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In Rehab Program with Direct Loans; How to Build Credit in the Meantime?

Hi, completely new to myFICO. I've been browsing the threads and I couldn't find anything to answer my question, so here's my first post.

 

A little background:

 

Due to losing a job/personal issues, I defaulted on my $13k student loan with Direct Loans. I've already entered into the rehab program and made my first payment. I'm looking to eventually purchase a new car after finishing out the rehab program. What I'm curious about is how I should build credit while I'm still techincally "defaulted" on my student loan. Am I even allowed to apply for a secured CC? I am going back to school and paying tuition out of pocket for now, and I am in a much better state financially than I was when I let my original loan go into default. I'd just like to be in the best possible place coming out of rehab, and I figure I have 10-12 months to do so.

 

Any advice?


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Re: In Rehab Program with Direct Loans; How to Build Credit in the Meantime?


martinsoka17 wrote:

Hi, completely new to myFICO. I've been browsing the threads and I couldn't find anything to answer my question, so here's my first post.

 

A little background:

 

Due to losing a job/personal issues, I defaulted on my $13k student loan with Direct Loans. I've already entered into the rehab program and made my first payment. I'm looking to eventually purchase a new car after finishing out the rehab program. What I'm curious about is how I should build credit while I'm still techincally "defaulted" on my student loan. Am I even allowed to apply for a secured CC? I am going back to school and paying tuition out of pocket for now, and I am in a much better state financially than I was when I let my original loan go into default. I'd just like to be in the best possible place coming out of rehab, and I figure I have 10-12 months to do so.

 

Any advice?


Sure. There's nothing in the rehab policy that precludes you from getting new cards. I got two secured cards while still in rehab, in hopes that by the time rehab ended I'd have some good tradelines showing on my credit report.

 

What else is showing on your credit report? Any tradelines that are in good standing? Revolving accounts, or an auto loan, maybe?

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Re: In Rehab Program with Direct Loans; How to Build Credit in the Meantime?

I have an auto loan that I first took out in 2009, and paid off fully about four months ago. I'm in the process of checking my credit score right now to see what exactly is on there. I've never taken out a credit card, have been with the same bank for...eight years now? I know when I went to take the auto loan out I had a collections negatively reporting on my credit that was actually for my father (long story) that has since been resolved. 

 

I'm a total credit newbie; we actually weren't even taught anything in high school about building credit/mainting a good credit score. Should I apply for a secured card with the bank I'm currently at? 


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Re: In Rehab Program with Direct Loans; How to Build Credit in the Meantime?

UPDATE: I checked my score...FICO has it as 523, which for someone having basically no credit history and a student loan in default, isn't that bad. I do have two collections showing on there, both of which are not for me; they're for my dad. They're only reporting on TU, so I've gone on and disputed them. They were sent to collections in 2009; when i was still a senior in high school, and are for unpaid medical bills. As a dependent at the time, I don't think I should have been responsible for paying those, and had no knowledge of the bills anyway.


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Re: In Rehab Program with Direct Loans; How to Build Credit in the Meantime?

Yeah, that's higher than what I started with, so not disastrous.

 

Were you over 18 at the time? You might have still been responsible even if you were a dependent.

 

Where do you bank? It's good to try to get into a bank that will eventually graduate your secured card to an unsecured version. But that's not always easy with a low score. I banked with Wells Fargo for close to 12 years and they flat turned me down for a secured card at first. I ended up going with Orchard (now Cap One) until I finished rehab. At that point my scores were high enough WF had no problem approving me.

 

I've heard good things about credit unions, if you're a member. And WF and Bof A are cards that will enventually graduate.

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Re: In Rehab Program with Direct Loans; How to Build Credit in the Meantime?


InvincibleSummer3 wrote:

Yeah, that's higher than what I started with, so not disastrous.

 

Were you over 18 at the time? You might have still been responsible even if you were a dependent.

 

Where do you bank? It's good to try to get into a bank that will eventually graduate your secured card to an unsecured version. But that's not always easy with a low score. I banked with Wells Fargo for close to 12 years and they flat turned me down for a secured card at first. I ended up going with Orchard (now Cap One) until I finished rehab. At that point my scores were high enough WF had no problem approving me.

 

I've heard good things about credit unions, if you're a member. And WF and Bof A are cards that will enventually graduate.


I was 18, but I had no knowledge of these medical bills at all. Hopefully either TransUnion will work with me or I'll have my father pay them off. They're minor, only $300. But I have zero credit really, so it's not helping.

 

I bank with a local bank, and that's who I had my car loan through as well. I'm going to meet with a PB on Friday to discuss my options. I do know the SCC they offer "graduates" in a year to a regular CC. Would it also be benficial for me, in a few months, to open a SCC outside of my bank?

 

I'm thinking with the rehab program for my student loans and the fact that my bank knows me personally will help down the road when I do want to apply for an auto loan. I have about $6000 in trade-in equity on my car right now (the loan is fully paid off) and I'm also planning on putting down $6-$7k. I just have no revolving credit.


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Re: In Rehab Program with Direct Loans; How to Build Credit in the Meantime?


martinsoka17 wrote:

InvincibleSummer3 wrote:

Yeah, that's higher than what I started with, so not disastrous.

 

Were you over 18 at the time? You might have still been responsible even if you were a dependent.

 

Where do you bank? It's good to try to get into a bank that will eventually graduate your secured card to an unsecured version. But that's not always easy with a low score. I banked with Wells Fargo for close to 12 years and they flat turned me down for a secured card at first. I ended up going with Orchard (now Cap One) until I finished rehab. At that point my scores were high enough WF had no problem approving me.

 

I've heard good things about credit unions, if you're a member. And WF and Bof A are cards that will enventually graduate.


I was 18, but I had no knowledge of these medical bills at all. Hopefully either TransUnion will work with me or I'll have my father pay them off. They're minor, only $300. But I have zero credit really, so it's not helping.

 

I bank with a local bank, and that's who I had my car loan through as well. I'm going to meet with a PB on Friday to discuss my options. I do know the SCC they offer "graduates" in a year to a regular CC. Would it also be benficial for me, in a few months, to open a SCC outside of my bank?

 

I'm thinking with the rehab program for my student loans and the fact that my bank knows me personally will help down the road when I do want to apply for an auto loan. I have about $6000 in trade-in equity on my car right now (the loan is fully paid off) and I'm also planning on putting down $6-$7k. I just have no revolving credit.


This really is a YMMV situation, so it's different for everyone. Over in the CC forums, there's a lot of talk that larger deposits on a secured card will translate into higher credit limits later. But for me, I really had no credit other than chargeoffs and defaulted loans, so I wanted to get multiple good tradelines reporting. That was my reasoning behind opening two secured cards rather than just one. That meant two cards with lower limits, though, and again on the CC forum where "high limits are king" I probably look like a total loser.

 

BUT I will say my score's up a solid 200 points since I started this little venture, and that's just with my two little bitty accounts. So ppppbbbtttt to anyone who thinks that it's not possible with puny limits.

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Re: In Rehab Program with Direct Loans; How to Build Credit in the Meantime?


InvincibleSummer3 wrote:

martinsoka17 wrote:

InvincibleSummer3 wrote:

Yeah, that's higher than what I started with, so not disastrous.

 

Were you over 18 at the time? You might have still been responsible even if you were a dependent.

 

Where do you bank? It's good to try to get into a bank that will eventually graduate your secured card to an unsecured version. But that's not always easy with a low score. I banked with Wells Fargo for close to 12 years and they flat turned me down for a secured card at first. I ended up going with Orchard (now Cap One) until I finished rehab. At that point my scores were high enough WF had no problem approving me.

 

I've heard good things about credit unions, if you're a member. And WF and Bof A are cards that will enventually graduate.


I was 18, but I had no knowledge of these medical bills at all. Hopefully either TransUnion will work with me or I'll have my father pay them off. They're minor, only $300. But I have zero credit really, so it's not helping.

 

I bank with a local bank, and that's who I had my car loan through as well. I'm going to meet with a PB on Friday to discuss my options. I do know the SCC they offer "graduates" in a year to a regular CC. Would it also be benficial for me, in a few months, to open a SCC outside of my bank?

 

I'm thinking with the rehab program for my student loans and the fact that my bank knows me personally will help down the road when I do want to apply for an auto loan. I have about $6000 in trade-in equity on my car right now (the loan is fully paid off) and I'm also planning on putting down $6-$7k. I just have no revolving credit.


This really is a YMMV situation, so it's different for everyone. Over in the CC forums, there's a lot of talk that larger deposits on a secured card will translate into higher credit limits later. But for me, I really had no credit other than chargeoffs and defaulted loans, so I wanted to get multiple good tradelines reporting. That was my reasoning behind opening two secured cards rather than just one. That meant two cards with lower limits, though, and again on the CC forum where "high limits are king" I probably look like a total loser.

 

BUT I will say my score's up a solid 200 points since I started this little venture, and that's just with my two little bitty accounts. So ppppbbbtttt to anyone who thinks that it's not possible with puny limits.


That's actually promising for me. I plan on opening a SCC with my bank with a $200CL and another with the credit union at the school I attend now with a slightly higher CL. The CU is offering an APR a full 4 points lower than my bank is, so we'll see. I technically have nothing "positive" on my CR because of the lack of revolving credit and credit history. So I guess it's all uphill from here? App for the cards and start "gardening"? Smiley Wink


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Re: In Rehab Program with Direct Loans; How to Build Credit in the Meantime?

One or two low limit secured cards will help you. I started last year my score was 530 in Nov. I had four COs all my loans were in default even though I had already started the rehab process. And I had one judgment I was still paying off. I got a secured merrick card 250 limit I should have went to a Cu but did not know to as I found this forum afterwards. But with just the one card reporting positive my score started climbing pretty quick. In feb I apped and was approved for a Cap1 plat and BBRZ. They both started out at 300 but i used the cap1 alot and always let a small balance report after six months they upped my limit to 1300.

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Re: In Rehab Program with Direct Loans; How to Build Credit in the Meantime?


twall06 wrote:

One or two low limit secured cards will help you. I started last year my score was 530 in Nov. I had four COs all my loans were in default even though I had already started the rehab process. And I had one judgment I was still paying off. I got a secured merrick card 250 limit I should have went to a Cu but did not know to as I found this forum afterwards. But with just the one card reporting positive my score started climbing pretty quick. In feb I apped and was approved for a Cap1 plat and BBRZ. They both started out at 300 but i used the cap1 alot and always let a small balance report after six months they upped my limit to 1300.


Oh! That's amazing! My further questions is: Do I app for the CU card or the one from my bank first? Loyalty, or lower rates? Hmmm


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