Does Getting a Store Credit Card Lower Your Credit Score?

Store credit cards lower your credit score as soon as you apply for one, but they can probably raise your credit score in the long run. What you must watch out for are cards that charge exorbitant fees, especially if you have no other lines of credit. Also, consider that normal credit cards usually offer a better deal in general if you can get one.

Identification

Getting any type of credit card account hurts your score because it requires a hard inquiry into your credit, which dings your score up to five points. The FICO scoring model will hurt your score result even more when you already own seven or more revolving accounts, because good borrowers limit the number of credit cards they own.

Considerations

Most retail cards have a low limit -- sometimes only a few hundred dollars -- and most come with an annual fee. The fees on these cards can use up most of limit the first month and cause a high credit utilization on the account. Maxing out a credit card does up 45 points of damage, but coming close to a utilization of 100 percent can still do harm to your credit score, especially if this will be your only revolving account.

Major Issue Cards

The FICO model views retail accounts as less important than an account issued by a national credit card company or major lender, according to Fox Business. The Fair Isaac Corporation has millions of pieces of data on consumers and finds that major credit cards are slightly better at predicting a borrower's behavior. National credit cards usually have a limit of thousands of dollars, so the account holder has a larger control over how much debt he carries.

Tip

American Banker suggests using a retail card to help rebuild a credit history rather than for the promotion that usually comes with it. If you can qualify for a regular credit card, you will probably see a much lower interest rate, higher limit and build your credit score faster. A department store that offers promotions for signing up for their store card likely offers it on some other offer, such as signing up for an email newsletter.