Prepaid cards and credit score: which statement is accurate?

• A. Prepaid cards improve your credit score by building credit history.
• B. Prepaid cards have a strong positive effect on your credit report.
• C. Prepaid cards do not improve your credit score by building credit history.
• D. Prepaid cards never affect credit scores.

Answer: (C)

When credit scores are built, the key is showing a history of borrowing and repaying debt that gets reported to the credit bureaus. A prepaid card is funded in advance and involves no borrowed money or monthly payments, so there’s nothing to report as a repayment history. Because of that, standard prepaid cards don’t build credit history and don’t typically raise your credit score. Some products marketed as credit builders may report to the bureaus, but that’s not the usual prepaid card function. If you want to improve your credit, you’d use a product that involves borrowing and on-time payments, such as a secured credit card or a credit-builder loan, which they report to the credit bureaus.