Do charge cards build credit?

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Do charge cards build credit?

Postby mahesh » Sat Jul 09, 2011 3:09 am

Hi credit gurus, I'm considering applying for a charge card. Have a question about the general pros and cons of charge cards versus credit - Are charge cards better or worse for your credit score than credit cards? Assuming that the account is always in good standing and the balance is always paid off in full every month, would your credit score improve faster with a charge card than with a credit card?


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Postby Meltdownblitz » Sat Jul 09, 2011 11:11 am

Hmm, I'm not to sure but my guess would be it probably would help your credit and score just as much. Although just make sure you pay your balance in full on any card for that matter, 3-5 days before your statement cut, or the company will report your balances to the credit burreau and your scores WILL drop! So I repeat, make sure you pay your balances in full 3-5 days before the statement ends so the card company reports ZERO! Take it from me, I've already learned this.

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Building credit

Postby Iroquois » Sun Jul 10, 2011 11:12 am

I think if you look at a credit bureau report the report will reflect your highest balance or your credit line. A portion of the scoring mechanism, in fact a large part, is the perecnt of your credit that you use.
I think it may work like this. If you have a charge card and pay in full you'll show a good payment history and time on book but not get the scoring benefit from the bureaus for having available credit. If the balance on the charge card somehow gets reporetd, usually meaning that you have missed a due date ( perhaps just late and not delinquent) and then gets paid down you actually demonstrate the amount of credit that has been used.

On a credit card, the line gets reported, unless its something like a Visa Signature with no preset spending limit, in which case the highest credit used gets reported.

Don't know for sure, but I suspect based on my understanding of how the system works you build a better score on the bureaus ( individual issuers have their own proprietory data of usage of your activity with them to evaluate) with a card that reports the amount of credit available and your usage of that credit. I don't think that happens with charge cards unless you revolve or don't pay the charges within the required time.

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