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Should I close my loan shark credit cards for a major bank secured credit card?

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lhcole77
Valued Contributor

Re: Should I close my loan shark credit cards for a major bank secured credit card?

Hmmmm...these are good questions.

 

I would do a google search for your question regarding charge-offs and AAoA. My guess is that they are not included, but I can't speak from personal experience.

 

Did you say that your FP is secured?

Message 21 of 51
Jasir
Frequent Contributor

Re: Should I close my loan shark credit cards for a major bank secured credit card?

I suggest you close both shark cards. Fiscal managment is a huge part of credit rebuilding, and since you've alrerady done the math, you know you are spending too much for the sake of repairing your credit. Your AAoA won't dip too badly seeing as accounts closed in good standing remain on your rport for 10 years. Ten years from now when they fall off you should be well established with prime cards so it won't matter.

 

These are the steps I suggest:

 

1. Bring both shark cards down to a zero balance. Don't close them yet.

2. Apply for Capital One becaue they are generally easier to get. If you don't qualify for their unsecured card get a Capital One secured card.

3. Look into Bank of America secured cards (they also upgrade to unsecured after 12 months); apply for unsecured; if they deny you and your credit is good enough they will immediately counter-offer with the 99/500 card option ($99 down for $500 CLI)

4. Get the Wells Fargo secured card (which can take up to 2 years to unsecure) if you don't get the BOA.

5. Once you have at least one of these cards approved, close both shark cards and start nurturing your new accounts.

 

 



Amex BCE: $2600 - Bank of America Cash Rewards: $4800 - Barclaycard Rewards: Jefferson Collections - Capital One Quicksilver: CO - Chase Freedom: C0 - Merrick Bank: $1400 -
Message 22 of 51
money_talks
Frequent Contributor

Re: Should I close my loan shark credit cards for a major bank secured credit card?

lhcole77 wrote: I would do a google search for your question regarding charge-offs and AAoA. My guess is that they are not included, but I can't speak from personal experience.

 

Did you say that your FP is secured?

 

FP is secured.

 

I did a search and apparently Charge offs are included in the AAoA. Some answers I found were pretty good of what happens when these baddies drop from your credit report.

 

It is factored into your AAoA. Deleting it may be beneficial but your score could take a hit initially.

http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/AAoA-vs-Charge-off/td-p/1827637

 

However, I found in one forum that a user reported his score took a hit when a baddie dropped off but his AAoA remained the same before and after. It was suggested that this was due to something called "segmentation". I won't post the link as I don't know if it's allowed, but here are the responses.

 

I am going to go with " segmentation " then. According to those who better understand it (I really don't yet, it seems a very complex part of scoring), there are twelve " buckets ", or segments, of risk. A big change, like a CO being deleted, may put you into a different one of those 12 buckets or segments, hence the lower score.

Simply put, segmentation is the process of "bucketing" consumers with other consumers that have similar credit reports. So, if you have a charge off you are in a "bucket" with other consumers that have charge offs. This bucket has a ceiling of how high your score can go due to the presence of a major negative (or whatever determining factor FICO decides on). Since that negative is no longer present on the report, you probably were moved from the high end of one bucket and pushed into the lower end of another (better) bucket.

Essentially, you went from being a big fish in a small pond to a small fish in a large pond. The new pond has room for you to grow and get bigger like the other fish around you.

 

 

Jasir wrote: Look into Bank of America secured cards (they also upgrade to unsecured after 12 months); apply for unsecured; if they deny you and your credit is good enough they will immediately counter-offer with the 99/500 card option ($99 down for $500 CLI)

 

Is that "99 down for 500 CL" deal only if you are turned down and have decent credit? I'm guessing I wouldn't qualify as my score is in the lower 600s. That means I would only be able to possibly get BOA standard secured card? According to the BOA website:

  • Credit line $300-$4,900. Your maximum credit line is determined by your individual ability to pay based on the income that you provide and your security deposit.

From what I understand from the statement above, you may be able to get a higher CL than your security deposit if your income is high enough. Have you heard good things on BOA graduating customers in a timely manner?

 

 

I appreciate everyone's help, this is all good stuff.

Message 23 of 51
Jasir
Frequent Contributor

Re: Should I close my loan shark credit cards for a major bank secured credit card?


 

Jasir wrote: Look into Bank of America secured cards (they also upgrade to unsecured after 12 months); apply for unsecured; if they deny you and your credit is good enough they will immediately counter-offer with the 99/500 card option ($99 down for $500 CLI)

 

Is that "99 down for 500 CL" deal only if you are turned down and have decent credit? I'm guessing I wouldn't qualify as my score is in the lower 600s. That means I would only be able to possibly get BOA standard secured card? According to the BOA website:

  • Credit line $300-$4,900. Your maximum credit line is determined by your individual ability to pay based on the income that you provide and your security deposit.

From what I understand from the statement above, you may be able to get a higher CL than your security deposit if your income is high enough. Have you heard good things on BOA graduating customers in a timely manner?

 


No, it isn't just for "decent" credit, "fair" credit is acceptable, but you do have to be invited (and the only invite is when you get denied for a regular unsecured card). The standard BOA secured card CL is (to my knowledge) equal to the amount you use as collateral, but I'd check with a rep to see if they do automatic CLI without the need for further deposit.

 

Yes, from many posts here in the forums, there is ample evidence that Bank of America unsecures in a timely manner, sometimes even before the 12 month time period usually quoted by BOA.

 

Also, don't allow your low 600's FICO discourage you from applying. We know lenders take into consideration more than FICO score; I received my 99/500 with low 600's (perhaps even high 500's) and several baddies (including a bunch of defaulted student loans) showing at the time. BOA pulled Experian for me (if you have a copy of your EX report to view what they will see).

 

Hope this info proves helpful & you are able to get rid of the sharks ASAP.



Amex BCE: $2600 - Bank of America Cash Rewards: $4800 - Barclaycard Rewards: Jefferson Collections - Capital One Quicksilver: CO - Chase Freedom: C0 - Merrick Bank: $1400 -
Message 24 of 51
lhcole77
Valued Contributor

Re: Should I close my loan shark credit cards for a major bank secured credit card?

Another thing to keep in mind is everything that we've shared is based either on personal experience or information we've read on here.

Your experience may be different based on your credit profile, your income and your FICO scores.

Hopefully you're equipped with enough information to make an informed decision. I'm curious to see what happens. Keep us posted.

And good luck!
Message 25 of 51
money_talks
Frequent Contributor

Re: Should I close my loan shark credit cards for a major bank secured credit card?

My Credit One Bank statement closed on the 14th and the new balance was reported to Equifax on the 17th.

 

Credit One = Util 9% (last month my Util was at 95% for this CC)

 

First Premier = (statement closes on the 24th, I will PIF) = Util 0% (last month my util was at 25% for this CC)

 

Questions:

 

1) Once the CC company sends the info to the credit bureaus, does the score update automatically? Or does it take additional days?

 

2) My EXP score last month was 588. Will I see a big improvement in my credit score with the new balances?

 

3) If next month nothing changes in my credit report and I keep exactly the same low Util balances, will I see another boost in score? That would be 2 months in a row with low Util on revolving accounts. Or is this boost in score that should be coming up be a one time deal? Should I wait another month for an improvement in score or should I just apply for the CCs once First Premier posts to the credit bureaus?

 

 

 

Message 26 of 51
lhcole77
Valued Contributor

Re: Should I close my loan shark credit cards for a major bank secured credit card?

First Premier = (statement closes on the 24th, I will PIF) = Util 0% ===> Are you PIF before the statement cuts? That is the only way to get it to report at 0% UTL.

 

1) Once the CC company sends the info to the credit bureaus, does the score update automatically? Or does it take additional days? Scores usually update immediately once the information has been reported.

 

2) My EXP score last month was 588. Will I see a big improvement in my credit score with the new balances? You should see an improvement. Looks like your overall UTL was ~60% last month. If you now have it at ~9% you will see a jump. UTL has a HUGE impact on score.

 

3) If next month nothing changes in my credit report and I keep exactly the same low Util balances, will I see another boost in score? That would be 2 months in a row with low Util on revolving accounts. Or is this boost in score that should be coming up be a one time deal? Should I wait another month for an improvement in score or should I just apply for the CCs once First Premier posts to the credit bureaus? If you are not in a hurry you may as well wait until your score is even higher so that you can get decent CL and APR.

 

 

Message 27 of 51
Creditaddict
Legendary Contributor

Re: Should I close my loan shark credit cards for a major bank secured credit card?

Who is the collection with and balance?

you tried the pre-qual with capital one and got no offers?

I would close First Preimier now and keep Credit One until you obtain at least 1 other card.

If you can't get unsecured capital one then your collection must be with them or they might offer secure card also.

I would check pre-qual for bank of america too.... it might offer secured if nothing else... id do them far before wells.

Message 28 of 51
money_talks
Frequent Contributor

Re: Should I close my loan shark credit cards for a major bank secured credit card?

lhcole77:

 

Yes, I am PIF the FP card before the statement cuts.

 

Are you saying that FICO scores you on how consistent you are with Util? If I decide to wait a little longer before applying, how long should I wait? 

 

Also, just to make sure, FICO determines Util by your active revolving accounts and does not include closed revolving accounts that report a balance, correct?

 

Credictaddict:

 

Why do you recommend closing FP now? Wouldn't it be better to have on my credit report as an active account with 0% Util  when I apply for new credit?

 

I will look into Capital One. Your advice is almost the same as Jasir, see above. Glad you recommend this also.

 

Message 29 of 51
lhcole77
Valued Contributor

Re: Should I close my loan shark credit cards for a major bank secured credit card?

Are you saying that FICO scores you on how consistent you are with Util? If I decide to wait a little longer before applying, how long should I wait? 

 

From what I've read and learned, FICO does not have a virtual memory of past performance with UTL. From what I gather your scores are in the high 500s, correct? It all depends on what you want to apply for. IME, lenders are more apt to approve individuals with higher scores, 620 being the min.

 

Also, just to make sure, FICO determines Util by your active revolving accounts and does not include closed revolving accounts that report a balance, correct?

 

Both open and closed revolving accounts will be factored into UTL. That is why it is so crucial to always close a revolver at 0%.

Message 30 of 51
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