topic Re: Just getting started.... need help in Credit Card Applications

Just getting started.... need help

Anonymous — Fri, 06 Sep 2019 03:36:17 GMT

Hi, I am just getting started on my credit building journey and am basically starting from scratch. Heres what I have on my credit profile so far :

- Authorized user on dads Amex card (1.5yrs, $13k limit, 93% utilization)

- RentReporters reporting $1,350 monthly rent payment (4 months so far)

- SelfLender CD loan $150 per month (first payment on Sept. 20)

- Just added 2 revolving credit lines which got posted today, $5k each, $10k total (MyJewelers and New Coast Direct)

Here is what I am in the process of adding :

- CreditPop reporting $13,500 monthly rent payment (started on Sept. 1st.... for one of my businesses)

- Getting added as an authorized user on my moms Capital One card (20yrs, $20k limit, >30% utilization)

Here is what I need help with :

- More ways to boost my credit as much and as quickly as possible

- Guidance on my next steps to build my credit... I applied for the DCU secured card and got preapproved for a $1000 limit, but was denied membership with DCU. I am pulling the ChexSystems report to see if it offers any clues as to why I was denied... Also, I just submitted a pre-approval request on Discovers website and they said they do not have any product offerings for me right now because of "Recently Opened Bank Revolving Trades". Discover also noted these negatives about my credit profile : Lack of recent revolving account information, Too few accounts currently paid as agreed, Too many inquires in last 12 months, Length of time accounts have been established. My current average age of credit is 6 months, average utilization is 53%, payment history is in good standing, although I do have 3 or more hard inquires for 2019, and I have 3 new accounts with not a lot of payment history. Also, I currently do not show much income (less than 5k per year) on my last few years of tax returns although I can possibly change this by showing a large net profit in my business for 2018 as I havent filed taxes yet and can reduce some of my deductions... but I will have to pay taxes on that money, which is fine if it helps me with my credit pursuits. Also I just turned 19 in May... so I'm young.

What should I do? Should I apply for the Discover/Capital one secured card? Should I apply for any unsecured cards? Should I open another Credit Builder loan? Please help me...

I really need credit desperately for my business and investing pursuits.

Re: Just getting started.... need help

Medic981 — Fri, 06 Sep 2019 03:55:45 GMT

Welcome to the myFICO forums!

Ultimately, what a person needs to improve their FICO scores and build credit are three open credit cards (secured or unsecured) in good standing and one open installment loan in good standing such as a car, home, student, personal, share secured, or credit building loan. This combination is what the myFICO score theorists here have determined is what you need for optimal credit building and FICO score. You can have more CCs and more installment loans, however, this will not increase your FICO scores.

Next, (this is only important if you are attempting to purchase a large ticket item like a home or car) is paying in full all of the credit card balances each month, before the posting date, except one. This is called the All Zero Except One (AZEO) method. The one credit card you allow to post a balance needs to be less than 8.9% of the credit limit of the card. So using one card each month to buy lunch, letting it report and then paying in full will maximize FICO scoring. Keeping your utilization of your cards below 28.9% both individually and collectively will prevent you from incurring a FICO scoring penalty.

An installment loan will have its greatest impact on your FICO score when the amount owed is at 8.9% or less of the original amount owed which is usually in the final months before the loan is paid in full. If you don't have an installment loan you can check into Self Lender or a Share Secured Loan at a Credit Union.

Keep in mind, building credit is a marathon, not a sprint. It involves demonstrating to a potential creditor that you can handle credit responsibly. If you have open, active credit accounts that are being paid on time and pay all of your bills on time every time, apply for credit only when you actually need it and use credit cards sparingly maintaining low credit utilization, then you’re going to earn and maintain great credit scores. It would be impossible for you not to do so. This is the fastest way you can build good, solid credit.

Re: Just getting started.... need help

Anonymous — Fri, 06 Sep 2019 04:07:14 GMT

@Medic981 wrote:
Welcome to the myFICO forums!

Ultimately, what a person needs to improve their FICO scores and build credit are three open credit cards (secured or unsecured) in good standing and one open installment loan in good standing such as a car, home, student, personal, share secured, or credit building loan. This combination is what the myFICO score theorists here have determined is what you need for optimal credit building and FICO score. You can have more CCs and more installment loans, however, this will not increase your FICO scores.

Next, (this is only important if you are attempting to purchase a large ticket item like a home or car) is paying in full all of the credit card balances each month, before the posting date, except one. This is called the All Zero Except One (AZEO) method. The one credit card you allow to post a balance needs to be less than 8.9% of the credit limit of the card. So using one card each month to buy lunch, letting it report and then paying in full will maximize FICO scoring. Keeping your utilization of your cards below 28.9% both individually and collectively will prevent you from incurring a FICO scoring penalty.

An installment loan will have its greatest impact on your FICO score when the amount owed is at 8.9% or less of the original amount owed which is usually in the final months before the loan is paid in full. If you don't have an installment loan you can check into Self Lender or a Share Secured Loan at a Credit Union.

Keep in mind, building credit is a marathon, not a sprint. It involves demonstrating to a potential creditor that you can handle credit responsibly. If you have open, active credit accounts that are being paid on time and pay all of your bills on time every time, apply for credit only when you actually need it and use credit cards sparingly maintaining low credit utilization, then you’re going to earn and maintain great credit scores. It would be impossible for you not to do so. This is the fastest way you can build good, solid credit.

My goal is to be able to use credit to secure loans to invest in cashflowing real estate in the next economic downturn when properties will be available at a discount. Since I'm starting out my credit building journey late in the economic cycle, I am extremely pressed on the time line and can't wait years and years to build credit. I understand that building credit is not a sprint, although as with anything I am sure that there are strategic ways to maximize efficiency while building. With that said, taking into account Everything I outlined in my very detailed intial post, what actions do you recommend I take in order to expedite my credit building process? I outlined quite a bit about my exact situation, what I have access to, and what I am contemplating doing. What are your thoughts?

Re: Just getting started.... need help

BearsCubsOtters — Fri, 06 Sep 2019 04:42:30 GMT

Medic gave you some solid pointers.

I would like to add that being on your old man's Amex card with 93% utilization may actually be hurting you more than helping you at this point. Overall utilization across all cards and even per card should be 33% or less for optimal scores.

You need a secured credit card and I would recommend removing yourself from your old man's Amex at this point. No more loans! You have one so now you need revolving (credit card) trade lines. I would recommend looking into your local bank or local credit union first to see what they have to offer in terms of a secured card; otherwise, Capital One is always a good option for a secured card. Just please note that the Capital One secured card has a sell-by date: meaning, do not expect it to ever really get better. It is a card to use temporarily until you get better offers from other creditors and then move on.

Re: Just getting started.... need help

Medic981 — Fri, 06 Sep 2019 04:54:08 GMT

@Anonymous wrote:
@Medic981 wrote:
Welcome to the myFICO forums!

Ultimately, what a person needs to improve their FICO scores and build credit are three open credit cards (secured or unsecured) in good standing and one open installment loan in good standing such as a car, home, student, personal, share secured, or credit building loan. This combination is what the myFICO score theorists here have determined is what you need for optimal credit building and FICO score. You can have more CCs and more installment loans, however, this will not increase your FICO scores.

Next, (this is only important if you are attempting to purchase a large ticket item like a home or car) is paying in full all of the credit card balances each month, before the posting date, except one. This is called the All Zero Except One (AZEO) method. The one credit card you allow to post a balance needs to be less than 8.9% of the credit limit of the card. So using one card each month to buy lunch, letting it report and then paying in full will maximize FICO scoring. Keeping your utilization of your cards below 28.9% both individually and collectively will prevent you from incurring a FICO scoring penalty.

An installment loan will have its greatest impact on your FICO score when the amount owed is at 8.9% or less of the original amount owed which is usually in the final months before the loan is paid in full. If you don't have an installment loan you can check into Self Lender or a Share Secured Loan at a Credit Union.

Keep in mind, building credit is a marathon, not a sprint. It involves demonstrating to a potential creditor that you can handle credit responsibly. If you have open, active credit accounts that are being paid on time and pay all of your bills on time every time, apply for credit only when you actually need it and use credit cards sparingly maintaining low credit utilization, then you’re going to earn and maintain great credit scores. It would be impossible for you not to do so. This is the fastest way you can build good, solid credit.

My goal is to be able to use credit to secure loans to invest in cashflowing real estate in the next economic downturn when properties will be available at a discount. Since I'm starting out my credit building journey late in the economic cycle, I am extremely pressed on the time line and can't wait years and years to build credit. I understand that building credit is not a sprint, although as with anything I am sure that there are strategic ways to maximize efficiency while building. With that said, taking into account Everything I outlined in my very detailed intial post, what actions do you recommend I take in order to expedite my credit building process? I outlined quite a bit about my exact situation, what I have access to, and what I am contemplating doing. What are your thoughts?

Well, it is kind of like making a baby. It takes on average 9 months from conception to birth. Mother to be needs to be taking prenatal vitamins, not smoke, abstain from drinking alcohol, and have regular prenatal visits with her obstetrician. It is not wise to rush delivery unless it is emergent. Too soon and the baby will have many problems early in life and could ultimately die. Just like a baby developing in the womb, credit takes time to develop. It takes the time it takes.

It takes time to build credit and there are no real short cuts. As you have acknowledged, building credit is a marathon, not a sprint. I have no sage wisdom to give you to make potential creditors want to lend you money other than what I have already posted. It is what it is.

As Bob Hope once said, "A bank is a place that will lend you money if you can prove that you don't need it."

Re: Just getting started.... need help

BearsCubsOtters — Fri, 06 Sep 2019 05:02:39 GMT

Deleting my long reply here...Medic has really given you solid advice and he isn't wrong. In the meantime you need to go about this smarter...you need to watch inquiries. Open a secured credit card-the more you can put up for a higher credit line, the better; and please remove yourself from your old man's Amex card. 93% utilization is nearly maxed out and that will hurt you.

Re: Just getting started.... need help

AllZero — Fri, 06 Sep 2019 06:55:13 GMT

No more applying for credit. Save your hard pull inquiries. You've been denied by DCU and Discover. Take that as a sign to stop "credit seeking" behavior.

Let your credit age. Pay your bills on time and all the time. You need positive payment history.

Read the Discover denial again and understand what you need to address. Discover is giving you clues.

Practice AZEO All Zero Except One. Your utilization ratio is high. Which will not make your credit report attractive to lenders.

Wait 6 months. In the meantime, feel free to stick around and read the forums. There is treasure trove of knowledge here. You'll learn a lot and put yourself in a better position.

Before applying for credit, take the time to research what you want and why you want it. Don't get a credit card just because it was easy to get. Get one so it benefits you and your spend; sign up bonus, cash back, miles, points, etc.

Re: Just getting started.... need help

AllZero — Fri, 06 Sep 2019 08:47:36 GMT

@Anonymous wrote:
- Authorized user on dads Amex card (1.5yrs, $13k limit, 93% utilization)
- RentReporters reporting $1,350 monthly rent payment (4 months so far)
- SelfLender CD loan $150 per month (first payment on Sept. 20)

- Getting added as an authorized user on my moms Capital One card (20yrs, $20k limit, >30% utilization)

My current average age of credit is 6 months, average utilization is 53%

Also, I currently do not show much income (less than 5k per year) on my last few years of tax returns although I can possibly change this by showing a large net profit in my business for 2018 as I havent filed taxes yet and can reduce some of my deductions...

Getting added as an authorized user is great for obtaining the account age. However, the drawback is the reported utilization. Check into DTI Debt To Income. Do you see a disparity in what I highlighted in bold red?

Have you pulled your own 3 bureau credit report? If not, check into creditchecktotal.com (part of Experian) for $1. Cancel in 7 days or less to avoid the reoccurring monthly charge.

Re: Just getting started.... need help

Anonymous — Fri, 06 Sep 2019 09:19:49 GMT

AllZero is on point. Get off that Amex card today. It helps your credit age factors, but they’re a smaller part of your credit than utilization is. At 93%, that card is over the 88.9% threshold where it’s considered to be maxed out. The usage is hurting you more than its age is helping. And at 18 months old, there’s not very much age that it’s helping with. The CapOne card you mention is still higher than ideal on balance but it’s far better than the Amex - that one is killing you. And the age of the CapOne is fantastic. Get on that one ASAP.

Next, as stated, look at your denial reasons:

Not enough positive payment history
Too many apps
Length of time accounts have been established

They’re telling you to stop applying, maintain the accounts you have, and keep making on-time payments. You are young, your profile is very young and thin, and it can’t sustain continued applications. The fact that your profile is 6 months old, showing over 50% utilization, and only $5k is being reported as annual income, practically screams to be denied by most creditors. You need to show them you can manage what you have for a period of time before attempting to get more.

I know gardening sucks, and you have a plan for buying real estate, but the timetable you’re trying for isn’t feasible. Build your profile correctly and you’ll be far better off later on.

Re: Just getting started.... need help

Medic981 — Fri, 06 Sep 2019 13:49:28 GMT

@Anonymous wrote:
@Medic981 wrote:
Welcome to the myFICO forums!

Ultimately, what a person needs to improve their FICO scores and build credit are three open credit cards (secured or unsecured) in good standing and one open installment loan in good standing such as a car, home, student, personal, share secured, or credit building loan. This combination is what the myFICO score theorists here have determined is what you need for optimal credit building and FICO score. You can have more CCs and more installment loans, however, this will not increase your FICO scores.

Next, (this is only important if you are attempting to purchase a large ticket item like a home or car) is paying in full all of the credit card balances each month, before the posting date, except one. This is called the All Zero Except One (AZEO) method. The one credit card you allow to post a balance needs to be less than 8.9% of the credit limit of the card. So using one card each month to buy lunch, letting it report and then paying in full will maximize FICO scoring. Keeping your utilization of your cards below 28.9% both individually and collectively will prevent you from incurring a FICO scoring penalty.

An installment loan will have its greatest impact on your FICO score when the amount owed is at 8.9% or less of the original amount owed which is usually in the final months before the loan is paid in full. If you don't have an installment loan you can check into Self Lender or a Share Secured Loan at a Credit Union.

Keep in mind, building credit is a marathon, not a sprint. It involves demonstrating to a potential creditor that you can handle credit responsibly. If you have open, active credit accounts that are being paid on time and pay all of your bills on time every time, apply for credit only when you actually need it and use credit cards sparingly maintaining low credit utilization, then you’re going to earn and maintain great credit scores. It would be impossible for you not to do so. This is the fastest way you can build good, solid credit.

My goal is to be able to use credit to secure loans to invest in cashflowing real estate in the next economic downturn when properties will be available at a discount. Since I'm starting out my credit building journey late in the economic cycle, I am extremely pressed on the time line and can't wait years and years to build credit. I understand that building credit is not a sprint, although as with anything I am sure that there are strategic ways to maximize efficiency while building. With that said, taking into account Everything I outlined in my very detailed intial post, what actions do you recommend I take in order to expedite my credit building process? I outlined quite a bit about my exact situation, what I have access to, and what I am contemplating doing. What are your thoughts?

Here is a graphic that may help illustrate what everyone is trying to explain to you. As an authorized user on your dad's AmEx card, his utilization is killing your score. Rather than helping you, it is hurting you.

Re: Just getting started.... need help

Anonymous — Fri, 06 Sep 2019 14:32:38 GMT

I just want to also add- yes, file and pay your taxes for the income you earned. The IRS will come after the money. I know it depends on the structure, but if you have pierced the veil, it isn't going to matter what you build your credit file to.

Re: Just getting started.... need help

Anonymous — Fri, 06 Sep 2019 16:08:10 GMT

@Anonymous wrote:
I just want to also add- yes, file and pay your taxes for the income you earned. The IRS will come after the money. I know it depends on the structure, but if you have pierced the veil, it isn't going to matter what you build your credit file to.

All of you guys are awesome! Thank you so much for all of the advice!!

CheeseNCrackers - I'm saying that I have the option of either reporting zero net profit due to depreciation and expense deductions, or I can report a higher than necessary net profit and add that to my personal income but it will cost me 30% on whatever I report my income to be.

As far as applying for more credit goes, heres my new plan - please tell me all of your opinions.

1) Remove myself from being an authorized user on my dads Amex card

2) Get added on to my moms CapitalOne card as an authorized user

3) Pause applying for new credit temporarily, at least for a couple months

4) File 2018 business taxes and backdate a w-2 income statement to show 30-50k personal income for 2018 (will have to pay a late penalty and taxes on the paper income)

5) Once my CD loan, rent payments, and 2 revolving credit lines have had 2-3 months to build up payment history, apply for a secured card either through Discover or CapitalOne.

*Side note - During my 2-3 month waiting period while I'm doing items 1-4, I will also be in the forums reading and asking questions to learn.

How does that sound?

Re: Just getting started.... need help

Anonymous — Fri, 06 Sep 2019 16:24:49 GMT

Also how long does it take to have the hard inquiries fall off or become irrelevant to new lending? I’ve seen a lot of different information ranging from 6 months to 7 years.

Also, as far as pausing my credit application activities, I thought that secured cards were much easier to get approved for? No?

Re: Just getting started.... need help

Medic981 — Fri, 06 Sep 2019 19:48:53 GMT

@Anonymous wrote:
Also how long does it take to have the hard inquiries fall off or become irrelevant to new lending? I’ve seen a lot of different information ranging from 6 months to 7 years.

Also, as far as pausing my credit application activities, I thought that secured cards were much easier to get approved for? No?

Hard inquiries fall off your CRs in 24 months. Hard inquiries stop affecting your FICO scores after 12 months. Remember, Hard inquiries or Hard Pulls (HP) is a signal to potential creditors that you are credit-seeking.

As for secured cards, they are easier to get if you have not mucked up your credit previously. Since you are credit building rather than repairing, you should have no problems obtaining decent secured cards.

IHMO, Discover It Secured is one of the best-secured credit cards for no or limited credit, poor credit, and bad credit applicants — and one of the best gas credit cards you can get with bad credit. Disco offers 2% cash back at restaurants and gas stations (one up to $1,000 in combined purchases each quarter) and 1% cash back on other purchases. You’ll need an up-front security deposit of at least $200 to apply for the Discover It Secured Card.

Capital One Secured Mastercard requires a refundable security deposit of $49, $99 or $200 based on your creditworthiness. Make the minimum required security deposit and you'll get an initial credit line of $200. Plus, deposit more money before your account opens to get a higher credit line. Get access to a higher credit line after making your first 5 monthly payments on time.

The Citi Diamond Secured Mastercard can help you establish, improve or rebuild your credit. Build your credit history by using your card responsibly. Best of all, there's no annual fee. Applicants must meet Citi Bank's credit qualification criteria for this card, which includes a review of your income and your debt. If approved, a minimum of $200 security deposit is required. The security deposit is always equal to your credit limit and will be held for an initial term of up to 18 months. You must not have any bankruptcy history within the last two years.

Bank of America's BankAmericard Secured Credit Card is designed to help establish, strengthen or rebuild credit for an annual fee of $39. A minimum refundable security deposit of $300 is required to open this account. Your maximum credit limit will be determined by the amount of the security deposit you provide, your income and your ability to pay the credit line established. If you provide a deposit that exceeds the calculated maximum amount based on your ability to pay, a will be returned to you for the difference. BoA periodically reviews your account and, based on your overall credit history (including your account with BoA and other credit cards and loans), you may qualify to have your security deposit returned. Not all cardholders will qualify.

Re: Just getting started.... need help

Anonymous — Fri, 06 Sep 2019 20:22:02 GMT

Wow thanks for all of that info Medic...

Taking into account the recent HP’s on my profile, and current provable income of basically zero, is it a good or bad idea to try and apply for the Discover it secured card right now. Or should I wait a few months so that I have payments on record for my recent credit lines and CD loan I’ve opened?

Re: Just getting started.... need help

Anonymous — Fri, 06 Sep 2019 20:33:46 GMT

I think no matter what, you should wait 3-6 months before apping anything. Then go after Disco. Nice thing about them is that around statement #7, they start reviewing your account for graduation, at which time your card unsecures, you get your deposit back, and many people often get an increase as well. Plus you get all the cash back match benefits of the card while it’s secured. It’s a great card, and the stronger your profile is going in, the better your odds of a CLI and graduation coming out (provided you’re responsible while you have it).

Re: Just getting started.... need help

Anonymous — Fri, 06 Sep 2019 20:43:56 GMT

@Anonymous wrote:
AllZero is on point. Get off that Amex card today. It helps your credit age factors, but they’re a smaller part of your credit than utilization is. At 93%, that card is over the 88.9% threshold where it’s considered to be maxed out. The usage is hurting you more than its age is helping. And at 18 months old, there’s not very much age that it’s helping with. The CapOne card you mention is still higher than ideal on balance but it’s far better than the Amex - that one is killing you. And the age of the CapOne is fantastic. Get on that one ASAP.

Next, as stated, look at your denial reasons:

Not enough positive payment history
Too many apps
Length of time accounts have been established

They’re telling you to stop applying, maintain the accounts you have, and keep making on-time payments. You are young, your profile is very young and thin, and it can’t sustain continued applications. The fact that your profile is 6 months old, showing over 50% utilization, and only $5k is being reported as annual income, practically screams to be denied by most creditors. You need to show them you can manage what you have for a period of time before attempting to get more.

I know gardening sucks, and you have a plan for buying real estate, but the timetable you’re trying for isn’t feasible. Build your profile correctly and you’ll be far better off later on.

Amex is unusual in that it does not transfer an account's age to the authorized user; the age of an Authorized User account starts on the date they were added to the "parent" account. The OP isn't even getting the benefit of "credit age" from the already negligible original account age, but is being dinged for the extremely high utilization.

As for the OP I have no advice to offer. Unless he/she intends to buy properties for cash outright a lender will want to know where they deposits/downpayments came from. So leveraging credit cards to buy property wouldn't work in that scenario.

Re: Just getting started.... need help

Anonymous — Fri, 06 Sep 2019 22:20:44 GMT

@Anonymous wrote:
@Anonymous wrote:
AllZero is on point. Get off that Amex card today. It helps your credit age factors, but they’re a smaller part of your credit than utilization is. At 93%, that card is over the 88.9% threshold where it’s considered to be maxed out. The usage is hurting you more than its age is helping. And at 18 months old, there’s not very much age that it’s helping with. The CapOne card you mention is still higher than ideal on balance but it’s far better than the Amex - that one is killing you. And the age of the CapOne is fantastic. Get on that one ASAP.

Next, as stated, look at your denial reasons:

Not enough positive payment history
Too many apps
Length of time accounts have been established

They’re telling you to stop applying, maintain the accounts you have, and keep making on-time payments. You are young, your profile is very young and thin, and it can’t sustain continued applications. The fact that your profile is 6 months old, showing over 50% utilization, and only $5k is being reported as annual income, practically screams to be denied by most creditors. You need to show them you can manage what you have for a period of time before attempting to get more.

I know gardening sucks, and you have a plan for buying real estate, but the timetable you’re trying for isn’t feasible. Build your profile correctly and you’ll be far better off later on.
Amex is unusual in that it does not transfer an account's age to the authorized user; the age of an Authorized User account starts on the date they were added to the "parent" account. The OP isn't even getting the benefit of "credit age" from the already negligible original account age, but is being dinged for the extremely high utilization.

As for the OP I have no advice to offer. Unless he/she intends to buy properties for cash outright a lender will want to know where they deposits/downpayments came from. So leveraging credit cards to buy property wouldn't work in that scenario.

As far as property acquisitions, I wouldn't be using credit cards... I would be applying for residential and commercial real estate loans/mortgages.

Re: Just getting started.... need help

Anonymous — Fri, 06 Sep 2019 23:13:50 GMT

An underwriter or loan officer will definitely asked where your downpayment(s) originated; and of course if you use cash advances from credit cards it will show up on your credit report.

EDIT: Never mind, I just re-read your comment and you said you planned to "use credit to secure loans", not use "credit cards." Using credit cards is possible because lenders like Bank of America, Chase and Discover allow you to transfer cash via ACH from your credit card to your checking account. But is definitely not adviseable to do so.