If you have a less than perfect credit score, being agreed for a card can be tough. However, there are products that give you all the benefits of a traditional credit or debit card and help you to repair your credit rating.
They’re called ‘credit building prepaid cards’ and they can be ideal if you have a poor credit rating but you’re looking for a better way to manage your finances.
How do prepaid cards to build credit work?
Many banks will refuse to agree applications from people with bad credit and those that do often charge high interest rates for the privilege. There are a couple of reasons why this may be.
Firstly, you may have some issues on your credit file that are making providers wary – for example County Court Judgements, mortgage arrears, defaults or late/missed payments on a loan or credit card.
Secondly, you may have what is called ‘thin credit’ whereby there’s simply not enough information about you on your credit file for a company to make a decision.
Prepaid credit cards to rebuild credit rating work by allowing you to demonstrate that you can responsibly manage credit. This helps to build your credit history so you're more likely to get approved for other financial products in the future.
A prepaid card works in the same way as a traditional credit or debit card except you never borrow from the card provider. You can only spend the money you have loaded onto your card.
So, if you load up your card and use it regularly, your credit file will begin to show that you are capable of managing your finances and keeping your account in credit.
Finding the best prepaid cards to build credit rating
Although there are dozens of prepaid cards available, not all of them will help you rebuild your credit rating. So, if improving your credit rating is your priority, it’s vital that you search for the best prepaid cards to build credit rating.
However, the best cards to build credit will help you to demonstrate to potential lenders that you are a good risk while charging you little in the way of fees or charges. It's really important you check the charges for topping up, spending and withdrawing cash before you apply otherwise using a prepaid card could prove costly.
Our prepaid cards comparison table will help you research and compare the leading ‘prepaid card to rebuild credit history’ deals available.
You should compare fees, charges and other features and benefits of all the prepaid cards on offer and only then make your choice.
