Prepaid debit cards have the same effect on your personal FICO credit score just like normal credit cards, so they can be used to build a better credit score. Just be careful since they can also damage your credit if you misuse them. Generally, we recommend prepaid credit cards from big banks to people who need to repair their credit as well as those who cannot get a unsecured credit card.
For people with bad credit, it is easy to get a prepaid debit card such as the Eufora prepaid Preferred and Elite Mastercards. These have cheaper fees compared to other types of secured credit cards for bad credit. The best way to rebuild good credit history is to show good borrowing records on your credit file records – whenever you borrow money, you pay it back completely and on time. You need to make sure your creditor reports such payment details regularly to the main credit monitoring bureaus, and using a prepaid debit card is the easiest method. Many people especially students have bad credit because they do not have any established history on their credit file. This is not caused by being in debts but rather they have never used a credit card or get a personal loan (student loan, car loan, cash advance etc).
Whether you have poor credit or never established any credit previously, getting instant approval for a prepaid debit card at major banks do not require any credit check. Prepaid credit cards are designed to be preloaded, so you need to put an account opening deposit before you use them. If you deposit $100 into your prepaid debit card, you can only use up to $100 although there is also a minimum amount that must be maintained in your account. This is why they are not considered as real credit cards since the banks do not actually extend any credit to you. However, some Mastercard prepaid cards offer an unsecured line of credit feature that allows you to borrow $100 quickly. These can also be viewed as no credit check unsecured credit cards.
Your credit file is updated whenever you pay the balance on your account, as reported by your lenders and card issuers. A good credit score allows you to get cheap loans rates because you are considered a responsible borrower with zero risk of defaulting on payments. People with bad credit must pay much higher interest rates and may not even get approved for a loan or credit card. Using secured or prepaid debit cards is one of the cheapest ways to increase your credit score and you can even borrow money with no interest for free if you know how to do it.
If you are going to use prepaid credit cards to build FICO score, make sure that the card issuer explicitly state that they report to the credit tracking agencies. Not every prepaid debit cards can be used for credit restoration purposes, especially those with no annual fees. Generally, rebuilding your credit means that the bank will offer a small amount of personal credit and you make pay back the loan on time. By repeating this for several months, you can have good records on your credit file again.
For example, we recommend the AccountNow Prepaid Visa or MasterCard which is a legit prepaid credit card to build better FICO credit score. It provides guaranteed approval to the iAdvance Line of Credit, which is a debit card cash advance. For example, you can borrow $400 guaranteed approved but just make sure you pay back on time. Your payment activities are reported monthly to the major credit agencies: Equifax, Experian, and TransUnion.
If you choose to pay your monthly bills through the AccountNow Prepaid Visa card, these will also be reported every month to PRBC, which is another national credit reporting agency. Make sure you settle your monthly prepaid credit card bills on time, and you can use this free service to establish a good credit history.
Alternatively, you can sign up for the Upside Visa Prepaid Card with no credit check. This card provides cheaper fees and allows you to make online payments, direct cash deposit or personal checks etc. However, it does not report to the credit agencies so it will not help your credit rating.
For students and young adults, starting with a prepaid debit card or the best secured credit card offers help you learn how to manage your own money and the prepaid card limit can avoid overspending. Your card limit is based on how much money you have in the account, so you cannot overspend and end up with overwhelming debts like a normal credit card. That is why prepaid Mastercard or Visa credit cards are recommended for people who have never used a credit card before. They also have very clear fee structures compared to normal unsecured credit cards with hidden or variable fees. You can find prepaid credit cards issued by big banks with no annual fees, so do not apply for cards with account fees. Customer support from big banks can offer better help if you suspect card fraud or identity theft.