Using Prepaid Credit Cards to Build Credit

The concept of using credit cards to build credit has become very popular, post the economic recession, as there are several people who are attempting to repair their credit reports and improve their credit scores. The biggest advantage of applying for prepaid credit cards to rebuild credit is that the prepaid credit card application is never declined, and since it works in the exact opposite manner as a conventional credit card, it shows great results, that is the credit score definitely improves. Sounds great, doesn't it? Well, here's how it works.

How do Prepaid Credit Cards Build Credit?

The credit card companies have a substantial control over your credit score and so do the other lenders. These, lenders and companies keep on reporting information to credit reporting agencies such as Experian, Equifax and TransUnion, which keep a track of your credit related activities, our credit reports and most important of all, our credit score. When the credit card company or a lender reports a non-payment or late payment of a bill, the credit score is brought down, and on other hand, in cases where a timely payment is reported, the credit score goes up.

As mentioned above, the prepaid credit cards that help to build credit, work in the exact opposite manner as a conventional credit card. When you get a repaid credit card approved, the company gives you an account in which you need to transfer or deposit a sum of money. This way, the credit card gets 'charged' with the sum deposed in the account and the money can be spent through the prepaid credit card. Now in such instances, credit card companies give a positive report to the credit reporting agency when you deposit the said money into the account, thereby increasing your credit score. Some companies however provide a positive report after you swipe the card and conduct the transaction. Thus your credit score, keeps in getting steadily improved with each transaction. All you need to do is feed the account with money and keep using the prepaid card instead of the conventional credit card. The only common thing between a prepaid and conventional credit card is that the company charges a membership fee and also an APR (Annual Percentage Rate) in both the cases. In certain cases though, if you own other credit cards or are a long time customer of the company, then you can also get a prepaid credit card with no fees.

Best Prepaid Credit Cards for Rebuilding Credit

Almost all credit card companies make and operate accounts for prepaid credit cards to build credit. The best prepaid card is the one that charges less fees and at the same time reports to almost all the credit reporting agencies. There are some prepaid credit cards that have a certain overdraft facility, which means that the card can be used to spend more than the money that is deposited into the account. Here are some common prepaid credit cards:

• SilverCard Prepaid MasterCard
• Walmart MoneyCardSM Visa Prepaid Card
• Capital One Reloadable Prepaid MasterCard
• READYdebit Visa Prepaid Card
• BabyPhat Prepaid Visa RushCard

Using these prepaid credit cards is a great way to increase credit score in 30 days, or even increase credit score after bankruptcy. It must be noted that prepaid credit cards are different from common debit cards, as the debit card provider does not report to the credit reporting agency and none of your timely payments affect the credit score.