How a prepaid card can improve a credit score

More and more people are catching on to the fact that prepaid cards are an excellent way to safely pay for their bargains online and at millions of outlets worldwide. But on top of this very useful function, a certain prepaid card can assist with something that’s vital in these credit crunch times: it can help improve a customer’s credit score.

Having a decent credit score is absolutely essential these days, because everything from getting a mobile phone on a contract to a mortgage depends on it. So on top of the usual routes to a better rating, such as paying bills on time and making sure his or her details are correct on the electoral roll, people should consider getting a prepaid card.

To start with, it’s best to search online for a card that offers a feature that’s especially designed to build the customer’s credit score. Even if the customer applying for the card has a poor rating (including CCJs!), there’s no need to worry, because acceptance for a prepaid card is guaranteed as long as the applicant’s 18 or over and lives in the UK.

Once the card arrives, the customer should make sure that he or she signs up for the credit building feature. Even if they’ve never ever had credit, have only just arrived in the UK or have had problems with credit previously, this feature really could help.

In fact, if the feature is used correctly, a customer who had a ‘Poor’ rating may shift up to a ‘Fair’ rating, and if they had a ‘Good’ rating it may move to ‘Excellent’. No wonder thousands of customers across the UK have already seen their credit score improve. What’s more, it’s usually available at no extra cost.

A prepaid card can help improve a rating in other ways – one prepaid card now offers a free Direct Debit service that helps customers to pay on time, warning them if a Direct Debit looks set to bounce. It can even offer a short term loan to cover the payment. This is an extremely valuable feature, because missing Direct debits, or paying them late can hurt a customer’s credit score.

The same card also offers short term loans for any purpose, which if successfully repaid could also boost a customer’s credit score.

So all in all, anyone looking to improve their credit rating should seriously consider a prepaid card. But of course, there’s no magic wand in use here, customers will still need to manage any credit they have responsibly.

Jason Paget is a finance writer who has worked in the industry for over 10 years providing insights on money matters throughout the UK from prepaid cards to house prices.