No, using Wealthsimple cards does not affect your credit score.
Wealthsimple cards, such as the Wealthsimple Cash card, are prepaid Mastercard cards. This means they function by allowing you to spend funds that you have pre-loaded into your account, rather than borrowing money. Because they are prepaid, they do not involve credit and therefore, do not report activity to credit bureaus like Equifax or TransUnion.
Understanding Prepaid Cards and Your Credit Score
Credit scores are built and influenced by your borrowing and repayment history on credit products. These include traditional credit cards, loans, mortgages, and lines of credit. Prepaid cards, in contrast, are not credit products. They are a cash management tool where you can only spend the funds you've already deposited.
Here's a comparison to clarify the difference between prepaid cards and credit cards in relation to your credit score:
| Feature | Prepaid Card (e.g., Wealthsimple Card) | Traditional Credit Card |
|---|---|---|
| Nature | Funds you've pre-loaded | Borrowed funds (a line of credit) |
| Credit Check | Not required | Typically required for approval |
| Impact on Credit Score | No direct impact (neither positive nor negative) | Direct impact (positive with responsible use, negative with misuse) |
| Credit Reporting | No reporting to credit bureaus | Regular reporting to credit bureaus |
| Interest Charges | None | Yes, on outstanding balances |
How Credit Scores are Built and Maintained
Building a strong credit score involves several key factors related to managing borrowed money:
- Payment History: Consistently making on-time payments for all your credit accounts.
- Credit Utilization: Keeping the amount of credit you use low compared to your total available credit limit.
- Length of Credit History: The longer your credit accounts have been open and in good standing, the better.
- New Credit: Avoiding opening too many new credit accounts in a short period.
- Credit Mix: Having a healthy variety of credit accounts (e.g., credit cards, car loans, mortgages).
Since prepaid cards like those offered by Wealthsimple do not fall into any of these categories, their use will not contribute to building, improving, or negatively impacting your credit score. They offer a convenient way to manage your daily spending without affecting your credit profile.
