Build Credit Using Credit Cards, Not Debit Cards

Added August 6, 2002 by Ilyce R. Glink

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Summary: Have a good credit score and history is critical to buying a home. What can you do if you're trying to improve your credit history to buy a home? Use credit cards wisely. Debit cards do not count toward building a credit history and score. If you can't qualify to get a credit card, you should set up a secured credit card with your bank.

WGN-TV Show Notes -- August 6, 2002

Q: Approximately four years ago I began using my debit card as my only credit card. I am working on improving my credit history to buy a home. I have applied with several credit card companies, but I am consistently turned down for lack of revolving account utilization. Amazingly enough, my annual income is over $150,000 and I still cannot get a major credit card. I have had major credits in the past, but I was not timely in making payments (not due to lack of money).

I welcome any advice you may have on fixing my credit card dilemma.

A: Debit cards are completely useless. They don't help you build your credit. And, they don't give you the same protections as a credit card. Clark calls them "fake Visa and fake MasterCards" which is what they are.

You need to go to your bank and set up a secured credit card. That is, you'll put $3,000 in an account and be able to charge up to $3,000. After a couple of months of on-time payments, you should be able to upgrade to gas cards, department store cards and then, finally, a Visa or MasterCard.

BTW: Now you know what late payments can do to your credit -- they can completely wreck it. To avoid any late payment charges once you have a real credit card, arrange to pay the card electronically.

Aug. 6, 2002.

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