Should I cancel my secured card?

[TampaJim]

Hello,

I have a BK7 discharge in Feb14.  I got a USAA secured card before I started reading this forum.  I put $500 in a CD as security for this card.  I can add to this amount to increase my credit limit whenever I want.  I was planning on adding $500 a month to the card to continually increase my limit.  I can do this up to $5000.  A couple of things about the USAA secured card.  It never graduates.  It does not report as a secured card (reports as USAA Savings Bank credit card).

I was planning on following Soulmaster's plan.   I am currently in Pre-Step 1.  I have sent out letters to all three of the CRAs, and I am waiting for the return receipts.

Here is my main question.  How bad is it going to look on my CRs to have a card that is closed after 1 or 2 months?

It appears that Discover is the one that really penalizes for secured cards.  Should I just jack up my credit limit to $3000 over the course of 6 months, and then cancel it? 

Right now, the only credit lines that I have open is a Student Loan with perfect payment history, and this USAA card.  I am planning on applying to Credit One 15 days after I receive the CMRRR receipts back from the CRAs.  I have opened an account at NFCU, and I will be going to open a $1000 secured loan with them once I receive the Credit One card.

I am just really confused about what to do with this secured USAA card.  I welcome any input into this matter.

Thanks,

TampaJim

[SoulMaster]

TJ, 

I'm sure quite a few posters would tell you to leave it open.  Me?  I'd just kill it now and rip-off the proverbial band-aid and close it in the near future (though probably not immediately).

I'd like to see you get the Cred1 and Cap1 opened (leave navy alone for now, except use them as your primary bank to build a strong relationship) before you kill it.  In other words, if it's not costing you any $, I'd kill it in a couple months or maybe in a year.

You can leave it open, but your scores will be slightly inflated because we can safely assume that they'll take an AAoA hit when you close the account (which is probably inevitable in the long-term).  The longer it stays open, the bigger the hit you'll take when you close it.

As for "It does not report as a secured card"; until I see a full-on tri-merge (or "for creditor use only" report) with all the codes attached to prove this, I wouldn't believe that.  

     Note: I haven't seen one w/ this card.  

     Note 2:  To the best of my knowledge You CANNOT get your full credit report anywhere online.  

In other words, just because what you're looking at doesn't say it's secured, doesn't mean all reports don't say that.  As an alternative example, a lot of people think "store cards" a.k.a "retail cards" don't list as such on a CR either.  They do; but people don't know how to read a full report (or ever see one).

Here's an example of the codes most people don't know about:

http://www.freddiemac.com/learn/lo/creditreport/lo_credrpt.html

Collateral (on this report) would be listed in the "Trades" section.  If collateral is not null, it's a secured TL.  Just some food for thought.

Cheers,

-SM

You have some stuff in your siggy, too.  Check form 12277 to get the tax liens removed, and get someone to execute a short-sale on the property, lest you wait eons for the bank to forclose.  <--- I think I told you both of these things before.

[ezdriver]

Only you can decide. Use all feedback and act accordingly.

If I were you, I would keep and use it until your credit has fully recovered to the point where dropping one card won't significantly impact your overall credit profile. My bk7 discharge was less than one year ago and I have rebuilt my own credit profile starting with three secured credit cards and one secured installment loan. There is no single path to rebuilding one's credit profile. 

By the way, none of my three secured credit cards indicate "secured" in my trimerge credit report. Also, an underwriter has reviewed my credit report for mortgage app processing and approved me without any comment related to "secured". The claim that having secured cards vs unsecured cards are frowned upon by underwriters is simply a myth.

[TampaJim]

Thanks to you both for the advice.

I guess I'm going to add $1500 to it, and keep if for at least 6 months.  This will give me a $2000 credit card on paper.  This card has a $35 annual fee, so I def won't keep it long enough to have to pay that again.

It seems like the real test will be the Discover Card application.  I will still apply for the Credit One card sometime within the next month.  I will follow that up with a $1000 secured loan at NFCU.

I will sit back for 5 months using less than 10% of the available credit on the USAA secured card and the Credit One card.  Then I will apply to Cap One.  When I receive the Cap One unsecured card, then I will probably close out the USAA secured card.

Then 6 months later I can apply for the Discover.

I will keep you guys informed with my journey as I go...

TampaJim

[ezdriver]

---

@TampaJim wrote:

Thanks to you both for the advice.

I guess I'm going to add $1500 to it, and keep if for at least 6 months.  This will give me a $2000 credit card on paper.  This card has a $35 annual fee, so I def won't keep it long enough to have to pay that again.

It seems like the real test will be the Discover Card application.  I will still apply for the Credit One card sometime within the next month.  I will follow that up with a $1000 secured loan at NFCU.

I will sit back for 5 months using less than 10% of the available credit on the USAA secured card and the Credit One card.  Then I will apply to Cap One.  When I receive the Cap One unsecured card, then I will probably close out the USAA secured card.

Then 6 months later I can apply for the Discover.

I will keep you guys informed with my journey as I go...

TampaJim

---

I recommend that you put a reminder in your calender to check back with USAA at the six-month mark and inquire about the possibility of having your secured card be "graduated" to an unsecured one. All the best with your rebuilding efforts.

[TampaJim]

EZ,

Thanks.  That's a good idea.  I have had my car insurance with them for several years with it autodrafting from my checking account...never late.  Maybe they will take into account my payment history with them on that one.  Either way, I am soooo relieved to have a fresh start with my BK7.    This forum is an invaluable tool.  The real-file examples that everyone shares here really eleminates the mystery behind credit scores.  I feel 100% sure that I will have excellent credit within the next couple of years. 

TampaJim

[TampaJim]

Since I'm keeping this card for between 6-12 months, then I went ahead with my plan to increase the credit limit.  This was very easy to do online, by simply adding $500 to my CD which is used as security for this card.  Within 5 minutes, my card reflected the CLI to $1000.   I can use this same method to increase my limit up to $5000.  Hopefully this higher credit line will look good on my report when I start applying for unsecured cards.

I just recieved my CMMRR from each of the 3 CRAs on Friday and Saturday of last week, so I will be applying for my first unsecured card in 2 weeks.

TampaJim

[grassfeeder]

I would slow your roll with apping for Discover at the 6 month mark.  Not many people have had much success with that.

I would skip the Credit One card as well and go for a Capital One card.  Better card, better terms.  Once you have a Cap One card, I'd cancel the secured card.  The longer you keep it the longer you're tying up liquid capital needlessly.  If you're in NFCU, app for their CC at the 6 month mark after getting Cap One and using it wisely.  You should then have clean reports, 2 active, good cards at the 6 month mark.  Not half bad.

[TampaJim]

Thanks for the input.

I am really considering not doing the Credit One card at all.  I like your idea.  Maybe I will use the Captial One preauth option that doesn't do a hard pull to see what they will give me.  Then I will let the Cap One and the secured USAA run together for 6 months before hitting up NFCU.  I have already switched my paycheck to direct deposit with NFCU, and I am planning on using them for the $1000 secured credit builder loan once I have an unsecured credit card in my wallet (hopefully it will be Capital One).

Having the money tied up on the secured USAA doesn't bother me.  I still plan on adding to it until I cancel it.  I will def cancel it sometime between 6months and a year.  Especially if I can get an unsecured NFCU card to go along with my first unsecured card.  I am trying to build my banking relationship with NFCU since they seem to be the most generous with post BK credit.

TampaJim

[Lechte]

---

@SoulMaster wrote:

TJ, 

I'm sure quite a few posters would tell you to leave it open.  Me?  I'd just kill it now and rip-off the proverbial band-aid and close it in the near future (though probably not immediately).

I'd like to see you get the Cred1 and Cap1 opened (leave navy alone for now, except use them as your primary bank to build a strong relationship) before you kill it.  In other words, if it's not costing you any $, I'd kill it in a couple months or maybe in a year.

You can leave it open, but your scores will be slightly inflated because we can safely assume that they'll take an AAoA hit when you close the account (which is probably inevitable in the long-term).  The longer it stays open, the bigger the hit you'll take when you close it.

As for "It does not report as a secured card"; until I see a full-on tri-merge (or "for creditor use only" report) with all the codes attached to prove this, I wouldn't believe that.  

     Note: I haven't seen one w/ this card.  

     Note 2:  To the best of my knowledge You CANNOT get your full credit report anywhere online.  

In other words, just because what you're looking at doesn't say it's secured, doesn't mean all reports don't say that.  As an alternative example, a lot of people think "store cards" a.k.a "retail cards" don't list as such on a CR either.  They do; but people don't know how to read a full report (or ever see one).

Here's an example of the codes most people don't know about:

http://www.freddiemac.com/learn/lo/creditreport/lo_credrpt.html

Collateral (on this report) would be listed in the "Trades" section.  If collateral is not null, it's a secured TL.  Just some food for thought.

Cheers,

-SM

You have some stuff in your siggy, too.  Check form 12277 to get the tax liens removed, and get someone to execute a short-sale on the property, lest you wait eons for the bank to forclose.  <--- I think I told you both of these things before.

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Closing CC's does not affect your AAoA...not for 10 years anyway.   All accounts..closed or open are factored into your AAoA (excluding PR's and Collections).