Pro's & Con's of getting a Credit Card when rebuilding Credit

[bruiseviolet]

Here is my dilemma.  Still fixing my credit- score should be right around 600 FICO.  (just had a BUNCH of medical's fall off- and haven't gotten new score yet- but was 587? previously.)  

We are needing to get a loan of roughly $30-$40k, before February- or ASAP.  LOL.  However neither one of us have ANY credit cards or anything- and every score simulator we've used pretty much shows the only thing left we can do to raise scores anymore, is to have some open lines of credit.

Now, I understand applying for a new card will drop scores.  How long until it would bring them back up?  I would hate to apply for a card- have the score drop and then get the phone call that what we need is available- only my score would be too low because of the drop.  However, if It's going to end up being January/February, I would like to get my score up as much as possible by then.  

I realize it's a bit of a gamble.  Just trying to weigh my options.

(1)  How much of a score decreas will applying for new credit have?

(2)  How long until having the CC [assuming it's paid on time etc..] before it will raise my score?

(3)  If I do go this route- am I best to apply and get ONE card?  Or should I get 2 or 3?  Will having more make any difference?

[nuggets321]

In my experience, I took an ititial hit for the inquiry, but it rebounded + some about the six month mark ... I would imagine another slight bump at the 1 yr mark...Capital One MAY be an option for you, they do have a "pre-qualify" link on their site ... they worked out for me in initially rebuilding, but YMMV. I have learned that you need to have at least ONE credit item reporting for FICO to generate a true score

[JM-AM]

---

@bruiseviolet wrote:

Here is my dilemma.  Still fixing my credit- score should be right around 600 FICO.  (just had a BUNCH of medical's fall off- and haven't gotten new score yet- but was 587? previously.)  

We are needing to get a loan of roughly $30-$40k, before February- or ASAP.  LOL.  However neither one of us have ANY credit cards or anything- and every score simulator we've used pretty much shows the only thing left we can do to raise scores anymore, is to have some open lines of credit.

Now, I understand applying for a new card will drop scores.  How long until it would bring them back up?  I would hate to apply for a card- have the score drop and then get the phone call that what we need is available- only my score would be too low because of the drop.  However, if It's going to end up being January/February, I would like to get my score up as much as possible by then.  

I realize it's a bit of a gamble.  Just trying to weigh my options.

(1)  How much of a score decreas will applying for new credit have? 

(2)  How long until having the CC [assuming it's paid on time etc..] before it will raise my score? 

(3)  If I do go this route- am I best to apply and get ONE card?  Or should I get 2 or 3?  Will having more make any difference?

---

Just a simple response to your questions. Your mileage on score decrease and score increases will vary from one person to another. Usually the recovery process takes about 6 months to a year. 

But the good news is in your situation there is a possibility that applying and getting a CC will give you an increase in scores instead of a decrease since you have no revolving history. Just have to remember the INQUIRY for credit will ding you which is usually very minimal. 

I am unsure if this will be feasible for you to do either way. The time line and increase in scores IMO just isn't enough time since you are still trying to fix a few baddies.

The question to ask yourself would be what if you get scores high enough to where you feel you would get loan, but are turned down?

Do you have another solution if that is the case?

[bruiseviolet]

So if it takes 6 months before it will give me a score increase- and we need tthe loan by February (which is 5 months) I don't know if we should do it or not.  Worse case is our score doesn't increase and we end up paying a higher interest rate.  We already qualified for what we need- even with our pathetic scores----  oh to do it or not. LOL 

I've heard some people say it took 3 months, others say 3 weeks- and others like you say 6+ months.....  such a gamble, I just don't know.....

[bruiseviolet]

---

@JM-AM wrote:

---

@bruiseviolet wrote:

Here is my dilemma.  Still fixing my credit- score should be right around 600 FICO.  (just had a BUNCH of medical's fall off- and haven't gotten new score yet- but was 587? previously.)  

We are needing to get a loan of roughly $30-$40k, before February- or ASAP.  LOL.  However neither one of us have ANY credit cards or anything- and every score simulator we've used pretty much shows the only thing left we can do to raise scores anymore, is to have some open lines of credit.

Now, I understand applying for a new card will drop scores.  How long until it would bring them back up?  I would hate to apply for a card- have the score drop and then get the phone call that what we need is available- only my score would be too low because of the drop.  However, if It's going to end up being January/February, I would like to get my score up as much as possible by then.  

I realize it's a bit of a gamble.  Just trying to weigh my options.

(1)  How much of a score decreas will applying for new credit have? 

(2)  How long until having the CC [assuming it's paid on time etc..] before it will raise my score? 

(3)  If I do go this route- am I best to apply and get ONE card?  Or should I get 2 or 3?  Will having more make any difference?

---

Just a simple response to your questions. Your mileage on score decrease and score increases will vary from one person to another. Usually the recovery process takes about 6 months to a year. 

But the good news is in your situation there is a possibility that applying and getting a CC will give you an increase in scores instead of a decrease since you have no revolving history. Just have to remember the INQUIRY for credit will ding you which is usually very minimal. 

I am unsure if this will be feasible for you to do either way. The time line and increase in scores IMO just isn't enough time since you are still trying to fix a few baddies.

The question to ask yourself would be what if you get scores high enough to where you feel you would get loan, but are turned down?

Do you have another solution if that is the case?

---

We already have been approved for the loan- even with our horrible scores.  We are working to get our scores up- and also getting them up will give us a much lower interest rate.  If the ding is only a few points for the inquiry- I don't see that it will make THAT much of a difference.  We are still working on cleaning things up- I sent out 20 dispute letters on colleciton accounts last week- so scores will go up even if a few come off (which most of them should- ) and the rest will do PFD if they are verified as mine.  So that also would bring scores up before February.

[RussianPassion]

I had no credit cards or open accounts for a while. My scores were dancing around low 600's. I had multiple CO's and CA's TLs. I got 300CL card from Capital One and the moment it hit my report, my scores went up by 50. Since then I got another Capital One card with 1000CL that has not reported yet. I expect another bump in the scores. If you dont have any credit cards and no recent inquaries, getting a single card will bump your score as "Types of Credit" and "Available Credit" are a part of scoring algorithm. If I were you, I would look at Capital One preapprovals.

[JM-AM]

---

@bruiseviolet wrote:

So if it takes 6 months before it will give me a score increase- and we need tthe loan by February (which is 5 months) I don't know if we should do it or not.  Worse case is our score doesn't increase and we end up paying a higher interest rate.  We already qualified for what we need- even with our pathetic scores----  oh to do it or not. LOL 

I've heard some people say it took 3 months, others say 3 weeks- and others like you say 6+ months.....  such a gamble, I just don't know.....

---

Personally I don't think you will lose any points and a better opportunity to gain a few points. Since you don't have any revolving credit it usually gives your credit score a boost. But Im not the one controlling that computer that sets the scores! lol

[Anonymous]

We also had NO credit cards and we are just starting to rebuild.  We now have 3 CCs --- BUT, they haven't started reporting to the CRAs yet.  EVERYTHING takes so much time.  We still have no FICO score yet! 

But, regarding the inquiries -- when you are starting from having NO CCs at all, the inquiries are the least of your worries.  Its the waiting on the CCs to start reporting and gaining a score from the reports, this process is v-e-r-y slow. 

I hope you will see some good increases between now and February but, I'm thinking you should wait till June or July to REALLY see the improvement you're hoping for.  I'm just judging by how slow everything is moving along for us.  Hopefully, YMMV and will vary in your favor! 

Best wishes!

[llecs]

OP, what's the loan for? Is it secured by anything?

I'd get a card, but I'd get a secured card so I could set my limit and minimize inquiries. As someone mentioned, inquiries are the least of your worries per scoring, but under a manual review, it could be an issue, along with the new credit reporting. YMMV based on lender. But I'd personally do it for one or two CCs max and I'd secured them. Per FICO, I'd guess an initial net gain if they report from having 0 CCs reporting, with small increases over the next few months.

[bruiseviolet]

---

@llecs wrote:

OP, what's the loan for? Is it secured by anything?

I'd get a card, but I'd get a secured card so I could set my limit and minimize inquiries. As someone mentioned, inquiries are the least of your worries per scoring, but under a manual review, it could be an issue, along with the new credit reporting. YMMV based on lender. But I'd personally do it for one or two CCs max and I'd secured them. Per FICO, I'd guess an initial net gain if they report from having 0 CCs reporting, with small increases over the next few months.

---

I'm embarressed to say, so I didn't come right out and say it.  Our original plan was to save and get credit in check for a mortgage- however due to extenuating circumstances, we will no longer be able to live in the home we are in now (the owners are being foreclosed on) after February of next year.  Due to our family needs and current situation and lots and lots of prayer- we have decided that purchasing a newer, used, mobile home will make the most economic and emotional sense for our family vs. getting another 12 month + lease on a small apartment (We can purchase a mobile home even with lot rent that's nice and more square foot- than we can even think about renting somewhere comprable in the area we live in.)  Because our older kids are in middle school- moving out of the area is simply not an option for us at this point.  So that's why the loan is only for $30-$40k.  We've already been approved- just will get a lower interest rate and a lower down payment the more our scores go up.  

**edited for a grammar error