Establishing Credit

Can You Build Credit with a Debit Card?

Dear Experian,

I'm trying to establish a positive credit history. I've been paying my power bill and my telecommunications, internet and cable bills on time every month for over a year now with a debit card. My question is, can I report the bill payment history to the credit bureau or have the company send it? Or can I have the debit card company report to the bureau? Also, can you build credit with a debit card?


Dear ILG,

A Debit Card Cannot Help You Build Credit

Purchases made with a debit card do not help you build credit. When you use a debit card, the funds are automatically taken directly from your checking account, so it is essentially a cash purchase.
Banks do not report debit card accounts to Experian or the other credit reporting agencies.

Utility Payments Are Typically Not Reported to Experian

Currently, utility companies do not typically report directly to the credit reporting agencies, and neither you nor your banking institution would be able to report a record of payments on their behalf.

In recent years, there has been some discussion of the possibility that utility companies might begin reporting positive payment history, so it's possible that you may see your utility accounts on your credit report in the future. Until then, however, your on-time utility payments probably won't help you build your credit history.
Keep in mind that even though making on-time utility payments may not help you build your credit history, it's still in your best interest to do so. Failing to pay a utility bill can have serious consequences, such as hefty fees and the possibility that the account will be sent to collections. Once sold to a collection agency, it's likely that the account will appear on your credit report.

Collection accounts remain on your credit report for seven years from the original delinquency date, and they usually have a very negative impact on credit scores.

How to Begin Building Credit

In order to build a strong credit history, you will need to demonstrate your ability to manage credit wisely. If you are just starting to establish credit and do not yet have any credit accounts, here are a few ways you can begin:

  • Apply for and open a credit card account. Apply for a credit card with your bank or credit union first. You may be more likely to be approved because you already have an account in good standing with them.
  • Consider opening a secured credit card. Even if you are unable to qualify for a traditional credit card right away, you may be able to open a secured card. With a secured card, the bank will require that you open a savings account. The credit card limit will be tied to the balance in the account. That "secures," or protects the bank, if you do not repay the charges you make. Secured cards usually have a small credit limit.

    Use the card the same way you would a traditional credit card, charging small amounts and paying your balance in full each month. If you are able to demonstrate responsible use of the card, in time the bank may be willing to convert the card over to a regular, unsecured, credit card account.

    Most banks report secured cards to the credit reporting agencies, so you may be able to use the account to begin building credit right away.

  • Ask a family member to add you to their account as a joint account holder or an authorized user. With a joint account, you will each be equally responsible for managing the account and making sure all payments are made on time.
  • As an authorized user, you won't be responsible for making payments, but will still have access to use the account. Although both options can help you begin building credit, not all creditors report authorized user accounts to the credit reporting agencies, so you may want to ask first.

    Thanks for asking,
    The "Ask Experian" Team