Do Store Credit Cards Build Credit?

You’ve probably been to a department store where you’ve been offered to apply for a store credit card in exchange for a huge discount, and so you might be wondering do store credit cards build credit? We will answer this question in much detail below.

Do Store Credit Cards Build Credit?

Some store credit cards do help build credit because they report your account status to the credit bureaus (Experian, Transunion, and Equifax), however, not all store credit cards will help you build credit. Store credit cards that don’t report your account status to the credit bureaus will not help you build credit. Research the specific store credit card to determine whether it builds credit before applying.

If your store credit card reports to the three major credit bureaus, your store credit card will help you build credit so long as you use it responsibly by making all of your payments on time and keeping your account balances low.

That said, you should be aware that only credit cards build credit, rewards cards, membership cards, and other forms of rewards cards that help you accumulate points will not help you build credit.

Here is a list of some store credit cards that will help you build credit:

  1. Amazon Credit Card
  2. Target RED Card
  3. Walmart Credit Card
  4. Best Buy Credit Card
  5. Kroger Credit Card
  6. Home Depot Credit Card
  7. Wallgreens Mastercard Credit Card
  8. Apple Credit Card
  9. Macy’s Credit Card
  10. Starbucks Rewards Visa Credit Card

If the store credit card you’re applying for reports your account status to the credit bureaus, your store credit card will help you build credit. Some store credit cards help you build credit because they do report your account status to the credit bureaus.

That said, if you apply for a store credit card that is co-branded with a large payment network, such as Visa, Mastercard, or American Express, there is a good change that your store credit card reports your account status to the credit reporting bureaus.

However, some smaller store credit cards may not report your account status to the credit bureaus. In this case, your store credit card will not help you build credit.

So, if you want to open a store credit card than help you build your credit, you should contact the card issuer before applying and asking them whether they report to the three major credit bureaus. If they do report the store credit card’s status to the credit bureaus, your account will help you build credit if you use your credit card responsibly and make your payments on time.

It’s important to note that some store credit cards that only work in the store that issued them do not report to all three credit bureaus or only report to one of the credit bureaus. So, when choosing a store credit card that will help you build credit, you should choose one that reports to all three credit bureaus.

How Do Store Credit Cards Impact Your Credit Score?

If you choose a store credit card that reports to all three credit reporting bureaus for it to help all three of your credit scores.

1. Pay Your Store Credit Card On Time – For your store credit to help your credit, you should ensure that you at least make your minimum payment on time. This is so because your payment history accounts for 35% of your credit score, so paying your credit card on time will definitely help your credit. That said, missing even a single payment on your store credit card can cause significant damage to your credit. So, make sure to pay your store credit card on time for the best impact on your credit score. Also, if you are clumsy like us and often forget to make your minimum required payment, most card issuers allow you to set up automatic payments, so that you can at least make the minimum payment to avoid hurting your credit.

2. Keep Your Balance Low – When you use your store credit card, you should try to keep your credit utilization (use of available credit) at or below 10% and never exceed 30%. If you use more than 30% of your available credit and you leave a high balance, you can lower your credit score. This is so because your credit utilization accounts for 30% of your credit score. So, keep your account balance for your store credit card to help your credit score. So, for example, if your store credit card has a $2,000 credit limit and you leave a balance on your credit card of $1,000, you’re using 50% of your available credit. This can lower your credit score because credit bureaus factor in your credit utilization when calculating your credit score. So, avoid leaving a high balance on your store credit card.

3. Don’t Apply For Too Many Accounts and Loans – Other than using your store card responsibly and making your payments, to build credit, you should refrain from applying for other credit cards and loans. This is so because each time you submit a credit card or loan application, a hard inquiry is added to your credit report, slightly lowering your credit score.

4. Assistance Making Payments – If for any reason, you’re unable to make your payments on time, you should contact your store card issuer and ask them about your options. Some card issuers may be willing to work with you, allowing you to skip a payment or come to some sort of agreement as to how the balance is paid down. That said, if that does not work, you can try credit counseling services that are available to you, and they should be able to provide you with your options.

Should You Even Apply For a Store Credit Card?

It’s often tempting when you’re standing to check out at a store and the cashier tells you that you can get 30% off your entire order if you open a store credit card to apply for the store credit card to get the discount. But, you should keep in mind that merely applying for the store credit card may lower your credit score because a hard inquiry is added to your credit report when the store reviews your credit report to determine whether to open the account for you. That said, a hard inquiry will only remain on your credit report for two years, after which it’s automatically removed from your credit report.

So, before you apply, you should ask yourself: what are the odds of you being approved? Do you meet the store credit card lending criteria? If you have excellent credit, your chance of being approved is very high. However, if you have bad credit, applying could further lower your credit score. So, keep this in mind before even applying. If your reject, the hard inquiry will still appear on your credit report, alerting future lenders that you’ve been seeking credit.

You may benefit from opening a store credit in terms of the benefits you get by becoming a cardholder as many store credit cards offer unique benefits to their cardholders, such as discounts and early access to some items that are not available to persons without the store card. So, before applying you should consider whether the benefits offered by the store credit are worth applying for it.

That said, before opening a store credit card, you should consider the fact that store credit cards often have a higher interest than regular credit cards. So, if you are planning on leaving a balance on your store credit card, you should know that you will be paying more interest on the card balance. This is something to keep in mind as it could negate any discounts that you receive as a cardholder.

Also, there are many rewards credit cards that offer points for purchases, so it’s worth looking at whether the rewards and perks offered by your store credit card exceed those of a rewards credit card. If they do, then applying may make senses, but if they do not, you’re better off using a rewards credit card than opening a store credit card.

At the end of the day, the decision is up to you. If you like the benefits offered by a store credit card, and you meet the requirements, there is nothing wrong with opening a store credit card. Just weigh the factors discussed above before doing so that you can make an informed decision.

Overall, a store credit card makes sense if the following apply to you:

  1. You frequently shop at the store, allowing you take full advantage of the benefits, rewards, and perks offered by the store credit card
  2. You can keep your card balance low to avoid paying high interest rates on the balance
  3. You want to take advantage of an interest-free period the card offers
  4. You pay off your balance in full at the end of each billing cycle

Frequently Asked Questions (FAQs)

1. Can store credit cards improve your credit?

Yes, store cards that report to the three major credit bureaus can improve your credit so long as you use your store credit card by always making your payment on time, and keeping a low balance on the card. However, not all store cards will improve your credit. If you want a store credit card that can improve your credit, you must select one that reports to the credit bureaus. As your card issuer whether they report the credit bureaus if you want a card that will help you build your credit.

2. Do store cards hurt your credit?

Applying for a store card can temporarily slightly hurt your credit and lower your credit score because when you apply for one, a hard inquiry is placed on your credit report. A hard inquiry can lower your credit score by a few points. That said, the imapct of a hard inquiry wears off after 12 months, and it’s removed after 2 years automatically.

3. What store cards build credit?

Walmart, Target, Best Buy, Amazon, Starbucks, Home Depot, Walgreens, Apple, and many stores have credit cards that can help you build credit. Research the credit card you want before applying to see if that specific store credit card reports to the credit bureaus to help you build credit.

4. Can you get a store credit card with bad credit?

You may be denied if you have bad credit as most store credit cards require a credit approval. So, if you have bad credit, you could be rejected.