Does a Gas Card Build Credit?

Many consumers wonder if a gas card can help build credit. Understanding how different types of gas cards operate and report to credit bureaus is essential for effective credit building.

Understanding Gas Cards and Credit Reporting

The ability of a gas card to build credit depends significantly on its type and whether the issuer reports payment activity to the major credit bureaus. There are generally two common categories of consumer gas cards. One type is a store-specific or private-label gas card, usable only at a particular gas station brand. These cards often have easier approval requirements, making them accessible to individuals with limited credit history. However, some of these cards might only report to one credit bureau or not at all, which limits their impact on a comprehensive credit profile.

The second type is a general-purpose credit card co-branded with a gas company. These cards carry a major credit card network logo and can be used for purchases beyond gas stations. They function much like any other traditional credit card and typically report payment activity to all three major credit bureaus. For any card to contribute to building credit, its payment performance—both positive and negative—must be regularly furnished to these credit reporting agencies.

Strategies for Building Credit with Gas Cards

Using a gas card that reports to credit bureaus can be an effective way to establish or improve a credit score, provided it is managed responsibly. The most impactful action is consistently making on-time payments. Payment history is the most significant factor in credit scoring models, accounting for approximately 35% to 40% of a FICO Score or VantageScore. Missing even one payment by 30 days or more can negatively impact a score and remain on a credit report for up to seven years.

Another important strategy involves keeping the credit utilization ratio low. This ratio represents the amount of credit used compared to the total available credit. Lenders prefer this ratio to be below 30%, as a lower percentage indicates responsible credit management. For example, if a gas card has a low credit limit, such as $300, charging $150 in gas would result in a 50% utilization, which could negatively affect the score. Regularly paying the full balance before the statement closing date helps maintain a low utilization ratio, even if the card is used frequently.

Other Avenues for Credit Building

Beyond gas cards, several other methods can effectively help individuals build a positive credit history. Secured credit cards are a common option, particularly for those with limited or poor credit. These cards require a cash deposit, which often serves as the credit limit. The issuer reports payment activity to credit bureaus, allowing for credit building through responsible use, and the deposit is usually refundable upon graduation to an unsecured card.

Credit-builder loans offer another structured approach. With this type of loan, the funds are held by the lender in a savings account or Certificate of Deposit (CD) while the borrower makes regular payments over a set term. These consistent, on-time payments are reported to credit bureaus, building a positive payment history, and the borrower receives the saved funds at the end of the loan term. Becoming an authorized user on another person’s credit card account can also contribute to credit building. This works best when the primary cardholder maintains a strong payment history and low credit utilization, as their account activity can appear on the authorized user’s credit report.

While utility and rent payments do not automatically appear on credit reports, there are services that can report these on-time payments to credit bureaus for a fee. This can be particularly beneficial for individuals with a “thin” credit file, adding positive payment history that might otherwise go unreported.