All Baddies are FINALLY Gone! Which credit cards and strategies are best now?

[Anonymous]

My credit reports and FICO scores are finally turning the corner and ALL baddies will be gone from my credit reports in January 2011! I went through a bankruptcy in 2003 and my credit went into the toilet (from high 700’s to the low 500’s). Though everything left on my credit reports after January 2011will be positive there will only be a few accounts remaining in my file (is this the definition of a “Thin File”?). Below is the info in my credit reports:

TU - 739

• 4 school loans from 1994 no delinquencies (current balances total $40,000)
• 1 Household bank card $320 limit with $20 balance (opened 2008)
• Gym membership installment loan for $1400 with $100 balance opened in 2007 (will be paid and closed in December)
• 1 closed Macy’s account with $0 balance and no derogatory notes (opened in 1990 and due to fall off soon I believe because of its age)
• 1 paid judgment for $5,000 from 2001 due to age off CRs in January 2011
• Zero inquiries

EQ - 721

• 4 school loans from 1994 no delinquencies (current balances total $40,000)
• 1 Household bank card $320 limit with $20 balance (opened 2008)
• Gym membership installment loan for $1400 with $100 balance opened in 2007 (will be paid and closed in December)
• 1 paid judgment for $5,000 from 2001 due to age off CRs in January 2011
• Zero inquiries

A major priority for me is to wipe out my student loan debt over the next 2 - 3 years. I’d like to strengthen my credit profile and eventually get my FICO scores closer to the 800 range. I plan on purchasing a home at the beginning of 2013 (unfortunately I think I will have to wait that long because of an unemployment gap in my work history). I plan to finance a car at the beginning of 2012 (the loan will be around $10,000).

The MyFICO simulator indicates that my FICO scores will increase if I add another line of revolving credit and I would like to have more respectable credit card limits (my only credit card has a low $300 limit presently). My plan is to apply for 2 or 3 “good” credit cards in February 2011 (once the judgment falls off my credit reports so I have no baddies at all). I plan to carry a very low or zero balance on any credit cards I get.

I have no idea which credit card companies I should apply to or what companies are likely to give me nice credit limits despite the tiny $300 limit my only credit card has at present. Even though my overall credit scores are not bad and my credit file is over 15 years old I wonder if the fact that my only credit card has such a low limit will trigger some type of red flag with lenders. Are there specific cards anyone would recommend I apply for? Does anyone have any general strategies or advice to offer as I strengthen my credit profile (aside from live well below my means)?

Thanks in advance

[Anonymous]

I say wait another few more months until that judgement falls off and then you will in in very prime position  for a nice card.

[poet]

I'm in a very similar position. I'm down to PFDing a couple of collections and have (as of today!) paid off ALL outstanding consumer debt (a small loan plus the last of the credit card debt). After the PFDs, I will only owe student loans (in deferral because I'm still in school) and the mortgage (a very manageable small payment).

(YAY US!)

Because I'd hoped to pay cash for a newer used car, I might be waiting another six months to do so. My car really is making me nervous, but the idea of a car note plus insurance makes me even more so at the moment. I also am hoping for a credit card with a small $2K-5K line for business travel expenses, which can wreck a tiny budget.

Because your timeline is 2-3 years down the road, you should be able to upgrade to a better card in the next several months. When, exactly, I have no idea. I can tell you that your car score(s) differ from your regular consumer FICO/BEACON scores and that auto lenders generally will go with lower scores than, say, mortgage lenders. I bought my house exactly two years ago, just before the predatory lending reforms came down, and was told to get up over 700 with rapd rescoring, and still had to go through some bottom-feeding lenders before I could get financed--and that was with Countrywide. Still paying an *insane* 2+ points above the going rate, but hope to refinance very shortly. Check with a buyer's agent--just let him/her know you're not ready to buy yet, but wanted to know the general criteria (particularly minimum FICO score, debt-to-income ratio, and interest rate tiers) for  30-yr. fixed and 15-yr. fixed loans. He or she may punt you to a lender. Another option is to call a bank or credit union directly. Even better is to go in and ask your banker in person.

For us, I think it's best to sit on the sidelines for a few months. Keep the cards under 10% of actual balance to show you're alive. My new approach is: If you can make do without spending for a day, stay home. If you can make do without spending for a week, do it. If you can wait two weeks, wait a month until payday. If you can pay it off this payday, do it. If you can wait all this time for a car, you can wait six more months. So... I'm thinking you can wait a few more months in order to reap the greatest possible benefit of a "real" credit card. If you feel weak, know that I'll be waiting along with you.

You can do it!

--poet

[Anonymous]

Hi pumbaablah I appreciate your response. I am already on board with your suggestion and I will not apply for any new credit until the judgement drops off my CRs in January. What I'm trying to figure out is which banks are likely to give me a nice limit on a new credit card despite my thin file and current low limit credit card. I'd also like to know if anyone has any strategies they would recommend I use as I work to join the ranks of those with "good" credit.

[Anonymous]

Hi Poet, thanks for your reply. Because you have already purchased your home and have multiple credit cards it seems you are a few steps ahead of me... At this point the idea of carrying any aditional debt is also very unappealing to me. The auto loan I will get next year will be for a used car with a large cash downpayment. I will likely pay it off  early but I want the auto loan next year to improve my credit score for the auto industry so that when it is pristine when I finance a better car in the coming years.

When I apply for 2 - 3 credit cards in February the cards and inquiries will have time to age so that they don't negatively impact my ability to get a mortage in 2013 (and they will raise my overall FICOs). I don't want to waste credit inquireis with lenders who won't approve my application or will offer more cards with micro-limits so that why I asking you guys for advice and guidance here.

I appreciate your words of encouragement and I look forward to a few years down the line when we both have awesome FICO scores and near perfect credit reports...

[Uniqua]

Local CUs are the best bet.  You don't even need to wait until your judgment is deleted.   They are more willing to work with you than the big boy banks.  People can make suggestions as to which banks will approve you, but remember that those are just "suggestions."  All banks are not the same and what may get one person approved may get you denied.  All depends on what time of day or what day of the week the bank changes their underwear.

Now, I am going to give you MY suggestions.  Barclays and Discover.  Barclays has a nice AmEx CC which I like a lot (received $12,500 CL on app), and there are many success stories from those who were denied for one of their CCs but called backdoor and got approved.  Discover has been pretty generous with their CLs lately from what I've been reading.  I would hold off on BofA, AmEx, Chase and Citi until you've built up some positive revolving debt payments.  As always, make note of those who Blacklist; so be cautious on applying with those who were IIBK and/or who had a judgment against you.  All the best! 

[Anonymous]

I'm not sure Discover will approve a card at this time.   I have a 670 and applied for a Discover the other day and got denied because I have a paid off repo from almost 6 years ago.   It stated the reason for denial as repossession.   I think the OP filing for Bankruptcy would probably get a denial.   Bankruptcies stay on your report for 10 years, I believe, just like judgements do. 

(However, my paid repo did not stop my mortgage from going through this winter.  At a 661 middle score I got a 5.625% interest rate.)

Good luck!

[Uniqua]

I'm not actually sure about Discover myself, but lately I have seen others get in with baddies on their CRs (none recent though).  Dismissed Ch 7 & 13 BKs stay on your CR for 10 years.  Discharged Ch 7 BKs stay on for 10 years.  Discharged Ch 13 BKs stay on for 7 years.  Judgments (civil) stay on for 7 years (may be 10 for tax liens, etc.).   Not sure about repos.  Barclay's has approved with baddies, but I do know that they like to see a payment history with revolving debt.

You're waiting on a short sale so you can close on 2/11/10?  Couldn't resist.  LOL

[Anonymous]

Hi Uniqua, your post provided exactly the type of specific info I was hoping to get in reponse to my original post. Before I started browsing the MyFICO forums I had never heard of Barclays but from what I gather  they seem well regarded. In fact, I almost wonder if getting a Barclays card right away might be out of my reach?

I am not currently a member of any CU but I will definitely join one or two ASAP and apply for a credit card with them in January or February once the judgement falls off my reports. Now I will have to figure out which CUs I am eligible to join and which ones won't mind my limited revolving credit line.

Everyone please feel free to make more suggestions or let me know about your experiences with specific credit card issuers.

Thanks!

[Anonymous]

Hi moonlitnight, I appreciate your concern about my Discover application being declined due to my bankrupcy. The good news is my bankruptcy has run its course and legally aged off my credit reports (with no action required on my part). I have no late payments or derogotory notes at all on any of my reports (except for the paid judgement which will fall off in January).

My biggest concerns are not having enough revolving credit, having a low credit limit and having a thin credit file overall. If anyone can suggest credit card issuers who might be likely to offer nice credit limits to someone in my situation please post.

Thanks!

Every time I think about having "Good" credit again I want to dance a little jig...lol