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Credit Q&A: Can a Debit Card Affect My Score?

Q: Can you build credit with a debit card?

A: Sorry, but owning a debit card isn’t going to earn you credit. Remember, your credit report and subsequent score is based on what gets reported to the three credit bureaus, and banks don’t send them information on your debit accounts.

This is because while a debit card may resemble a credit card in an appearance, it’s not actually backed by a credit line.

“A debit card is really just a plastic check,” Rod Griffin, director of public education for Experian, tells MainStreet. “Checking accounts are not reported.”

Banks don’t send the three credit reporting bureaus (Experian, Equifax and TransUnion) information on prepaid debit cards either. These cards, which enable users to put a specified amount of money on a plastic card that can be accessed immediately, became increasingly popular during the credit crunch, but they shouldn’t be thought of as a full-fledged credit substitute.

“TransUnion does not accept data from providers with prepaid debit cards as no extension of credit has occurred,” David Blumberg, a spokesperson for the credit bureau, confirms.  

Additionally, according to Griffin, you also may want to check with an issuer before taking out a secured credit card to build your credit – which requires customers to put down a sum of money upfront to cover the line of credit and thereby minimize the risk of default – because some lenders don’t report those either.

“What they’ll let you do instead, if you manage the card well, is convert it to a traditional account that will establish credit,” Griffin explains.

This doesn’t mean you can ignore your debit card account entirely, though. While using the card properly won’t build your credit score, MainStreet did find out that mismanaging the account could wind up hurting your credit. Those who opt for overdraft protection, for instance, can wind up in trouble if they spend more than what they have in their accounts.

“It’s like bouncing a check,” Griffin says. He explains that if the amount you overdraw is high enough and remains unpaid for too long, the debt could get sent to a collection agency, which, as we have discussed before, will almost certainly report it.    

Want to know what affects your credit score? E-mail your questions to MainStreet at editors@mainstreet.com.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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