Improving credit scores through store cards

Equifax Senior Financial Analyst Thomas Grayson recently stated that the key to improving one's credit score may lie in opting for credit cards which are associated with certain stores only. As opposed to the traditional credit card, Grayson says that there are exclusive things about store cards.

Hudson Belk and Macy's accept store cards for the reason that they carry fewer risks. This is because the store cards purchases are not allowed almost everywhere (possible for the traditional cards) except in selected stores.

Grayson adds that store cards are said to carry fewer risks because the lender doesn't have to worry about giving much credit to the cardholder since the card cannot be used to purchase in any other store. Thus, lower amounts of credit will be reasonable enough. More importantly, the lender does not entitle consumers with credit at the expense of them incurring more debts along the way because of limitations in their spending. This then is both a plus for the lenders and the consumers.

The fees offered by store cards are often more transparent to the cardholder as well. The matrix can be accessed given the easier availability of options for spending and even payment methods. The consumers can be guided in relation to the fees charged on their purchases since the stores can almost always practically accommodate their needs with exclusive store credits.

One thing about the store credit cards though, Grayson warns, is that they have higher percentage rates annually. This can be justified through simple and less expensive opening of accounts in the stores. Also, cardholders do not have to worry about credit which is often unsecured in traditional accounts. He adds that store cards offer credit score improvement simply by opening an account even if transactions are not usually made by consumers and the store. This is where the difference with the traditional credit card's open line of credit comes in.

Grayson mentions that store cards do have secured credit since what is stored is the amount of money that you only deposited. Instances of borrowing from banks are not apparent in this set-up.

Lastly, the secured credit in store cards also rid the cardholder of high interest rates, fees and charges. This is a source of relief for consumers who are bent on improving their credit scores.

With lower deposits eventually building credit that is responsibly used, your card company will have enough incentives to help you improve on your credit score.

Doug Nicholas

Doug Nicholas, a financial consultant by profession with a Masters degree in International Business from Brown University, is also an ardent writer. Though he has a full time job at one of the companies listed on Wall Street, he does manage to squeeze in time to follow his passion. He puts his ideas to words in his articles related to finance and business.