a 10 year file with the same score.

So any one of the above factors can nix an approval, no matter what your score is. That being said, here’s what you can expect on average with a 730 FICO score…

Most (but not all) reward cards

You should have a good shot at qualifying for many of the hottest cash back and travel cards on the market, but not even 730 is a guarantee of approval.

If you look on the forum you will regularly see posts from people who have scores in the 730 to 750 range and sometimes they still get denied for some of the better reward cards from American Express, Discover, and Chase.

Good (but not the best) mortgage rates

According to MyFICO.com, the average score range to get the best rates is 760 to 850. If you have a 730 FICO score with a few years of history and nothing sketchy (no bankruptcy, delinquencies, etc.) you probably should still be able to get good rates… but they won’t be the best.

The uber-good car loans (hopefully)

You know those car commercials which tout 0% for 60 months – or when 0% isn’t being offered – the advertised rate may be another low number like 1.9% or 2.9%?

So what’s the minimum credit score requirement for a 0% auto loan, or whatever the lowest rate is?

To get the low rates you hear in the commercials, you will need to have what they deem to be “tier 1” credit. Most auto manufacturers have 3 (but sometimes 4) tiers of financing:

• Tier 1 = 720 to 850
• Tier 2 = 700 to 719
• Tier 3 = 670 to 699
• Tier 4 = 639 to 669

These are only examples. Keep in mind different auto manufacturer might have different score ranges for each of their credit tiers.

However the short and sweet story here is that fortunately, a 730 credit score should probably qualify you for tier 1 (the lowest advertised rates) or tier 2 (which will likely be couple percentage points higher).

Important warning about checking your score

Ultimately the 730 number doesn’t mean diddly-squat if you are going off of a different scoring model. Did you know that most websites which offer credit scores do not give you a FICO? Read my post about the Experian PLUS Score before you check your score.

A couple years ago on the forum, there was a man who had a Merchant’s Tire credit card account. Even though he lived in Virginia, his soon to be ex-wife allegedly raked up $1,500 in charges on his account in a totally different state, Florida.

How did that happen? Well according to him, she allegedly was able to access his credit account at a Merchant’s Tire location in Florida by just giving them his Social Security number. Fortunately, the credit card’s customer service department eventually refunded him the money and turned the case over to law enforcement.

Whether things happened as he described, that’s impossible to know. But what I do know is that Merchants Tire is fairly aggressive with peddling their credit cards, at least from my experience.

What this card does (and doesn’t) offer

Obviously a credit card from Merchants Tire and Auto isn’t going to be super exciting. Its basic purpose is for financing.

The credit card offers may change periodically but this is what the application listed when I checked…

• 6 months deferred interest on purchases of $250 and up
• 12 months deferred interest on purchase of $750 and up

As I’ve said before with similar cards, keep in mind that these deferred interest plans work different than what you would be getting on a major bank credit card:

• In order to not pay interest the balance must be paid off within the specified promotional time-frame.
• If you don’t pay it in time, then the interest will be charged to your account from the purchase date (same holds true if you make a late payment).

On a $1,000 that would be almost $300 in interest charges after the 12 month “no interest” period is over, when you take into account the 28.99% APR.

On the brightside, there’s sometimes the occasional rebate or coupon offer made available only to those with the Merchants Tire credit card.

One example was a $25 Visa prepaid card for spending $250+ or a $50 card for spending $500+ before taxes. Is that enough of an incentive to apply for the card? I’ll let you be the judge.

Review written or last updated Jan 2012