Can Suze Orman's new prepaid card change credit scoring?

Personal finance guru Suze Orman says she never would have introduced her prepaid debit card if there wasn't a possibility that some day it could be used in credit scoring.

Orman launched the Approved Card this month. She has partnered with TransUnion, one of the three major credit bureaus, in a pilot program to see whether spending activity on the prepaid card could be used to develop a credit score.

Some credit experts are doubtful. People load money on a prepaid card that can be used at places that accept plastic. But how you spend your own cash, experts say, is not likely going to tell a lender how well you manage credit — other people's money. And that's what lenders want to know before they give you a mortgage or other line of credit.

Consumers wanting to establish a healthy credit history shouldn't wait to see if the TransUnion pilot works out. To build a good credit history and score, you have to do it the old-fashioned way: by getting a line of credit and paying bills on time. And if you start now, you could achieve your goal long before the TransUnion pilot is completed.

Credit scores, compiled from information on credit reports, have enormous influence. A single number determines who gets credit and what the terms will be.

"The current system is obsolete," Orman said in a telephone interview Monday.

Even consumers on the brink of bankruptcy can still have high credit scores, she says, by borrowing to keep up with the minimum payments on credit cards so their score doesn't drop.

On the Approved Card's website, Orman says, "I'm proud to say that the Approved Card is the first prepaid card in history to share information with TransUnion, a major credit bureau."

Some consumers reading that might mistakenly believe that the information will appear on their report and that the card will improve their score now, says John Ulzheimer, president of consumer education for

Click a little further on the site and you'll find more details. Consumers must sign up for the pilot program. Their information will remain anonymous and won't appear on their TransUnion credit report.

Orman says the credit bureau will study users' aggregated spending patterns for 18 to 24 months to see whether that information can predict creditworthiness.

"I don't know if any of this will come to pass," she said. "But I can't afford not to try."

TransUnion did not return phone calls seeking information about the pilot program.

But credit experts raise doubts.

If the information is anonymous and not listed on credit reports, Ulzheimer says, how would TransUnion know whether prepaid card users were better or worse credit risks than others?

Suzanne Martindale, staff attorney with Consumers Union, says this isn't the only prepaid card that has tried to work with a credit reporting agency to develop a score from prepaid card purchases.

"No one has done it yet," said Martindale, adding that she's "skeptical."

FICO, which produces a widely used credit score, also questions the value of the information.

Spokesman Anthony A. Sprauve wrote in an email that FICO considers only credit history information on reports from the major bureaus — and spending on prepaid cards isn't part of that.

"In our experience, spending is not actually a great indicator of the thing that the FICO score tries to measure, which is the likelihood you're going to default on a credit bill," he said.

There are other ways to build a credit score. You must show you can use credit responsibly.

Start by getting a credit card or a small line of credit at a community bank or credit union that is "more likely to take a chance on you" than a big bank, says Consumers Union's Martindale.

If you don't qualify for a credit card yet, see if you can become an authorized user on another's card. The payment history on the card will go on your credit report.

If you don't find anyone generous enough to put you on their card, get a secured credit card, which is designed to help people rebuild a damaged credit history or to establish a credit record. You deposit money in a bank account, which serves as the credit limit.

Secured cards tend to have higher interest rates and fees than regular credit cards. Shop for a card at

Usually after one year of responsible behavior, you can graduate to a regular credit card with more favorable terms.

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