Q: I’ve been told that it’s important to have “major” cards to achieve a good credit score. The question is, what’s considered a major credit card company?
A: Great question. When it comes to your creditworthiness, not all of your cards will be considered equal. There are two types by definition:
- Major Credit Cards: In the United States, this consists of cards which operate over the payment networks Visa, MasterCard, American Express, and Discover (in foreign countries, the last two might not always be counted).
- Store Credit Card: A card which is branded thru a department store, gas station, or other retailer. These can only be used at the affiliated store because they do not operate over a major payment network.
Which is the best one?
When it comes to your credit score, there’s absolutely zero difference between MasterCard vs. Visa vs. Discover vs. American Express. Why? Because that label won’t even show up on your credit report! Instead you will see the name of the issuing bank.
For example pictured at the right, you see a Chase Visa and Citi MasterCard account listed on my credit report. But all you see are the names of the issuing bank, not the type of cards they are.
The only exception to this rule is when the issuing bank and payment network are the same company.
Visa and MasterCard do not issue cards (they only operate as networks) so that means you will never see them listed on a credit report. However American Express and Discover do directly issue most of their cards, so you will see their name listed if you have a card issued by them.
Either way, all four companies are considered to be major credit cards. For scoring purposes, they are all weighed equally. One isn’t considered “best” or better over another.
Why not a store card?
It’s not that you can’t get them. It’s just that you don’t want to rely too heavily on them for credit building.
Unlike the average major credit card, a store card is usually quite easy to get approved for. The requirements are much more relaxed.
For this reason – whether it’s fair or not – most people don’t take them too seriously. If a mortgage broker was evaluating your loan application and looking at your credit report, I don’t think he would be too impressed if all you had on there were store cards (versus credit cards from respected major banks like Chase, American Express, etc).
The lesson? If their rewards and benefits are worth it, there’s nothing wrong with having one or two retail accounts. But just make sure you also have some major accounts, too.
What should you start with?
It’s a catch-22… major card companies are the best to have, but also harder to get. So how do you get one if you’re just starting out?
A beginner with little to no credit history probably won’t be approved for a mid-tier or high-end card. However you should have a good shot at qualifying for these cards for fair credit history.
If you already have an established credit history but it’s bad (such as having multiple charge-offs or a bankruptcy) then you may have to start out with a credit card that is secured.