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Q: I recently signed up for a store credit card to earn some discounts for back-to-school shopping. After reading your site, I’m afraid I’ve made a mistake opening this account. Can these cards actually hurt my credit score?
A: They can, if you don’t use them wisely.
Department store credit cards do appear on your credit report, and will be factored into your score. The same things that will hurt your score when you do them with a regular credit card will hurt your score if you do them with a department store card.
The effect may be smaller, since department store cards tend to have lower credit limits. But there will still be an effect.
For example, you don’t want to be maxed out.
In fact, it’s best to use no more than 30% of your available credit.
You also don’t want to cancel it if it’s your oldest credit card, as this can drop your credit score a few points when it disappears off your credit report.
Opening a bunch of retail credit cards around the same time isn’t a good idea, either. Too much new credit and you look like you’re having financial trouble.
Last, but probably most important, is to pay on time.
Late payments will get you not only fees but a bad credit score. Skipping payments altogether is even worse.
When used wisely, department store cards can be good for your pocketbook.
Most stores give special deals to customers who put their purchases on their store card, which can help you save some money on those new shoes or perfume you’ve been eyeing.
If you’re not careful, though, these cards can end up costing you more than you save. Interest rates are typically high, so pay your balance off as soon as you can.