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Valued Contributor
navigatethis12
Posts: 1,854
Registered: ‎01-24-2012

Re: Skipping sub-prime cards...It can be done


Dustink wrote:

I never went the secured card route or the nasty fee based cards. I was a teen with no credit, but my bank gave me an unsecured card with no annual fee. The banker explained to underwriting that I am a good customer with a checking account kept in good standing. That was enough for them to approve me. Then after a year or so they gave me a Visa Signature card with great rewards and a generous limit.

 

My recommendation to somebody with bad or new credit is to build a relationship with a bank. It can help if they see decent account activity in your checking account. The banker can have some pull to get you initially approved. After that, it is up to you to demonstrate your ability to handle the card. Different strategies work for different people, but as a general guide. Keep your balances low when they are reported, pay in full every month, and contact your bank for a limit increase every 6 months.

 

When I got the first card, my goal was to show the bank that I had no problem paying the card no matter how much I charged. I maxed the card every few days and paid it in full shortly after. So each month I had significantly more charges than my actual limit. After having the card for 6 months, I called up the bank and asked for an increase. I told them I needed the limit to cover atleast my average monthly spend. They increased the limit by over 8 times the original limit. Then I cut back my spending and focused on utilization and presenting the best over all credit picture. I proceeded to apply for other cards, and soon had a few other good ones.

 

This is the path I took. Just because it worked for me, does not mean it will work for you. It also creates a thin file and rapid expansion on credit limits will scare off some lenders. So, I wouldn't expect to qualify for a mortgage even with a FICO over 720.


 

I never went secured or fee based either. The people at PNC actually told me never to go secured because they cost money and have your money tied up. They were really helpful in telling me what credit cards to apply for and not to get discouraged. Now I have a great card with them and use it almost all the time. Getting approved was addicting to me though. I opened up Ten or so new accounts in January and February this year.

 

Regular Contributor
sbeasl11
Posts: 122
Registered: ‎07-23-2012

Re: Skipping sub-prime cards...It can be done

First of all, I do not consider my BofA a subprime. Yes, it is secured, but it Graduates to unsecured in 12 months or less. It has rewards added to it. What subprime card gives you rewards?? It auto declined because there was an error on my report I didn't even realize. Thank God, they declined me & took the time to look at my other reports & tell me that my old judgement wasn't showing satisfied at one of the CRA.

My cards, for those like me, who made mistakes don't have outrageous fees associated with them. My point is if there are others who messed up with these awful credit card companies & may be thinking there is no hope to rebuild...there is. This post was to encourage others, not brag that my cards are better than anyone else...

Moderator
Shogun
Posts: 11,007
Registered: ‎04-15-2011

Re: Skipping sub-prime cards...It can be done


Revelate wrote:

That point wasn't specifically directed at you OnTheRebound, my apologies if I gave that impression.  I should've been more careful in the quoting / response.

 

Personally I advocate people approach rebuilding from both directions: cleaning up negatives but also establishing positives immediately too... which usually mandates either secured cards or unsecured rebuilder ones for the majority of people.  The only constant in FICO is that time passes, and as such, it doesn't make mathematical sense to "waste" that time while clearing negatives (which can take a while in some cases) by not getting good payment history re-established as quickly as possible.

 

To paraphrase a romantic movie I actually enjoyed (shocking): when you realize you want to improve your FICO for the rest of your life, you want the rest of your life to start as soon as possible.  Establishing positive tradelines is one of the first steps, though admittedly 10 years from now it won't matter, it might in the short / mid term.

 


I was going to post my opinion on the subject, but I do believe this carries what I was going to say.  Clean and build.  You can't build very well with a dirty report, and a clean report with no positives is almost as bad.   Take time, research.  I think the OP is doing the right thing.  Get the secured card, let it age.  Show good use of it and it will definitely help!


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Established Contributor
CruzImperial
Posts: 863
Registered: ‎07-04-2012

Re: Skipping sub-prime cards...It can be done

I got Discover More without credit history. Had I gotten Citi Forward at that time, I think I could have avoided sub-prime cards in my credit building process.

The more reliable way  for me though is to just start with couple of sub-prime and then jump from there. I think 3rd spree would be prime only this way.

Fico Scores: . Walmart TU 748 . App free since Aug 2013 .

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Regular Contributor
Tommy5746
Posts: 440
Registered: ‎02-08-2012

Re: Skipping sub-prime cards...It can be done

The OP is excited that they are on their way to a healthy credit score and report so lets continue to give them support!! I say CONGRATS on doing the right thing and taking another step towards a healthy report :smileyhappy:

 

Goal: 700 and an Amex Card!

Chicks Dig Guys With Good Credit :smileyhappy:
Regular Contributor
ImprovingYouth
Posts: 154
Registered: ‎09-21-2012

Re: Skipping sub-prime cards...It can be done

@distantarray there is a liability for even secured card, even if they are 100% secured. Working for a bank I can't tell you how many times I've seen CC that are wayyy over balance and get charged off.

Age: 22 //Cards: Chase Freedom, Chase Amazon Visa, Discover IT, CreditOne, CapOne Quicksilver, CapOne Cash, Walmart, Barclaycard, Citibank BestBuy, NavyFederal Visa Signature cashRewards //AAoA: 1 Year 3 Months (but going down quickly :smileytongue:) //CK:692, Sesame:656
Valued Contributor
Dustink
Posts: 2,980
Registered: ‎10-02-2012

Re: Skipping sub-prime cards...It can be done

[ Edited ]

I don't think secured cards are completely bad. They just usually have an annual fee, which I do not totally agree with. They are great for getting you a high limit when there is no other place that will give it to you. I believe there are always other options for a low limit card of like $300. Most banks are willing to risk that much if you have your checking account in good standing for a long time with them.

 

A secured card can be used to fast track your credit building/rebuilding process. This can be done if you have a good chunk of money set aside. For example, you could get a $5000 secured card with okay rewards that carries a low but still present annual fee. If the card is used enough, then the rewards will offset the annual fee.  I bank with US Bank, and I know they offer a few secured cards with decent rewards, such as the Lanpass, Lifemiles, Skypass, and Harley Davidson cards.


The only problem would be that your first large line of credit would carry an annual fee. So if you cancel it later on, your oldest account will get closed and your credit score will drop.

 

 

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:21    


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Moderator
Revelate
Posts: 6,798
Registered: ‎12-30-2011

Re: Skipping sub-prime cards...It can be done

[ Edited ]

Dustink wrote:

I don't think secured cards are completely bad. They just usually have an annual fee, which I do not totally agree with. They are great for getting you a high limit when there is no other place that will give it to you. I believe there are always other options for a low limit card of like $300. Most banks are willing to risk that much if you have your checking account in good standing for a long time with them.

 

A secured card can be used to fast track your credit building/rebuilding process. This can be done if you have a good chunk of money set aside. For example, you could get a $5000 secured card with okay rewards that carries a low but still present annual fee. If the card is used enough, then the rewards will offset the annual fee.  I bank with US Bank, and I know they offer a few secured cards with decent rewards, such as the Lanpass, Lifemiles, Skypass, and Harley Davidson cards.


The only problem would be that your first large line of credit would carry an annual fee. So if you cancel it later on, your oldest account will get closed and your credit score will drop.

 

 


Very nice post; however, simply closing your oldest account doesn't have any immediate impact unless your revolving utilization substantially changes after closing the tradeline, or if you fall below the magic number of revolving tradelines which appears to be like two and may only count open tradelines (this is theory based on installment loan anecdotal evidence, and not based on absolute fact).

 

AAoA calculation is actually (and personally I think it's ludicrous but FICO is smarter than me) the time since opening an account, regardless of whether that account is open or not.  No kidding, someone could open 9 accounts, close them a month later, and 9 years down the road have 9 x 9 years AAoA for those 9 tradelines to offset whatever is done later.  

 

The biggest drawback I see is that account stops aging, and FICO also appears to like long individual tradelines (tradeline seasoning, the obvious boundary is six months, but probably there's further ones in the future too, maybe one year, maybe three years, etc) and once you close a card, that also puts the line in the sand as to when the 10 year clock starts ticking before the bureaus drop it off your report.

 

Personally I think that reasonable AF's are trivial  compared to building my credit profile (my squeel point appears to be $99 dollars, I don't know why a three digit AF bothers me so much) and most secured cards are in the 20-40 range.  That compared to even a fraction of a percent on a mortgage loan (my goal) is something I'll happily pay for the next several decades assuming I keep the BOFA one at any rate post graduation without PCing it to something else.   Actually the only $0 AF one I know of DCU's secured, though I'm certain there others.


Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
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Valued Contributor
Dustink
Posts: 2,980
Registered: ‎10-02-2012

Re: Skipping sub-prime cards...It can be done

[ Edited ]

 "Personally I think that reasonable AF's are trivial  compared to building my credit profile (my squeel point appears to be $99 dollars, I don't know why a three digit AF bothers me so much) and most secured cards are in the 20-40 range.  That compared to even a fraction of a percent on a mortgage loan (my goal) is something I'll happily pay for the next several decades assuming I keep the BOFA one at any rate post graduation without PCing it to something else.   Actually the only $0 AF one I know of DCU's secured, though I'm certain there others"

I am against any annual fee. I feel the bank should be paying me for my business, not the other way around. They make a killing off of merchant fee's which the merchant passes to us, so they shouldn't be shaking us down for another $25 per year. I have the US Bank Flexperks card which carries an annual fee of $49, but the fee gets waived with high enough annual spending so I tolerate it. Also, if the bank tried to charge me the fee at the end of the year the retentions depart would be hearing from me. Which is an idea for any of you. If you don't want to pay an annual fee. Just call the bank and ask them to waive it. There is always a chance that they will want to keep you enough to waive the fee.

 

 

I think no matter how you look at it, closing your first oldest and likely largest line of credit will lower your score. Utilization will jump. I have noticed that the ideal total utilization is 1-5% on one card each month. Anything above 5% takes a few points off, then 10% even more, ect.

 

The biggest drawback I see is that account stops aging, and FICO also appears to like long individual tradelines

Bingo...that is how people get into the 800 club. Long, long, long active; well maintained accounts.

Also, future creditors not necessarily the computers creating numbers will wonder why you closed the tradeline.

 

No kidding, someone could open 9 accounts, close them a month later, and 9 years down the road have 9 x 9 years AAoA for those 9 tradelines to offset whatever is done later. That would destroy AAoA at first and rack up some major inquires, I would not recommend that. Although, that is an interesting idea.

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:21    


     $14k          $8.5K          $7.5k          $7.5k         $6.5k             $6k             $5k            $5k             $5k              $5k           NPSL       @ 0%
Valued Contributor
maiden_girl
Posts: 1,773
Registered: ‎12-29-2011

Re: Skipping sub-prime cards...It can be done

I think a lot of people can avoid secured cards if they start out correctly. I never started out with a secured card either. I didn't really like the idea...so I applied all around and eventually ended up with a unsecured Cap1 card at $500 CL with no history whatsoever. It can be done. After a while, you can break away from toy limits by applying to other creditors to see who will give you a change.

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