How Do Debit Cards Affect My Credit?
Debit cards do not appear on your credit history or affect your credit score. When you use a debit card, the money is immediately taken out of your banking account. You are not borrowing money like you would with a credit card. Unlike with a credit card, you don’t get a bill at the end of the month for your debit card. Each debit card transaction is listed in your checking account statement as a withdrawal from your checking account.
The flipside to this is that if you only use your debit card to pay your bills (car payment, rent, mortgage, credit cards), you’re not building up a credit history or improving your credit score. The only positive thing you are doing is keeping yourself from going into debt.
Most prepaid debit cards don’t affect your credit history or score either. These “stored value cards” allow you to put money on them in a variety of ways: by direct-depositing your paycheck, by sending in a different check or by going to a location that handles prepaid debit card deposit transactions. Because you’re not borrowing money from anyone but yourself and you don’t have to pay it back in a timely matter, credit bureaus are not interested in your prepaid debit card use.
Some prepaid debit card companies claim they will report your history to the credit bureaus, but this won’t affect your credit score in the same way that credit cards can. If you do find a prepaid debit card that reports your history, know that it will show a record of your payments but this type of report won’t impact your credit score.
If you want to build or rebuild your credit score, a secured credit card may be a good place to start. A secured card is part debit and part credit. To get one, you open a special account at a bank and deposit money into it. The bank then issues you a credit card to charge against that amount. For example, if you deposit $500, you can charge up to $500. When you make your monthly payment, the bank reports this to the credit bureaus helping build or rebuilt your credit history.
If you pay your bill in full and on time for six months, you can then ask the bank to consider your application for a unsecured credit card (which is what most credit cards are). That should give you the ability to get a gas or department store card.