Does Applying for a Debit Card Affect Your Credit Score?

Does Applying for a Debit Card Affect Your Credit Score?

by | Jul 5, 2022

When it comes to your credit scores, it’s essential to pay attention to what can impact them. Depending on your credit, you can get better rates on loans, mortgages and credit cards. But does applying for a debit card negatively impact your credit? Here’s everything you need when it comes to debit cards and your credit.

Does Getting a Debit Card Impact My Credit Score?

Most lenders tend to use credit scores, a three-digit number, that comes from the three major credit bureaus to evaluate the potential of a borrower to repay loans. FICO® Scores (usually ranging from 300 to 850) are perhaps the most common type of credit scores. These are determined based on how a borrower handles credit or borrowed money and not debit card usage. A debit card is just an extension of your checking account.

When you apply for a credit card, lenders usually run a credit inquiry to check your credit report. Your credit report contains your personally identifying information, borrowing history (the longer, the better), payment history, balances, credit limits and types of accounts. This credit check can cause a slight drop in your credit score, but the impact can be minimal if it’s just a single inquiry.

Since a debit card draws money from your account directly, applying for one does not affect your credit scores. Also, having a debit card does not help you positively impact your credit, either.

Why Doesn’t a Debit Card Negatively Impact Credit?

When you make a payment using your debit cards, money can get deducted directly from your checking accounts. Because there’s no loan from the bank involved, your debit card does not affect your credit. Also, your debit card information does not appear in your credit report.

Unlike debit cards, credit cards allow you to borrow money from the bank up to a certain limit. You can withdraw the money or swipe the card to pay for items. You then have to pay back the money with interest at the end of each billing cycle.

Credit card issuers send your credit information, such as total credit card debts, payments history, account balances and credit utilization, to credit bureaus once a month. The bureaus then add this information to your credit reports to determine your credit score.

Benefits of Getting a Debit Card

  • Avoid fees and service charges associated with credit cards
  • Stay accountable for your spending
  • No interest charges
  • No application is necessary – you just need to have a checking account
  • Lower fees for tax payments
  • Bank and merchants’ rewards

Tips for Maintaining Your Credit

Now that you know your debit card won’t affect your credit, let’s identify a few ways you can impact your credit for the better.

Pay Your Bills on Time

Missed or delayed payment of credit card bills and loans can have a devastating impact on your credit score. You can avoid poor credit scores by paying all your bills on time. If you’re concerned that you might miss the due date, use autopay. It can help you stay ahead of your account payments.

Become An Authorized User On Someone Else’s Account

If you’re trying to refine your credit from a previous mistake, becoming an authorized user on someone else’s credit card is the way to go. You can ask your family member or loved one to add you as an authorized user to their existing account. If you make timely payments and keep your credit card balance low, you can positively impact your credit score.

Keep Your Credit Balance Low

Keep your credit utilization rate (CUR) as low as possible by not using all your credit. Your credit utilization rate is calculated by dividing your credit balance by your credit limit multiplied by 100. As a rule of thumb, your CUR needs to be below 30% or even lower to have healthy credit.

Monitor Your Credit Report

Finally, monitor your credit report for inaccuracies. Inaccuracies in your report can cause a dip in your credit score. Also, inaccurate information on your credit report can result from credit card fraud and identify theft. If you need help checking your credit report, consult a credit monitoring provider. They can alert you to any changes in your credit score and protect you from identity theft.

Bottom Line

Applying for a debit card does not affect your credit score. Also, your debit card usage does not reflect on your credit report. However, credit cards can impact your credit score. Luckily, there are several ways you can help and manage good credit, even when using credit cards. These include making timely payments, keeping your credit card balance low and using a credit monitoring service.

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*Source: Fair Isaac Corporation.

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