Most banks and building societies give you a debit card to access your money. So you might be wondering: “do debit cards affect credit scores in the same way a credit card would?”. Using a debit card does not directly affect your credit score, but there are subtle ways it can indirectly impact your creditworthiness. Loqbox explores debit cards and credit scores.
First things first, know the score(s)
Your credit scores represent your credit reports and give you an idea of how a lender would view them. It’s a myth that you have a universal credit score, because in fact, you actually have three.
These three scores are generated by the top three credit reference agencies (CRAs) in the UK: Experian, Equifax and TransUnion.
You can check your credit scores with all three CRAs, for free and without impacting them, using these sites:
*For transparency, we wanted to let you know that ClearScore pay us a small commission if you sign up using this link.
Ideally, you want your credit scores to be as high as possible because that will generally mean you are more likely to be able to take out lines of credit and could improve the interest rates you are offered.
But credit scores fluctuate depending on how you manage your borrowing. So it’s valid to be asking yourself “how can a debit card affect your credit score?”
What’s the difference between debit and credit cards?
Debit cards are directly linked to your bank balance. You only spend what’s in your account (plus any agreed overdraft but more on that later).
On the other hand, credit cards are a way of borrowing money within set credit limits and repayment terms that you agree with the provider. Spending on a credit card means the card issuer covers the cost until you repay it, often with high interest. Therefore, it’s possible to spend beyond your means with a credit card.
So, debit cards are different from credit cards in that you’re spending your own money rather than borrowing money from the card issuer as you would with a credit card. As a result, using a debit card isn’t reported to Experian, Equifax or TransUnion and does not influence your credit report. Even if you have multiple debit cards with different bank accounts, your debit card transactions alone won’t affect your credit score.
However, money you spend on a credit card is borrowed from the card issuer and has to be paid back. Because that money is provided on credit, your usage is reported to the credit reference agencies and can positively or negatively impact on your credit score, depending on how you manage it. Find out more about how missed payments affect your credit score here.
Does a debit card’s overdraft affect credit scores?
One way that you could find a debit card affects credit scores is if you have an overdraft associated with the bank account. It’s more the account that causes the impact to your score than the debit card itself, but this is because an overdraft is a form of borrowing money and you get into debt by using it. If you go overdrawn without authorisation or exceed your agreed limit, this will show up on your credit report and can affect your credit score negatively.
Using your overdraft properly can give your credit score a boost, so it’s not all bad! But they are easy to use, so of course there’s a temptation to go too far. Interest rates on overdrafts can be quite high, and even higher (with fees too!) if you go beyond the amount that you’ve agreed with the bank. So be careful with them.
Another way your debit card could indirectly affect your credit scores is by borrowing what you can’t afford using buy-now-pay-later services like Klarna. If you fall behind on your payments, this can appear on your credit report and significantly impact your credit scores.
Can you build credit scores with debit cards?
Not directly, but using your debit card responsibly and within your means can indirectly improve your chances of getting credit in the future.
Managing your finances well and not misusing your overdraft can demonstrate to potential lenders that you’re financially responsible. They may consider this when assessing if you can handle credit.
But it is important to say that the impact of using your debit card alone will be minimal. If you want your debit card to improve credit scores, there are better ways.
One way is to take out a traditional credit card. As mentioned above, because they use borrowed money which you then pay back, proper usage will show on your credit report and raise your credit score.
But you have to be careful with credit cards too! While they have a great impact on your credit score when managed well, if you have any problems or miss payments you can be stung with high interest rates that can spiral your debts quickly. It’s important to be confident you’re ready for a credit card.
For a safer alternative to credit cards, get started with Loqbox Grow for just £2.50 per week (less than the price of a flat white coffee!). It’s an interest-free credit account which reports your regular responsible usage to Experian, Equifax and TransUnion. It’s super simple and grows your credit just by using it for your Loqbox membership payments.
Loqbox membership also gives you access to Loqbox Save and Loqbox Rent. Using all three could boost your credit score by up to 300 points in the first three months.
Improvements to your credit score are not guaranteed. Your other financial behaviour counts too, read this list of what affects your scores and how to improve them to find out more.
Do I need a credit score for a debit card?
No, because debit cards don’t involve using credit, they are a financial product that banks and building societies can offer to you to help you withdraw and deposit your cash in a branch.
When you use a debit card you’re spending your own money, so there’s no need to establish how well you have managed credit in the past. Even if you have no credit history at all, you’ll be able to get a debit card.
If you are looking for a new bank or building society in the UK and are worried you don’t have enough credit history to be accepted, don’t worry! There are plenty of accounts that offer a debit card, allow you to pay your bills and use online banking.
- One that requires a soft credit check. This applies to most ‘basic accounts’.
- If you’re concerned about having an overdraft, you can opt out of this. These are usually offered with ‘current accounts’, rather than ‘basic accounts’.
- Only accept a monthly fee if you’re comfortable paying that. Many accounts are free. Unless there is a reason you’d like to pay (i.e. a package that gives you access to the account and insurance for travel or your phone).
Check out our bank account cheat sheet to help you decide.