Does the Green Dot Card Improve My Credit?

You can obtain a Green Dot card, which allows you to rent a car at some companies, and enjoy the convenience of electronic transactions without the need for good credit. One downside to this card is that you cannot build a traditional credit history. You can build credit but only with firms that allow self-reported payments.

Identification

Green Dot cards do not build credit history, according to the Green Dot website. Accounts issued by Green Dot are prepaid, so you do not receive a line of credit. Instead, you load funds onto the card, often by paying cash or through a credit or debit card. The major credit bureaus do not report prepaid accounts because they do not necessarily have as good a predictive value as a loan or other debt account.

Alternative Credit Agency

You can report purchases made using a Green Dot card to an alternative credit agency. This type of company reports any kind of account as long as you can prove payment, such as with a monthly statement. An alternative credit history, however, is not always accepted in lieu of a traditional credit history. Thus it is always ideal to use an account that reports to Experian, TransUnion and Equifax -- the national credit bureaus.

Considerations

Some prepaid cards, such as the Elite or Preferred Level Eufora Prepaid MasterCard, report to one or more of the major credit bureaus. However, they usually appear as an installment account rather than a revolving account. Revolving accounts are generally more important for building credit, because they are a better indicator of how a person uses credit. Also, prepaid cards with a credit building feature tend to charge a monthly fee.

Alternative

Retail, gas and secured cards are far better for building credit than prepaid accounts like a Green Dot card until alternative credit histories become widely accepted, according to Leslie McFadden of Bankrate.com. Look for a retail, gas or secured card that reports to all three national bureaus and charges a minimal annual fee. Some companies take advantage of people trying to rebuild credit by charging hundreds of dollars in fees for a secured card, according to the Federal Trade Commission.