If you love to shop, you can use yourÂ fashion sense toÂ build or even rebuild your credit.
Store-branded credit cardsÂ are some of theÂ easiest cardsÂ to qualify for and are often extended to those who haveÂ bad credit because they have lower criteria than traditional credit cards. Using them, especially if you’re loyal to a particular store, can bring card rewards, discounts and, if you pay your balanceÂ off every month, better credit.
Get It Now
In most cases, when you apply for a card, the retailer will offer a discount on that dayâs purchase.Â Sometimes the discount will be extended toÂ purchases made within a short time frameÂ (24 hours, for example), as an incentive to spend more. The risk is that instead of saving money, you end up spending more than planned, so it’s wiseÂ to be wary.
Watch Your Credit Scores
When you open your new credit card, you may see a dip in your credit scores for two reasons: one, the inquiry created when the issuer checks your credit score, which may cause your scores to drop, though usually not more than a few points. Second, a new account with a balance is often seen as a risk factor. As long as you pay on time and keep your balances below 30% of your credit line, or ideally 10%, you could eventually see a slight riseÂ becauseÂ you’ll have a positive new credit reference, which isÂ beneficial if you are trying to build or rebuild credit.
As you use your new card, you can track how your usage and payments are affecting your credit by signing up for Credit.com’s free credit report summary. In addition to getting two free credit scores, youâll get your own credit report card that showsÂ how youâre doing in five key areas on your credit report that alsoÂ determine your credit score â payment history, debt usage, credit age, account mix and inquiries.
Know the APR
Interest rates for department store credit cards are almost always high, often betweenÂ 19% and 22%, or more. If you carry a balance, the interest you pay will likely exceed the amount you saved with the discount. ThisÂ means carrying a balanceÂ could hamper your goals, especiallyÂ if you fail toÂ make on-time payments.
Given store credit cards’ high APRs, you won’t want to go on a shopping spree with them, nor will you want to put more purchases on the card than your budget can handle. (For tips on cutting back without feeling deprived, you can go here.)Â That said, making a couple of small purchases a month, say, on home essentials or groceries, and paying them off quickly (and on time) will likely beef up your credit.
Before You ApplyÂ
Before you fill out anÂ application, you’ll want toÂ know where your credit stands so you have a good sense of what type of cardÂ you might qualify for. KnowingÂ your score willÂ also inform your decision to apply forÂ a card in general, asÂ inquiries on your credit report can cause your score to take an unnecessary hit.
More on Credit Reports & Credit Scores:
- The Credit.com Credit Reports Learning Center
- Whatâs a Good Credit Score?
- How to Get Your Free Annual Credit Report
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