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Paul Yamilkoski

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Do Prepaid Cards Help My Credit?

“I have a prepaid credit card. Will that help my credit score?”

That is a question that I get asked quite often, as I am working with clients to help them build their credit scores.

The cards that they are referring to, are like those that you can find in the Wal Mart check-out line. These cards are then loaded with a balance in exchange for cash you give the cashier. They can then be used much like any other credit card.

Clients ask me this question when encouraged to start a credit card, to help build credit.

The important thing to know here is that NO, they do not help your credit score.

The reason is twofold.

One, a prepaid card is not a credit line. It is just like a checking account, where you are spending the money you have there. You don’t have minimum payments to make or a credit limit.

Credit scoring is based upon you being extended a line of credit, making payments on-time, keeping the account active for a long time and keeping your balances low compared to the limit. A prepaid card does not do this.

Two, prepaid cards do not get reported to the credit bureaus. In order for anything to help or hurt your scores, the information has to be reported to the three major credit bureaus.
Having a active credit card reporting on your credit is an important part of helping build your credit scores. But a prepaid card will not help.

Prepaid cards often get confused with “secured” credit cards, because secured credit cards require a deposit to open them.

However, the difference is that you are not spending the money deposited to open the card. You are being extended a credit line, commonly of the same value as the deposit. The credit line is “secured” by the deposit, much like a auto loan is secured by the vehicle itself.

A secured credit card can be a very good tool to building your credit, when you are not able to qualify for an unsecured card.

If you or anyone you know is facing credit challenges and would like so help, Heartland Credit Restoration is a great place to start. Call or email me for a free consultation. The same goes for those of you who have clients with credit challenges. Forward their contact info to me and I will be happy to give them a free consultation and see what we can do to get them back to you with loan ready credit.

Please share this with your friends and contacts on social media. I also welcome comments and encourage you to feel free to let me know if you have any questions. In the mean time, I hope you have a wonderfully blessed day!

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