One of the classic, old school ways of starting to build credit was by first applying for a store card.
What Is a Store Card?
A store card is a credit card offered by a store or brand, for example, Gap, Kohl’s, Home Depot, etc. The credit card is designed to be used for purchases within the store. Store cards often come with many store-related perks, for example, discounts, bonus points on store purchases, free returns, and more. Many store credit cards can be used just like any other credit card for purchases outside of the store network as well.
Store cards are usually easy to get approved for (even for newcomers to credit). But, you will usually only get approved for a shallow credit limit (sometimes as low as $200), and they often come with a very high APR on balances.
Should It Be My First Card?
If you’re a newcomer to credit, then most credit cards will decline you. Why? Because they want first to see some payment history. That’s why store cards may be a perfect way to start building credit, as store cards usually approve even newcomers, and they typically report the payment history to the credit bureaus.
But store cards are not counted by FICO as a regular credit card, and in the long run, will not help build credit as much as a regular credit card. So after having the store card for a few months, make sure to get yourself approved for one or two typical credit cards as well.
Alternatively, you can also follow these easy four steps to build credit without a store card, which may be much more effective.
Make it a great day!