Credit 101: Debit cards don’t build your credit score

You use debit cards and credit cards in the same way: A swipe or wave in a card reader or type in your number online.

But the two are very different; only credit cards help build your credit score and are listed on your credit report.

Activity on a debit card isn’t reported to the three credit bureaus (Experian, Equifax, and TransUnion). The credit bureaus monitor how people use credit. But they don’t monitor debit cards, which are used like cash. The full amount is deducted from your checking account as soon as the purchase is made.

With credit cards, the full amount is loaned to you on a credit line.

With debit cards, you avoid interest charges and don’t go into debt because if you don’t have the money in the bank, the debit card will be declined.

Credit cards, on the other hand, can build credit — or trash your credit if you don’t make the payments on time. If you use a credit card on purchases you can pay off quickly, especially in the same month, your credit score may increase.

You can’t get a conventional credit card if you have bad credit or no credit history. Enter the secured credit card. With a secured card, you make a deposit to the credit card company, and that deposit becomes your credit line. Then, you can use the card to buy an item every month and then pay off the item each month. This way, you build a history of paying for what you buy. That’s good credit. In some cases, credit card companies will eventually upgrade a secured card to an unsecured card.