Can a Best Buy credit card help you build credit?

Is it a mortgage or a car loan in your future? If so, there are a few things you need to know before trying to make that dream come true. Buying a home or car is a huge financial responsibility, requiring a lot of time, discipline, and money. Most of us don’t have enough cash to pay for the entire purchase, which means having to go to a bank for a loan to finance the purchase. To qualify, you will need good credit. But what do you do if you’re just starting out or have a bad credit score? There are a few ways you can work to build your credit or get it back on track. One way to do this is by applying for a store credit card like the one Best Buy offers. Learn more about your credit score and how a Best Buy card can help your bottom line.

Understanding your credit score

Your FICO Score helps lenders decide whether to grant you credit. FICO stands for Fair Isaac Corporation. This score is a three-digit number that is derived from your credit reports from the three major credit reporting agencies: Equifax, Experian, and Trans Union.

The FICO score is calculated using five different factors, each with its own weight based on importance:

  • Payment history: 35%
  • Balances owed: 30%
  • Length of credit history: 15%
  • New credit: 10%
  • Credit mix: 10%

Essentially, more than two-thirds of the overall credit score is based on how well you pay your balances in full and on time. The rest of the credit score looks at information like the length of your credit history and how often you open new lines of credit.

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Keep in mind that a FICO score is a credit score, but not all credit scores are FICO scores. How they are calculated, how they are used and who are all the differences between the two. About 90% of lenders use FICO scores to make their credit decisions.

Key takeaways

  • Best Buy offers two different credit card options: a store credit card and a Best Buy Visa that can be used anywhere Visa is accepted.
  • Both cards offer consumers rewards that can be used toward future Best Buy purchases.
  • Best Buy cardholders can also take advantage of flexible financing on select purchases.
  • Paying your Best Buy credit card on time can improve your credit history.

Credit card stores

You probably know that almost every retail store, large or small, has a credit card. After all, almost every ATM you will come across will ask you if you would like to apply for their card. Most of these credit cards are financed through different banks or finance companies. Some of the most notable are those available through Target, Amazon, Walmart, Costco, the Gap family (Gap, Banana Republic, and Old Navy), and Best Buy. Getting a card approved from many retailers can be quite easy, especially since the application can be done online or right at the register. That’s because these lenders have looser restrictions than traditional credit card companies.

Most store credit cards have no annual fees and often have a very manageable credit limit, so hopefully you won’t overspend. If you’re a frequent shopper at that retailer, say Best Buy, you may even earn points or other rewards. Best Buy offers two different credit card options: the My Best Buy credit card and the Best Buy Visa.

The Best Buy credit card can only be used at Best Buy. You can get 5% back in rewards and another 1% if you are an elite plus card holder. You also get flexible financing options if you make larger purchases and have an adequate credit limit. The Visa card, on the other hand, can also be used anywhere Visa is accepted. Not only do you get the same benefits as the credit card at the store, but you also get 3% rewards on gas purchases, 2% on meals, and 1% on other purchases. Rewards can be used toward future Best Buy purchases.

But like any other card in the store, there is a catch. Expect to pay above-average interest on the card. The Annual Percentage Rate (APR) for both cards is 25.24% on regular purchases and both charge $ 40 for late payments. The Visa card charges 27.99% for the cash advances plus a fee of $ 10 or 5% of the cash advance, whichever is greater.

Retail credit cards like those offered by Best Buy tend to have higher interest rates, an important factor to consider if you tend to carry a balance.

How the Best Buy Credit Card Can Help

If you use a Best Buy credit card but pay the balance within the terms of the agreement, you will likely see an improvement in your credit score. Timely payments on any outstanding credit balance help you build a strong credit history and avoid paying unnecessary interest and late fees.

The financing that Best Buy offers on certain purchases means that you may not have to pay interest, as long as you pay the entire purchase balance on time. Doing so will likely result in a higher credit score, as it shows lenders that you can use the card responsibly and that you have the means to pay back what you have borrowed.

About the author

Mark Holland

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