In Monday's blog, I wanted to clear up the relationship between credit scores and Suze Orman's new prepaid card. (The short of it: There's no connection.)
But while I trekked the credit score universe, I came across a few other nuggets about prepaid cards and credit scores that are worth thinking about, especially if you're considering one for your wallet.
You already know FICO's traditional credit scores don't count prepaid cards in their calculation. But here's something new: Even the FICO Expansion Score, which uses nontraditional data such as purchase payment plans and checking account information, doesn't take prepaid card payments into account, says Jason Sprenger, a spokesman for FICO.
The only way a prepaid card will show up on an alternative credit report -- such as one provided by PRBC and not the conventional ones from the big three credit bureaus -- is as a method of payment, says Sprenger. That means if you pay your cellphone bill or water bill with a prepaid card, it's recorded as such. Just like if you pay with cash, check or EFT.
But prepaid cards don't show up as a separate tradeline account like credit cards do, he says.
"By extension of that, getting a prepaid credit isn't the best way to improve one's credit score," Sprenger says. "There are other more impactful ways of doing that, most notably paying your bills on time."
That's how the credit score rules are written, folks. And while Suze is on a mission with credit reporting agency TransUnion to create a way to include prepaid card data in credit scoring, the results of that experiment are at least a year and a half away.
So, in the meantime, you're left with the traditional ways to start building credit: a secured credit card or being an authorized user on your mom or pop's credit card.
How did you start building credit? Tell me your story.
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