Credit building

Key takeaways

• Credit builder prepaid cards aid in repairing credit ratings for those with past financial issues, improving chances for future credit approval

• Payment history is reported to credit agencies, potentially improving credit score within three months

• Credit builder prepaid cards help establish budgeting habits by limiting spending to the loaded amount

Compare prepaid cards for credit building - Ordered alphabetically A-Z

Prepaid cards are not eligible for protection under the Financial Services Compensation Scheme

What is a credit builder prepaid card?

A credit builder prepaid card is like a regular prepaid card: you load money onto it and use it to pay for goods and services.

The difference is that with the credit builder option, the card provider effectively “lends” you a year’s worth of monthly fees, which you pay back in instalments.

Each payment is reported to credit reference agencies, gradually boosting your credit history.

How do credit building prepaid cards work?

When you take out a credit building prepaid card, here’s how it will work:

1. You load the card with cash and use it for everyday spending

2. Your provider will add a credit builder service, essentially a loan for the 12 months of fees

3. You’ll repay this loan monthly, usually around £5-£10 per month

4. These payments are reported to credit reference agencies, showing you can keep up with repayments, therefore improving your credit score over time

What are the benefits of using a credit building prepaid card?

The main benefit of using a credit building prepaid card is that there is no interest or pay, and no admin fees beyond the set monthly cost. You’re also guaranteed to be accepted, even with a poor credit history.

These cards encourage budgeting, and you won’t be able to spend more than what you’ve loaded on to the card. You could even see signs of your credit score improving often within three months.

Around a third of prepaid card users in the UK use them to control their finances, while over a quarter said it was to avoid debt.

Will my purchases be protected?

Unlike traditional credit cards, prepaid cards don’t offer Section 75 protection. This means you won’t be able to claim a refund from the card provider if a purchase between £100 and £30,000 is faulty or undelivered.

Check your credit rating

You can monitor your improving credit rating through agencies such as Experian or Equifax, and get a copy of your credit report through our credit scoring channel.

Using MoneySuperMarket’s Eligibility Checker, you can also see which credit cards you’re likely to be approved for as your score improves.