How Do Store Credit Cards Affect Your Credit Scores?

Learn about retail store credit cards and what to look for when you’re thinking about applying for one

You’re at checkout to make your new purchases. The store assistant says you can get a discount on the spot if you sign up for and pay with the store credit card. What do you do?

A store credit card can offer you savings and perks now and in the future. And a store credit card can be a great financial tool if you use it responsibly. But before you decide whether to apply for one, read on for tips to help you make an informed decision.

What Is a Store Credit Card?

Store credit cards are similar to traditional credit cards. You use them to make purchases and pay down the balance over time. And, as the Consumer Financial Protection Bureau (CFPB) explains, “These cards typically provide additional discounts and frequent shopper rewards when used exclusively at their stores or with affiliate retailers.”

There are two types of store credit cards:

  • Private Label: These can usually be used only at the store or group of stores that issued them. 
  • Co-Branded General Purpose: These are similar to traditional credit cards and can be used outside of the store or group of stores that issued them. 

Like traditional credit cards, both types of store cards are examples of revolving credit. This means they can be used and paid down repeatedly for as long as the account stays open. And if your card issuer reports your use of the card to the credit bureaus, your card will appear on your credit reports.

How a Store Credit Card May Affect Credit

It’s not the store credit card itself that affects your credit scores. It’s how you use the card that could affect your scores. And that’s true for all types of credit cards that are reported to credit bureaus.

Here are some ways a store credit card—like a traditional credit card—might impact your credit positively or negatively:

Positive: If It Helps You Build Credit

Store credit cards might be easier to get than traditional credit cards if you have no credit or bad credit, according to the CFPB. And with responsible use, they’ll help you build credit just like any other credit account.

Positive: If It Adds to Your Credit Mix

Credit-scoring models take into account the variety of credit accounts you use. If you show you can responsibly manage a mix of credit—like a credit card, mortgage and loan—it could improve your credit scores.

Negative: If You Carry a High Balance

If your card has a low credit limit, that could make it hard to stay well below the limit. And a high credit card balance can lead to a high credit utilization ratio. This is a measure of how much of your available credit you’re using. Experts recommend keeping your credit utilization ratio below 30%, because a higher ratio can hurt your credit scores.

Negative: If You Sign Up for Too Many Cards

New credit applications typically trigger hard credit inquiries. This is when a lender checks your credit report to decide whether to approve your application. A hard inquiry can make your credit scores drop—usually by just a few points. But having too many hard inquiries in a short period of time could have a bigger negative impact. It might make lenders think your financial situation has changed for the worse.

Negative: If You Miss Payments

When missed payments are reported to credit bureaus, they can hurt your credit reports and scores. And the fees and finance charges associated with missed or late payments can drive up your credit utilization ratio and hurt your credit even more.

When to Consider a Store Credit Card

Applying for any type of credit needs careful consideration. And it’s important that you take into account your unique financial situation. Here are some instances where you might want to consider signing up for a store credit card:

  • If you shop at the store a lot. Loyal shoppers benefit the most from store credit cards. If there’s a store you really like or purchase from over and over again, a store card might snag you the best rewards and cardholder benefits. But make sure the savings and discounts you get are worth the effect on your credit. 
  • If you can pay off the balance in full every month. As the CFPB points out, store cards often offer “special no-interest or deferred-interest offers on purchases made during a promotional period.” Keep in mind that if they defer the interest for an introductory period, that doesn’t mean they cancel it altogether. So if you’re planning to carry a balance on the card, make sure you understand how much you’ll pay in interest.

Use Store Credit Cards Responsibly

Remember, store credit cards themselves don’t affect your credit. Instead, it’s how you use the cards that can make a difference, whether positively or negatively. 

Like traditional credit cards, store cards can be a great financial tool when used responsibly. And they can offer discounts, exclusive benefits and access to experiences that aren’t available to the general public. 

Learn more about Capital One’s response to COVID-19 and resources available to customers. For information about COVID-19, head over to the Centers for Disease Control and Prevention

Government and private relief efforts vary by location and may have changed since this article was published. Consult a financial adviser or the relevant government agencies and private lenders for the most current information.

We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.

Your CreditWise score is calculated using the TransUnion® VantageScore® 3.0 model, which is one of many credit scoring models. It may not be the same model your lender uses, but it is an accurate measure of your credit health. The availability of the CreditWise tool depends on our ability to obtain your credit history from TransUnion. Some monitoring and alerts may not be available to you if the information you enter at enrollment does not match the information in your credit file at (or you do not have a file at) one or more consumer reporting agencies.

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