How to Build Credit with a Prepaid Card in Canada (Yes, It's Possible!)
Think prepaid cards can't build credit? Think again. Discover how KOHO's unique credit building tools allow you to improve your credit score without a traditional credit card.
If you’ve ever Googled “do prepaid cards build credit,” the answer is usually a resounding “no.” And technically, that’s true. Standard prepaid cards are just like debit cards—you load money, you spend it, and the credit bureaus (Equifax and TransUnion) never hear a peep.
But here’s the secret: KOHO isn’t just a standard prepaid card.
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KOHO has engineered a way to help Canadians build their credit history using a prepaid Mastercard, without the risk of debt or the need for a hard credit check. If you’re looking to boost your credit score but can’t (or don’t want to) get a traditional credit card, this guide is for you.
The “Prepaid Paradox”: Why Most Cards Don’t Work
To build credit, you need a “tradeline”—a credit account that reports your payment history to the bureaus. Traditional prepaid cards don’t offer this because you’re spending your own money, not borrowing from the bank. Since there’s no lending involved, there’s nothing to report.
This leaves many Canadians in a tough spot: you need credit to get a card, but you need a card to build credit. It’s the classic “credit trap.”
How KOHO Breaks the Cycle
KOHO solves this problem by separating the card from the credit building.
When you sign up for KOHO, you get a prepaid Mastercard for your daily spending. This part works like a debit card—no interest, no debt. But alongside that, you can subscribe to KOHO Credit Building.
How It Works
- Subscription Model: You subscribe to the Credit Building tool for a small monthly fee (between $5 and $10, depending on your plan).
- The Tradeline: KOHO opens a line of credit on your behalf. You don’t actually borrow money to spend; instead, the “line of credit” is the subscription fee itself.
- Reporting: Every month that you have enough money in your account to cover the subscription fee, KOHO reports a “successful payment” to Equifax.
- Score Growth: Over time, these on-time payments build a positive payment history, which accounts for 35% of your credit score.
KOHO vs. Traditional Secured Cards
Before KOHO, the only option for people with poor or no credit was a “secured credit card.” Let’s compare the two:
| Feature | Traditional Secured Card | KOHO Credit Building |
|---|---|---|
| Upfront Cost | Security Deposit (usually $500+) | Subscription Fee ($5-$10/mo) |
| Credit Check | Often a “Hard Check” (can lower score) | No Credit Check (Soft inquiry only) |
| Risk | High (Interest charges if you miss payments) | Low (Prepaid model, no interest on spending) |
| Access to Funds | Deposit is locked away | Keep your cash flow free |
For many people, coming up with a $500 security deposit is a major hurdle. KOHO allows you to start building credit for the price of a fancy coffee, keeping your cash available for rent and groceries.
Steps to Start Building Credit Today
Ready to start your journey to a better credit score? Here is the roadmap:
- Download the App: Sign up for KOHO (it takes minutes and there’s no impact on your credit score).
- Fund Your Account: E-transfer money to your new account.
- Activate Credit Building: Go to the “Credit” tab in the app and subscribe.
- Automate It: Ensure you always have enough funds in your “Spendable” balance to cover the monthly fee.
- Watch It Grow: You can track your credit score directly in the app to see your progress.
The Bottom Line
You don’t need to go into debt to build credit. By using KOHO’s innovative tools, you can enjoy the safety and control of a prepaid card while still getting the credit-boosting benefits of a loan. It’s the smartest way to hack the system and get your financial reputation back on track.
Explore more credit building strategies in our guides on Rebuilding Credit After a Consumer Proposal, Guaranteed Approval Credit Cards, and Secure Line of Credit Without Hard Inquiry.
📈 Start Building Credit Today
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