How to Build Credit with a Store Card

Disclaimer: The views and opinions expressed in this article are those of the author only and are not endorsed by Credit.com.

When a consumer wants to start building credit, a logical step to take is to get a credit card. However, credit card issuers want to check your credit and payment history before they approve you for a card. Now, if you’re just starting out with credit, you have no credit history to show for, and are often not eligible for credit cards with higher credit limits and rewards.

How do you then get out of this helpless circle? One option is getting a store card. Store cards are often easy to get approved for, even without having previous credit history. And they can help you get into the credit world, at least for starters.

What Is a Store Card?

Store cards are credit cards made by specific stores or brands, for instance; Costco, Walmart, Amazon, etc. These cards are made to be used for purchases at the store. Store cards often offer perks at the store such as bonus points, in-store discounts, and more.

There are store cards that act as credit cards and can be used in any other store on all purchases, besides the specific store. However, the card benefits will usually be specifically at the store. Compare different credit card offers to see which one works best for you. 

How a Store Card Can Help You Build Credit-Easy Approval

Store cards are often thought of as beginner cards. They’re often easy to get approved for, even for someone completely new to credit.

That’s how a store card can help you jump-start your credit journey. If you have zero credit, regular credit cards may not approve you for credit cards because they want to see your payment history first. But store cards may have higher approval odds. Carefully consider one in your credit-building journey.

Downside of a Store Card

Though a store card is easy to get approved for, you most likely won’t get approved for a high credit limit. You can get approved for a limit of as low as a couple hundred dollars with a store card. In addition, the APR will usually be very high on store cards.

Store Cards and Your Credit Score

If you’re a beginner to credit and want to build your credit using a store card, here’s how.

1. Research store cards that report to at least one credit bureau.
2. Apply for a store card and if approved, use it to. Simply build your credit history by using and paying the card payments. By doing so, you work toward establishing a positive payment history to help get other credit card types later.
3. After some time of being with a store card, a good idea is to see how your credit score has been affected. Then you can see if applying for a credit card that is a step up to the next level of  building more credit history. See some cards that are geared toward building credit history here.

To sum it up, store cards are great for breaking into credit. After some time, you may become eligible for cards that can help you keep building and establishing your credit. From there, to the premium cards you go!

Store Card Pros and Cons 

Store cards have their pros and cons. 

Pros	Cons
Easier to get approved for	It’s not considered a real credit card according to FICO
Helps you start building credit	Higher interest rates
Store perks and benefits	Can sometimes only be used at the store/brand
	Low credit limits

Alternatives for Building Credit

Building your credit is not limited to getting a store card. There are alternative ways to go about building your credit.

Secured Cards

Secured cards work a little differently than regular credit cards. With a secured card, the card issuer requests a deposit from you, a set amount of money which they hold as collateral in case you fail to make payments. The deposit amount is usually the same as your credit limit (a $500 deposit lends to a $500 credit limit).

Secured cards are generally easier to get approved for and with some cards, you don’t need any previous credit history. So, they’re good as a first card. As long as you make on-time payments, you’ll be helping build your credit history. 

Secured Card Pros and Cons

Pros	Cons
They’re easier to get approved for	You must leave a deposit
They help start up your credit	They often don’t earn rewards

Authorized User

Another alternative to store cards is building credit through becoming an authorized user on an existing credit card.

When you’re not in a credit position to get approved for your own credit loan, you can get added as an authorized user on the account of a friend, spouse, family member, acquaintance, or anyone else. Usually, depending on the card issue, only family members are allowed. Verify this with the card issuer/ 

The primary account holder adds you as an authorized user on the account. Only do this on an account that is in good standing. Once the account is reported to the credit bureaus and to your credit report, the account history of the card becomes yours too.

So, if the primary has had the card open for two years and has made on-time payments all that time, that’s now reflected on your credit report. This can help build your credit history.

Pros and Cons of Becoming an Authorized User

Pros	Cons
It can help your credit	You could have conflicts with the primary cardholder
It’s simple to do and there’s no need to lock up funds	You could be removed at any time
You can build healthy spending habits	Delinquencies impact your credit

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