Ask the expert

Add captcha
Enter the text shown above:

Are debit cards connected and reported to credit reporting agencies? Does the judicious use of debit cards increase your credit score?

By , CardRatings contributor
  • Google +
  • Twitter
  • Facebook

American Express is a CardRatings.com advertiser.

Our editorial team recently spoke with Beth Robertson, who studies prepaid debit cards for Javelin Strategy and Research. Robertson and her team have studied how thousands of Americans use their debit cards, and why. Robertson's research shows that many frequent debit card users prefer the convenience of loading up their accounts at retail stores instead of using traditional bank branches. Without a credit card, debit cards become crucial to shop online, to travel, and to pay many routine bills.

However, debit cards don't yet have a way to influence your credit score or your credit report. Suze Orman and Russell Simmons, backers of two major consumer debit card programs, have both talked about making data from their customers' accounts available to credit reporting bureaus. Orman's product, the Approved Card, has agreed to feed some transaction details to TransUnion. However, according to Robertson, TU doesn't yet have a way to factor that information into its credit scoring models.

FICO and other credit scoring algorithms measure how you manage your debt, assigning a grade based on factors like your credit utilization, the number of revolving accounts you maintain, and whether you've fallen behind on any of your bills. Credit scores don't calculate whether you're on time with your rent every month, or whether you've paid your cable bill reliably. Yet, if any of those debts fall into collections, they'll show up on your credit profile, with disastrous results.

Still, at least one major prepaid debit card issuer has found a way to translate responsible transaction history into unsecured credit. American Express caused a stir in the financial community when it launched a series of prepaid cards with no monthly fees. The American Express Prepaid Card links to your existing checking account, while Bluebird lets you reload your account with an employer's direct deposit or via retail "feeder packs."

Both cards include many of the same member perks as traditional AmEx charge cards, including purchase protection and global travel assistance. Through a program called "Make Your Move," American Express will monitor cardholders' cash management and spending patterns. Demonstrate good money management over the course of a year, and AmEx could override your credit score to qualify you for a standard Green Card with charge privileges.

0 Responses to "Are debit cards connected and reported to credit reporting agencies? Does the judicious use of debit cards increase your credit score?"

No Comments

Leave a Comment
About Our Ratings ×

Our editors rate credit cards objectively based on the features the credit card offers consumers, the fees and interest rates, and how a credit card compares with other cards in its category. Ratings vary by category, and the same card may receive a certain number of stars in one category and a higher or lower number in another.

The ratings are the expert opinion of our editors, and not influenced by any remuneration this site may receive from card issuers.

Advertisers in our database are highlighted, and advertisements include an option to apply using links on our site. CardRatings.com may be compensated by companies mentioned on the site when a user's application is accepted or approved by such companies.

How do your cards stack up?

Compare your card starting here


Featured Partner Cards