Does using a debit card improve credit score?

Does Using a Debit Card Impact Credit Scores?

Contrary to popular belief, using a debit card alone does not directly contribute to improving credit scores. Credit scores are primarily calculated based on information from credit bureaus, which typically do not track debit card transactions.

The Role of Credit Cards in Credit Scoring

Credit cards offer a line of credit, allowing you to borrow money and pay it back over time. When you use a credit card, the lender reports your payment history, credit utilization, and other factors to credit bureaus. These bureaus use this information to assess your creditworthiness and generate your credit scores.

Debit Cards vs. Credit Cards

Debit cards, on the other hand, are not linked to a line of credit. When you use a debit card, funds are directly deducted from your checking account. Since there is no borrowing involved, debit card transactions are not reported to credit bureaus. Therefore, they do not affect your credit scores either positively or negatively.

Exceptions: Modern Checking Accounts

In recent years, some modern checking accounts have emerged that offer credit-building opportunities linked to debit card use. These accounts may partner with third-party companies that track debit card transactions and report positive payment history to credit bureaus. However, it is important to note that these programs are not universal and may vary depending on the specific account and provider.

Conclusion

While using a debit card alone does not directly improve credit scores, it does not harm them either. If you are looking to build or improve your credit, it is more effective to use a credit card responsibly and make timely payments. However, if you are exploring alternatives, modern checking accounts with debit card-linked credit-building opportunities may be worth considering.