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Unfortunately, building credit with debit card activity won’t kickstart your credit file. Having a solid credit history provides greater access to competitive financing offers. Additionally, your creditworthiness is reviewed in other parts of your life, like when renting an apartment unit or applying for a job.

That’s why it’s worth exploring ways you can build your credit, given the fact that you can’t build credit with a debit card. Once you understand how building credit works, there are a few strategies you can explore to establish your credit.

Recommended: How to Avoid Interest On a Credit Card

How Does Building Credit Work?

Purchasing goods or services on credit means you’re borrowing money that you don’t already have to make the purchase now. When you enter into this agreement with a lender, you’re accepting the responsibility of repaying the balance — typically, plus interest — over time.

The lender reports the new credit account under your identity to the credit bureaus, Experian, Equifax, and TransUnion. As you make payments toward the debt, your lender will send routine updates to the bureaus about the account’s status and repayment activity.

Your borrowing and repayment data is what creates your credit profile and what’s used to determine your credit score. Keep in mind that all data is reported by your lender, whether positive or negative. For example, if you’re chronically late on your loan payments, but make on-time payments toward a credit card, all of this information is reflected on your credit report.

Recommended: When Are Credit Card Payments Due?

Can You Build Credit With a Traditional Debit Card?

Although they’re a helpful financial tool, when your goal is building your credit from scratch, the pros and cons of debit cards should be closely considered. One major downside is that you generally can’t build credit with a debit card.

That being said, some financial tech companies do offer debit cards with a credit-builder feature that can help you build your credit. This feature is not typical of most debit cards though.

Still, debit cards are convenient in that they let you spend your money without carrying physical cash. They can also help you avoid racking up debt for purchases, and in some cases, it’s even possible to pay a credit card with a debit card.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

Can You Use a Credit Card to Build Credit?

A credit card is a common financial tool that’s used to build credit. That’s because card issuers send credit card activity data to the credit bureaus.

A traditional credit card is a revolving credit line in which the issuer sets a maximum borrowing limit on the card. When using a credit card like a debit card, you can swipe your card to cover everyday purchases, like groceries or your cell phone bill. However, instead of those funds coming out of an attached bank account, you’re borrowing them — meaning you can spend with a credit card up to your credit limit, regardless of whether you actually have the money on hand at the moment.

At the end of each billing cycle, you’ll need to repay at least the minimum amount due, which is typically a portion of the total balance. Paying the minimum amount by the due date is sufficient to maintain positive payment data on your credit file.

However, this means you’ll accrue interest for rolling over a balance into the next billing cycle. When building your credit with a credit card, make sure you can afford to repay the full statement balance each month to avoid costly fees and deeper debt.

Recommended: What is the Average Credit Card Limit?

When to Use a Credit Card vs. Debit Card

The differences between credit cards and debit cards when it comes to establishing your credit are stark.

When you’re first starting out with credit, consider using a credit card for a few smaller purchases, like your next cup of coffee, or a recurring expense, like a streaming subscription. Keeping your purchases small and manageable adds bulk to your credit history while allowing you to better track your spending. That way, you don’t end up with overwhelming debt.

Your debit card, on the other hand, can be useful to pay for bills that only accept payment from a checking account, or if you’d like to access your cash at an ATM. You’ll need to ensure you have the funds in your account before you swipe, but you don’t run the same risk of racking up debt that you do with a credit card.

Other Ways to Build Credit

Since building credit with a debit card isn’t effective, you can start building your credit using one or more of the strategies below. Although these are all viable approaches to establishing credit, be aware that the process takes time.

Become an Authorized User

Ask a family member or trusted friend who has good credit if they’re willing to add you as an authorized user on their credit card. As an authorized user, a credit check isn’t required, and you’re ultimately not responsible for making the payments on the account.

If the card issuer reports data for both the primary cardholder and authorized users on the account, this strategy can help with establishing credit.

Recommended: Tips for Using a Credit Card Responsibly

Report Your Rent Payments

An unconventional way to build credit without a debit card is reporting payment data, such as rent payments or utility bills. Ask your landlord and service providers if they’re willing to report your rent payment history to the credit bureaus.

For example, landlords and property management companies can report rental payment data through Experian RentBureau. Your rent payment data is then included in your consumer credit report so you can establish your credit with your on-time rent payments.

Use a Credit Card Responsibly

As mentioned, credit cards do help when it comes to building credit. You might consider applying for a secured credit card or a more basic card with lower eligibility requirements as you get started establishing your credit profile. This will require consistently making on-time payments and keeping your spending in check.

Once you’ve started to build up your credit through responsible behavior, you might even have the opportunity to earn rewards as an added bonus alongside building your credit. Some credit cards offer rewards points, miles, or cash back for each dollar you spend on the card.

The Takeaway

Debit cards can offer a number of advantages, but building credit with a debit card is not among them. Although you can’t build your credit with a debit card, there are many other ways to get your credit profile started. This can include becoming an authorized user on someone else’s credit account, getting your on-time rent or other bill payments reported to the credit bureaus, or opening a credit card account.

FAQ

Does debit card usage get reported to credit bureaus?

No, your debit card usage is not reported to the three credit reporting bureaus. Debit card transactions are linked to a bank deposit account in which you’re drawing funds from your own pool of money.

Why can’t you build credit with a traditional debit card?

You can’t build credit with a traditional debit card because while a debit card offers the convenience of cashless purchases, you’re not actually borrowing money. Instead, you’re pulling funds from a personal checking account that’s tied to the debit card.

Does a debit card affect your credit score?

No, using a debit card doesn’t affect your credit score. However, carrying a debit card can be a useful part of managing your finances.

Photo credit: iStock/Drazen Zigic

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.




Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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Building good credit (or any credit at all) doesn’t happen overnight. Instead, you may need to have an open credit account for around three to six months before you first get a credit score.

From there, a good credit profile and good credit score can take awhile to build up. In reality, it’s much easier to lower your credit score, which is why it’s vital to aim to make solid financial choices, like consistently paying your bills on time. Building and maintaining good credit isn’t always easy, but by following a few simple steps, you can put yourself on solid ground.

How Long It Can Take to Build Credit From Scratch?

The exact length of time it takes to build credit from scratch varies by credit card issuer. That being said, it’s usually around three to six months from the time you first open a credit account.

Even though establishing and building credit can take time, it’s worth it as a way to improve your overall financial situation. Having good credit can make it easier to get approved for loans and secure lower interest rates.

Recommended: How to Avoid Interest On a Credit Card

4 Ways to Build Credit

If you’re hoping to begin building credit, here are some tactics you might consider.

Become An Authorized User

One way to help build your credit is by becoming an authorized user on an account of someone who already has good credit. This might be a trusted friend or family member. As they make on-time payments, that can have a positive impact on your credit score as well. Just know that if they miss or make late payments, that can also negatively impact your credit.

Recommended: When Are Credit Card Payments Due?

Apply For a Credit Card

If you’re getting a credit card for the first time, know that it is possible to apply for and get approved for a credit card with no existing credit history. However, you do need to be selective about which card you apply for. You’re unlikely to get approved for a premium or luxury credit card if you don’t already have excellent credit.

Still, there are credit cards that are marketed toward those who have no credit or a limited credit history. You might also consider a secured credit card, where you put down a refundable security deposit that then serves as your credit limit.

If you can get approved for a credit card, using that card responsibly, such as by making on-time payments, can help you build up your credit.

Recommended: Time It Takes to Get a Credit Card

Get a Cosigner

If you aren’t able to get approved for a loan on your own, you might consider applying for credit with a cosigner. Using a co-signer with good credit can help improve your chances of getting approved for a loan.

Then, if you reliably make on-time payments, that will get reported to the major credit bureaus and hopefully help you start building your credit score.

Recommended: Tips for Using a Credit Card Responsibly

Maintain Good Credit Habits

Once you have opened a credit account like a loan or credit card, it’s important to practice good credit habits. This includes paying your statement off in full, each and every month. Demonstrating a pattern of reliably paying your bills over time shows potential lenders that you’re likely to repay your debts.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

Factors That Affect Credit Score Calculations

There are five major factors that affect your credit score:

•   Credit utilization: Your credit utilization is the amount of the credit you’ve used compared to your total available credit. It’s recommended to keep this ratio to 30% or less.

•   Payment history: This indicates how reliably you make payments on your existing accounts.

•   Types of credit accounts: Having a good mix of different types of credit accounts has a positive impact on your credit score, as it indicates to lenders that manage multiple types of accounts.

•   Your average age of accounts: Having a lengthy credit history is a positive sign. This shows you have experience in responsibly managing accounts.

•   New credit: Opening a number of accounts or making a number of hard inquiries in quick succession can suggest to lenders that you’ve overextended yourself and are in need of funding to bail you out.

Recommended: Starting Credit Score for 18-Year-Olds

Things to Keep in Mind Before Building Credit

If you’re looking to build good credit, here are some tips on establishing credit to keep in mind.

Have a Solid Financial Plan

The first thing you’ll want to do is set up a budget. Getting a new credit card should not be viewed as a way to fix your budget or dig yourself out of a financial hole. Instead, the best way to use a credit card is as a tool of convenience for money that you already have. Make sure that you have the financial ability and discipline to pay your bills in full, each and every month.

Watch Out For Scams

Usually building credit is something that you do over a period of several months or years. If someone tells you that they can build or repair your credit quickly, it could be a sign of a credit card scam. There aren’t many shortcuts to the simple rules of just regularly paying your bills on time.

Don’t Open Too Many Accounts At Once

You might think that since opening a credit account can help build credit, opening many accounts will help build credit even faster. However, that is usually not the case. Many lenders view a high number of credit inquiries in a short period of time as a negative indicator. They may see it as a potential red flag that someone is in a bad financial situation.

The Takeaway

If you’re just starting out and have no credit history at all, you generally start without an actual credit score. It can take a few months after you open a credit account to start establishing a score. As you continue to show that you’re responsible for the credit you have, your score will likely increase. Building credit can take time, and you should be skeptical of any people or programs that say they can build your credit fast.

If you’re in the market for a new credit card, you might consider a cash-back rewards credit card like SoFi’s credit card. If you’re approved for a credit card with SoFi, you can earn unlimited cash-back rewards. You can use those rewards as a statement credit, invest them in fractional shares or put them toward other financial goals you might have, like paying down eligible SoFi debt.

Apply for a SoFi credit card today!

FAQ

What credit score do you start with?

There isn’t a starting credit score for those without any credit history. While you might think that you start with the lowest possible credit score (like 300) and have to build your way up, you actually don’t start with any credit score at all. As you open credit cards or other accounts, you’ll start to establish a credit history and score.

How long does it take to build a good credit score?

It usually takes anywhere from three to six months to start building a credit score after you’ve opened your first credit account. You’ll then continue to build and improve your credit by continually making on-time payments. You can always check your credit score periodically to see where you’re at on your credit journey.

How long does it take to recover from a hard inquiry on your credit?

Usually when you apply for a new credit card or other loan, your potential lender will pull your credit file. This is known as a hard inquiry. Since the number of recent hard inquiries is one factor in determining your credit score, applying for credit cards can lower your credit score. However, these inquiries typically only lower your score by a few points and drop off your report after a few months.

How fast can you build your credit in 3 months?

How fast you can build your credit depends on a number of factors. Generally, it takes a few months after you’ve opened a credit account to even establish any credit. Your credit score will improve as you continue to use your credit responsibly. It’s best to think about building credit as more of a marathon than a sprint.

Photo credit: iStock/YakobchukOlena

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.




Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points toward active SoFi accounts, including but not limited to, your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, Student Loan Refinance, or toward SoFi Travel purchases, your rewards points will redeem at a rate of 1 cent per every point. For more details, please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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