01-10-2013 09:07 PM
Hello everyone! I am currently in the process of rebuilding my credit. I only have one open line of revolving credit showing on my CR and that's my gf's walmart store cc since I am an authorized user, the rest are installment accounts..I'm also an authorized user on her BoA cc, but it isn't reporting. I am strongly considering opening up a secured credit card with a limit of $700 or $800 with my credit union and maybe another one with about $300 with USAA. Does this sound like a good idea or should I just have a higher limit on 1 card..thanks for the help in advance!!
P.S. I am also working to pay off my 3 cc chargeoffs.
01-10-2013 11:03 PM - edited 01-10-2013 11:03 PM
Ideally you want 2-3 of your own, personal tradelines. AU's are often discounted when it comes to internal scoring models and lender underwriting. Some issues in the FICO '08 model to, not sure how they do that verification though (possibly by last name and/or address matching).
The USAA card is a good option, though if I were you I'd strongly consider a BOFA secured card as well for the 1-2-3 rewards package that can be tacked on.
When you're in a rebuilding stage, limits aren't really that important; however, if I had to do it over again and also in your case what I'd do is go BOFA, USAA, CU cards, and then deposit money as you can to the USAA account to get the following benefits:
Anything more than 3 is extraneous really in terms of FICO benefit, and you're better off increasing the line of the USAA card instead of opening any more.
01-10-2013 11:28 PM
01-10-2013 11:36 PM - edited 01-10-2013 11:38 PM
As I understand how the FICO score works, simply put, if you pay your bills ahead of time and stick to your guns on controlled spending, never use up more than 40 percent of your available credit pool and use your cards as much as possible, your score will go up. Essentially, opening a new line of credit increases your available credit pool which in turns betters your CUR, using the cards regularly and paying your bills ahead of time creates positive credit history and not using up more than a limited amount of your credit keeps your CUR from spinning out of control.
To clarify a few points; how many transactions you run through your cards doesn't have any affect on FICO, though I certainly run my financial life through my cards for a whole lot of reasons not related to FICO.
CUR I'm assuming equals something on the lines of "Card Utilization Rate?" The revolving utilization calculation in the FICO algorithm is blind to prior history, it only uses the current balances and limits reported on the revolving tradelines. To that method, it's not new tradelines which factor into this, it's total aggregate limit, and whether that's across one card or one hundred doesn't matter.
The reason I suggested 2-3 cards is for aggregate payment history building; two cards really is sufficient to cover the marker for revolving tradelines in the mix of credit calculation, and a third is potentially slightly better as far as payment history goes, but also gets you closer to the minimum tradelines required to not be a "thin" file which I think most lenders set at roughly 4 tradelines. Have a student loan, or a car / mortgage or something, or pickup a secured installment loan of some sort to round out the number of tradelines (and also for the mix of credit function), but having more than 3 cards really makes no difference from a FICO perspective though I'll admit I'll probably wind up with either 5 or 7 just to make things easier for me managing my reported balances but that is way down the list of priorities in terms of building/rebuilding and nothing to worry about in the initial stages.
End of the day, it really just boils down to acquiring a few credit cards, using them by some amount (so at least they don't get closed or listed as inactive) and simply paying on time every time. That's 98% of the ballgame, and everything else can be fixed over time assuming one's debt doesn't get beyond one's ability to repay.
01-11-2013 06:34 AM
I'm probably gonna go with my cu and deposit 300. They don't do a HP, idk anywhere else I can try. I don't want to risk getting another inq. on my CR right now and get denied credit right now, I was reccently denied for the Capital one secured card. If you guys know of any other good secured cards can you please let me know..thanks!
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