Borrowing isn't an easy option for families living off of minimum wage. Between trying to understand what is a cash back credit card and how the credit score system itself works, such a task can be close to impossible on top of a full-time job and family obligations. But establishing credit is a necessity for anybody expecting to prosper in American society. Luckily there are ways around what seems like the catch-22 of being pressured to build credit without having the ability to borrow. Building credit without borrowing is possible through the following ways:
1. Pay utilities on time.
Thanks to the ability to self-enroll into the Payment Reporting Builds Creditmonitoring bureau, any and all of your utility bills and even your phone and Internet bills can count towards credit building. Just make sure to make your payments on time every month or else this will do little to improve your credit score.
2. Use prepaid cards as much as possible.
Several prepaid credit cards still help you build credit, so use these options as much as possible. Care needs to be taken to find out which ones help build credit and which ones don't, since chances are you would rather not be wasting your time.
3. Pay off balances at the end of the month.
There's nothing unwise about using credit cards to build credit on a modest income, so long as you do so responsibly. Since the point is to avoid borrowing, make it your mission to pay off the balance at the end of every month. In addition, opt for offers such as credit cards with rewards no annual fee included that put more pressure on you to pay the bill in full every time.
4. Borrow from yourself with a CD and a secured loan.
It's a bit of a hacker way to build credit, but borrowing from yourself is not only possible and legal, it's effective. Here is what you do: take a four figure sum of money and take out a CD with it. Then turn around and take out a secured loan with your CD as collateral. Take the loan and deposit it into a high yield savings account you can manipulate (unlike a CD) and make payments with the loan itself till it's paid off. If all goes well, the high yield should cover the loan interest, and you'll have cashing out a CD to look forward to at a later date.
Building credit is tough when you barely make enough to make ends meet. But burying yourself in debt is not the only way your credit score can improve. If you can manage charge cards responsibly and take advantage of the few loopholes and advantages that exist, just about anyone on any budget can improve their credit rating and score.