Debit cards wrecked my credit

How can a Debit Card hurt my credit score?

To be fair let me say that a Debit Card will not directly impact your credit score. That’s the point! A Debit Card will not impact your credit score. First lets take a look at the Debit Card.

Pros:

• Convenient
• Easy Access
• Track Spending
• Secured by Pin #

Cons:

• Easy Access
• Possible Fees
• Risk
• Secured by Pin #

 If I’m robbed and a thief steals my cash I am aware of it but there are thieves that will steal your debit information and clean out your account while the card is still safe in your pocket. Debit Cards should be protected as if they are cash and you should NEVER share your Pin #. This is not about the Pros and Cons of Debit Cards and their use is really a personal preference.

Being in the Mortgage industry I see a lot of credit reports and I am alarmed recently at the number of people that do not meet current standards for Lenders/PMI Companies. There are 2 things the Lenders are looking at. The first is your FICO credit score. Second it is your trade-lines in your credit profile that drives your score. Many Lenders/PMI Companies have credit overlays that want to see 3 to 4 open and active trade-lines or accounts for the last 12 months. Many people have either shut down or don’t use their credit enough to to keep their credit profile healthy because they rely soley on their Debit Card. You could have an 800 credit score and have an unhealthy profile! It’s like having a spare tire with NO air. Looks great in the trunk until that dark rainy night on the side of the road when reality strikes.

A profile may look like this:

• Car loan 9 months old
• Switched card B, for card C ,for better rate 6 months ago
• Keep card A for emergency haven’t used in 2 yrs
• Have a current Mortgage 3 yrs old

This profile has 4 accounts but only the Mortgage would count as an open and active trade-line. It is a good idea to pull your credit report at least every 1-2 years and make sure to keep your profile healthy and this will give you a FICO score you can depend on.

For more info on credit scores checkout this post:

“How Credit Really Works”

By Bill Frantz