There are many reasons to use your debit card responsibly. Doing so can help curb overspending and prevent you from overdrawing your bank account. And while being careful with your debit card is certainly important in protecting your finances, most conventional debit cards won't help you build credit or affect your credit score—with some new exceptions.
Here's what you need to know about why your debit card may not help grow your score, plus four ways to start building credit.
Loans and credit cards are treated differently, however, and will show up on your credit report and influence your credit score. If you're looking to establish credit, your debit card probably won't come into play—but there are other ways to get there.
Why Debit Cards Generally Don't Help You Build Credit
Most debit cards won't allow you to build credit. That's because the transactions you make with your debit card aren't typically reported to the three major credit bureaus (Experian, TransUnion and Equifax). That said, while it still isn't the norm, some new debit card offerings are changing the game with built-in ways for your debit card to add to your credit history.
To understand why a debit card won't typically allow you to build credit, consider how a debit card works. Whenever you use your debit card, the funds are directly withdrawn from your checking account. Since you aren't borrowing money, credit won't be established or maintained through these debit card transactions.
It's also worth noting that using your debit card as "credit" during checkout won't help you build credit, either. It simply changes the way the transaction is processed with the merchant. The funds will still come out of your checking account like they would normally.
On the other hand, when you swipe a credit card, the creditor pays the merchant on your behalf. You then accumulate a balance that's your responsibility to repay. Creditors typically report your credit card account balances and payment history—including whether your payments were on time—to the credit bureaus. Each credit bureau maintains its own credit report in your name. The information on your credit reports is used to determine your credit scores.
Some financial companies might report debit card transactions to the credit bureaus, but it isn't the norm. It's also worth noting that using your debit card as "credit" during checkout won't help you build credit, either. It simply changes the way the transaction is processed with the merchant. The funds will still come out of your checking account like they would normally.
How to Build Credit
Depending on your credit history, your available options for building (or rebuilding) your credit may vary. Regardless of the method, building your credit involves having on-time debt payments reported to the credit bureaus one way or another. Here are some strategies you can use to build credit.
1. Become an Authorized User
A family member or friend might be able to add you as an authorized user on one of their credit cards. You'll then receive a card in your name. It'll be added to your credit history if the credit card issuer reports authorized-user accounts to the credit bureaus. That, in turn, can help you build credit.
You won't be responsible for making payments—that will fall to the primary account holder, though you can reimburse them directly for any purchases you make. Just make sure they use their card responsibly before you ask to become an authorized user on their account. A credit history that has no missed payments and a consistently low credit utilization ratio will go the furthest toward helping you improve your credit score.
2. Open a Credit Card
Qualifying for a traditional (or unsecured) credit card can be tricky with a "thin" credit file, meaning a file with few or no credit accounts. A secured credit card may be a good alternative. It requires you to make a refundable deposit, which typically determines your credit limit. You can then use the card like any other credit card. If the issuer reports your payment history to the credit bureaus, it can help build your credit as long as you use your card responsibly. That means making on-time payments and keeping your credit utilization ratio as low as possible.
Some creditors will automatically convert a secured credit card to an unsecured card after so many months of responsible usage. If not, your credit may be strong enough at that point to qualify for a traditional credit card.
3. Consider a Credit-Builder Loan
With a traditional loan, the borrower receives the funds upfront and then repays it over time. A credit-builder loan works in reverse. You'll make fixed monthly payments for a certain period of time, usually six to 24 months. Your payment history is reported to the credit bureaus along the way. Making your payments on time can help you build credit. Once the loan term is up, you'll receive your money back—which may include interest. These types of loans can be a good option for those who lack credit history or have less-than-perfect credit.
4. Get Credit for Your Rent Payments
Another way to build credit is to use Experian Boost®ø to get credit for the rental payments you already make. Rent payments aren't normally reported to the credit bureaus, but features such as Experian Boost can add them to your credit report.
That could increase your credit score, and Experian Boost can be especially beneficial if you don't have much payment history yet. Your residential rent may qualify for Experian Boost if:
- You make online payments
- You've made at least three rent payments within the past six months (including one over the past three months)
- Your rent amount is high enough to qualify
Experian Boost could also help you build credit by adding other monthly bills to your Experian credit report, including eligible utility, streaming service, phone and insurance payments.
The Bottom Line
It's always smart to use your debit card responsibly. And while traditional debit cards don't typically allow you to build credit, some new fintech offerings could help you bridge the gap between your responsible checking and your creditworthiness. Regardless of the methods you use, the goal is to show creditors that you're a trustworthy borrower who knows how to manage payments. Meanwhile, you can check your credit report and FICO® Score☉ for free anytime you like with Experian.