Do Store Credit Accounts Help Build Your Credit Score?

You do not have a credit score until you actually start using credit, because the score is based on how well you handle your loans and other accounts. Your score builds up over time as you expand your credit use, and sometimes you must rebuild it if you have problems like a string of late payments. Store credit accounts help you get an initial score and improve your number if it goes down for some reason.

Account Reporting

Every loan and revolving credit account that is reported to the three national credit bureaus helps your credit score if you manage them appropriately by making all your payments by the due dates, according to the My FICO scoring site. This includes store credit accounts, because they typically report your records and Equifax, TransUnion and Experian add the information to your credit reports.

Account Types

Store credit accounts come in two types, known as revolving credit and installment loans. A revolving account means that a particular retailer issues you a credit line that you can use in its stores. You can purchase whatever you want at those stores until you reach the limit. Interest accrues monthly on the unpaid balance, and you can make minimum monthly payments that vary with the balance, pay more than the minimum or pay off the entire amount. An installment loan covers one purchase at a store. For example, you might finance furniture or an appliance through a retailer. Your monthly payments are set at a certain amount for the life of the loan. MSN Money columnist Liz Pulliam Weston advises that you need both installment and revolving accounts for the highest credit score.

Benefits

You can usually qualify for a store credit account more easily than a major credit card like MasterCard or Visa, according to Pulliam Weston. You may be able to get one even if you are young and do not have much established credit or if you had some financial problems in the past that show up on your Equifax, TransUnion and Experian reports. Use the account to establish yourself or to repair your bad credit by paying the new bills promptly.

Considerations

Store credit accounts hurt your credit as badly as any other loan or credit card if you consistently pay late or skip your payments altogether. The My FICO site warns that payment history is one of the most heavily weighted factors in your score. The number drops if you let any store accounts become delinquent, and you can only fix it by catching up the payments and rebuilding your on-time history.