Credit · March 24, 2022

Do Store Cards Build Credit?

If you have a low credit score or if you haven't established credit yet, you may have heard that it's a good idea to apply for a store credit card. Store cards are typically easier to qualify for than some other credit products, allowing you to get your foot in the door. The thinking goes that by opening an account and making regular payments, you can get your credit in good shape.


But do store cards build credit, or is this just a myth? The short answer is that they do, but it depends on both the situation and how you use the card. Here's how to determine if using a store card to build your credit is right for you.

How a store card can help build credit

According to the Consumer Financial Protection Bureau, or CFPB, using a store card can be a path toward better credit if you make payments on time. This is because you're building your payment history, which is one of the components of a credit score.

If you're careful to use no more than 30% of the card's limit, a store card might also help improve your credit utilization ratio, which also goes into your score. Plus, if you don't currently have a revolving credit account open, getting a store card can contribute to your credit mix, which is another factor that affects your score.

How a store card can set back your credit progress

On the other hand, a store card can be detrimental to your credit if you don't use it wisely. The CFPB cautions that store cards often charge high interest rates. If you carry a balance on a store card, the accumulating interest could cause your debt to balloon and become unmanageable. If you have trouble keeping up with payments, your credit score is likely to take a hit.

Furthermore, store cards sometimes encourage people to buy a lot with promotions and incentives. If the card entices you to overspend, it could be another risk to your credit.

Is a store card right for you?

Ultimately, the question to consider isn't whether store cards build credit but whether they'll be able to build credit for you.

Using a store card can be a good credit builder for those who can keep their spending well below their credit limit and pay their balance in full each month. But if you're unsure whether you'll be able to stick to a budget and make on-time store card payments, it might be better to explore other methods of building credit.

It's also important to have realistic expectations for what responsible use of a store card can accomplish. If you have negative information on your credit report, this information will stay on your record for a designated period of time. For example, late payments remain on your report for seven years (PDF), and a Chapter 7 bankruptcy appears for 10 years.

While getting a store card and keeping the account in good standing can add positive new information to your report and might boost your score over time, it doesn't erase any negative details that are already there. This information will still be visible to lenders. Additionally, any gains to your credit score won't be instantaneous. It could take several months or longer before you see a difference.

Ultimately, whether your score goes up as a result of using a store card depends on several factors, including your credit history and whether you're meeting your other financial obligations.

Credit-building alternatives to consider

Using a store card is just one possible way to build credit. Other options include secured credit cards, which require you to make a deposit and then let you borrow against the money you put down. There are also credit builder loans, which hold the money you're borrowing in a savings account for you until you've completed your payments. You can even build credit without borrowing money by signing up for a service that reports rent or utility payments to the major credit bureaus.

Using a store card is a potential way to establish or repair credit, but it's not the only approach. Before applying for a card from a retailer, learn about other credit-building products like secured credit cards so you can make the best decision for you.

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