Do Gas Cards Build Credit?

A credit score is a numerical representation of an individual’s financial reliability, typically ranging from 300 to 850. Lenders and creditors use this number to assess the potential risk of lending money. A higher score generally indicates lower risk, leading to more favorable terms for loans, credit cards, and other financial products. Many financial products can contribute to building credit, leading to questions about the role of gas cards.

Understanding Gas Cards and Credit Reporting

The ability of a gas card to build credit depends entirely on its type. There are two primary categories, and their impact on a credit report varies significantly. Distinguishing between these types is essential for consumers to understand their credit-building potential.

Closed-loop, or store-specific, gas cards are typically issued by a particular gas station chain and can only be used at its affiliated locations. For example, a card from “Gas Station X” is only accepted at “Gas Station X” pumps and convenience stores. These cards generally do not report payment activity to the major credit bureaus: Equifax, Experian, and TransUnion. Because they do not report, using these cards will not directly contribute to building a credit history or improving a credit score.

Conversely, open-loop, or network-branded, gas cards function more like traditional credit cards. These cards are often issued by major credit card companies, such as Visa, Mastercard, or American Express, but may carry the branding of a specific gas station. They can be used wherever the major credit card network is accepted, not just at the co-branded gas station. These open-loop cards typically report account activity, including payment history and outstanding balances, to the three major credit bureaus. Responsible use can directly influence an individual’s credit profile.

How Credit Scores Are Influenced

For an open-loop gas card that reports to credit bureaus, its usage can affect several components of a credit score. Credit scoring models, such as FICO and VantageScore, consider various factors to determine a score, with payment history and amounts owed being the most impactful. Understanding these components clarifies how a responsibly managed gas card can contribute to credit building.

Payment history is the most significant factor in credit score calculations, typically accounting for about 35% of a FICO Score. Consistently making on-time payments on an open-loop gas card demonstrates financial responsibility. Conversely, late payments can negatively impact a score, potentially remaining on a credit report for up to seven years.

The amount owed, also known as credit utilization, is another substantial factor, making up approximately 30% of a FICO Score. This refers to the amount of credit used relative to the total available credit limit. Keeping the balance low on an open-loop gas card, ideally below 30% of the credit limit, helps maintain a healthy credit utilization ratio. For instance, if a gas card has a $1,000 limit, keeping the balance under $300 is generally advised.

The length of credit history, which considers the age of accounts and the average age of all accounts, accounts for about 15% of a FICO Score. The longer an open-loop gas card account remains open and in good standing, the more positively it can reflect on the score. Closing older accounts, even if unused, can shorten the average age of credit and potentially have a negative impact. Other factors, such as new credit and credit mix, also play a role, each typically contributing about 10% to the score.