topic Re: Could beefing up my secured cc backfire? in Credit Cards

Could beefing up my secured cc backfire?

AQ — Tue, 19 Mar 2013 21:02:06 GMT

I have a secured cc that's about two months old, with a $500 cl. One of my credit reports said a negative factor is having cc under a $2000 cl. If I were to add, say, $1500 next fall, increasing my secured limit to $2000, could this backfire on me? Here's what I am concerned about:

I was planning on asking for an unsecured card after 1 year of on-time payments and utilization under 10%. I will have been out of bankruptcy for a ilttle over 1 year when I want to ask for the unsecured. But I'm concerned that if I add as much as $1000 or $1500 to my secured card, when it comes time to ask for it to be unsecured (the one year mark) they will be much more likely to say "no" because I have created my own, higher credit limit.

Does anyone have any thoughts or, better yet, experience with this?

On the one hand, it seems that puttng down more money and managing it well would be a plus and would show my responsibility. On the other hand, it might make me more of a credit risk to my credit union since my limit would be much higher. :/ I don't want to end up with $2000 secured and be stuck--not wanting to get my deposit back and lowering my credit limit.

Re: Could beefing up my secured cc backfire?

Anonymous — Tue, 19 Mar 2013 21:04:46 GMT

Higher limit is always better.

Even if they won't unsecure it. You will have an easier time getting credit from other lenders.

Add as much as you can. $5k is ideal.

Re: Could beefing up my secured cc backfire?

AQ — Tue, 19 Mar 2013 21:17:13 GMT

I wouldn't mind trying to get up that high, but I'm worried about that money getting locked up in that card. I just wonder if it's more or less inevitable for them to unsecure my card with the same limit I create for it on my own. I'd had to have thousands of dollars secured, only three years later still being denied for an unsecured card at $3k and having to take the CL loss or have several thousand I can't touch. Then again...maybe I could look at it as an unorthodox savings account? idk, still....removing that money will hurt my numbers if they don't match it.

Thanks for the insight about it making things easier to get higher limits from other lenders. That's rational and reasonable.

Re: Could beefing up my secured cc backfire?

DaveSignal — Tue, 19 Mar 2013 21:23:09 GMT

The only reason it would "backfire" would be if you need that $1500 to pay other bills. Otherwise, you should definately do it. If the issuer has a policy where they unsecure cards after a period of time and, for some reason, decides that $2000 is too much to grant unsecured, they will offer a lesser amount when the time comes. Many banks don't unsecure a secured card. They will just tell you to apply again for an unsecured card. If this is the case, you are still better off having a larger amount in your secured account.

Re: Could beefing up my secured cc backfire?

AQ — Tue, 19 Mar 2013 21:40:10 GMT

It's through my credit union and they told me I could have it unsecured, but that the typical wait time was a year. I hope they told me correctly. As it's an area credit union, they seem much more inclined to help build credit--I also have a secured loan with them, and also a secured loan with my second credit union. Patience, I guess.

I'll look into adding funds to it in the fall, when I have more to spare. Thanks!

Re: Could beefing up my secured cc backfire?

twall06 — Tue, 19 Mar 2013 21:45:57 GMT

Having a low limit credit card does not hurt your credit score. Limits i dont think matter that much . More about your utilization and on time payments .

Re: Could beefing up my secured cc backfire?

boomhower — Tue, 19 Mar 2013 21:58:34 GMT

@twall06 wrote:
Having a low limit credit card does not hurt your credit score. Limits i dont think matter that much . More about your utilization and on time payments .

Pretty much what I'm thinking. Saying a low credit limit is hurting your score sounds like they are struggling to find something to say.

Re: Could beefing up my secured cc backfire?

HiLine — Tue, 19 Mar 2013 22:04:00 GMT

The credit issuer is not bound to maintain your credit limit during the unsecuring process. So I wouldn't worry about the limit being too high.

Make sure you don't get a hard pull for the credit limit increase though. I would verify with the creditor first.

Re: Could beefing up my secured cc backfire?

AQ — Tue, 19 Mar 2013 22:30:16 GMT

@boomhower wrote:
@twall06 wrote:
Having a low limit credit card does not hurt your credit score. Limits i dont think matter that much . More about your utilization and on time payments .
Pretty much what I'm thinking. Saying a low credit limit is hurting your score sounds like they are struggling to find something to say.

Yeah, that could be it. It said something to the effect of "you have a credit card under a $2000 limit. Haivng credit cards with low limits suggests to lenders that you haven't had much experience managing larger amounts of credit, and therefore they may be less willing to extend more credit to you."

I could see it as having a higher limit is more helpful, as that's what I've read, due to it giving you a higher debt-to-credit ratio, but to say it's hurting me, that says a lot. In fact, once I opened the cc and secured loans, my score jumped up. idk. lol

Re: Could beefing up my secured cc backfire?

AQ — Tue, 19 Mar 2013 22:31:39 GMT

@HiLine wrote:
The credit issuer is not bound to maintain your credit limit during the unsecuring process. So I wouldn't worry about the limit being too high.

Make sure you don't get a hard pull for the credit limit increase though. I would verify with the creditor first.

Good idea! It seems they wouldn't do a HP if it was my own money, but then again, they did an HP to open one in the first place. They did, however, give me the option of putting down a larger amount, like $1000, but I don't know that that was my limit.

Re: Could beefing up my secured cc backfire?

Anonymous — Wed, 20 Mar 2013 00:52:16 GMT

I had a 5,000 secured CC for two years w/ USAA. May have helped me acquiring a 5,500 CL on the unsecured version when I app'd and closed my secured CC.

I received a lot of preapproved offers from amex, chase and a few others towards the end of my 2 yr secured agreement.

Re: Could beefing up my secured cc backfire?

AQ — Wed, 20 Mar 2013 01:05:29 GMT

I'm not asking specifics, but did you also have a moderate to high income when receiving those offers? I'm a low-income kid, so I wonder how much income relates to CL and cards when compared to credit score and history.

So when you went to unsecured, it was a different card, technically, not simply the unsecuring of the secured card?

Thank you for sharing your experinece!

@Anonymous wrote:
I had a 5,000 secured CC for two years w/ USAA. May have helped me acquiring a 5,500 CL on the unsecured version when I app'd and closed my secured CC.

I received a lot of preapproved offers from amex, chase and a few others towards the end of my 2 yr secured agreement.

Re: Could beefing up my secured cc backfire?

twall06 — Wed, 20 Mar 2013 01:38:11 GMT

I think having a higher limit would help you get higher limit unsecured cards when you are ready . One of the sites i use also says having low limits hurts but I do not pay it any attention . But im more focused on trying to show a positive payment history to rebuild my credit so I'm not worried about getting cards with higher limits right now .

Re: Could beefing up my secured cc backfire?

Anonymous — Wed, 20 Mar 2013 02:10:17 GMT

Not at all. I was and still am a student and make ~30000 a year with my school benefits. My AAoA at the end of last year was 3 years till I went on an app spree.

There's no way for a secured card to unsecure with USAA so I app'd for their unsecured, rewards AMEX version and was instantly approved...I did it in feb of this year but I waited two years to get to that point, that's probably the "sucky" part. Although a lot of people have had successes in a shorter amount, I just decided to wait.

I'm glad I could help!!

Re: Could beefing up my secured cc backfire?

AQ — Wed, 20 Mar 2013 02:32:04 GMT

@Anonymous wrote:
Not at all. I was and still am a student and make ~30000 a year with my school benefits. My AAoA at the end of last year was 3 years till I went on an app spree.

There's no way for a secured card to unsecure with USAA so I app'd for their unsecured, rewards AMEX version and was instantly approved...I did it in feb of this year but I waited two years to get to that point, that's probably the "sucky" part. Although a lot of people have had successes in a shorter amount, I just decided to wait.

I'm glad I could help!!

That'sa big help, and an encouragement!

I am also a student, but right now just squeaking by on my loans. When I get into graduate school (I'm 34, a late bloomer, and just out of BK), I'll be working more and still have some aid from school coming in, so my income/finances will be more lenient. Like you, my AAoA is around 3 1/2 years, but I think every time a new student loan is taken out, that changes. As well, in the next few years, old accounts will be dropping off, and that may hurt or it may help, as they were negatives.

So were your numbers or credit report fairly rough when you started your $5k secured card?

Waiting is the hardest part, to quote a song. But it's part of the game. I just need to keep cultivating patience.

Re: Could beefing up my secured cc backfire?

DaveSignal — Wed, 20 Mar 2013 02:30:40 GMT

@boomhower wrote:
@twall06 wrote:
Having a low limit credit card does not hurt your credit score. Limits i dont think matter that much . More about your utilization and on time payments .
Pretty much what I'm thinking. Saying a low credit limit is hurting your score sounds like they are struggling to find something to say.

It doesn't hurt your FICO score as long as utilization is the same, but it does impact your ability to get higher limit cards in the future, in addition to making utilization much easier to manage. It also shows creditors looking at your reports that you have the ability to manage a large amount of credit. These reasons are why some FAKO scores give more points for higher limits.

Re: Could beefing up my secured cc backfire?

Anonymous — Wed, 20 Mar 2013 02:35:26 GMT

One thing about some secured cards-No matter how much you pump into one, when it comes time to unsecure(assuming a particular card does unsecure) some issuers will re-asses your credit limit and actually CLD you. Happened to a few people here with the BOA secured over the years. I'm talking about credit limit being halved or even lower.

Re: Could beefing up my secured cc backfire?

7PM789 — Wed, 20 Mar 2013 02:44:05 GMT

I started my credit journey with a $500.00 secured card through my credit union which after six months of use I was approved for a Amex gold charge card with no prior credit history. . .

I have since bumped my secured cards limit up twice; once to $2,500.00 then to $5,000.00 each time it reset the 1 year count down to it being unsecured.

I honestly believe that the secured card has played a significant role the development of my credit profile and would recommend that you secure as much as you can afford.

In my case the $5,000.00 is frozen in my savings account incurring interest until the card is eligible to become unsecured at which point I will transfer the funds to an online savings account with a higher interest rate.

I wish you the best of luck with your rebuilding. . .

Re: Could beefing up my secured cc backfire?

AQ — Wed, 20 Mar 2013 03:08:47 GMT

@Anonymous wrote:
One thing about some secured cards-No matter how much you pump into one, when it comes time to unsecure(assuming a particular card does unsecure) some issuers will re-asses your credit limit and actually CLD you. Happened to a few people here with the BOA secured over the years. I'm talking about credit limit being halved or even lower.

Yikes! See, that's exactly what I was worried about when creating this post. I don't want a high amount of money tied up indefinitely in a card I cannot unsecure without a CLD, thus a potential drop in my score.

Sorry to hear that's happened. I bank with a credit union, so I'd think they are more lenient than BOA, but how much is not something I can determine.

Re: Could beefing up my secured cc backfire?

AQ — Wed, 20 Mar 2013 03:14:20 GMT

@7PM789 wrote:
I started my credit journey with a $500.00 secured card through my credit union which after six months of use I was approved for a Amex gold charge card with no prior credit history. . .

I have since bumped my secured cards limit up twice; once to $2,500.00 then to $5,000.00 each time it reset the 1 year count down to it being unsecured.

I honestly believe that the secured card has played a significant role the development of my credit profile and would recommend that you secure as much as you can afford.

In my case the $5,000.00 is frozen in my savings account incurring interest until the card is eligible to become unsecured at which point I will transfer the funds to an online savings account with a higher interest rate.

I wish you the best of luck with your rebuilding. . .

Thank you! And that's good information about the resetting of the 1 year mark. I wondered how that might work if i dropped a good deposit, only to request the unsecured only months later. That's sensible, and I'll ask my credit union if they have such a policy. I would be surprised now if they didn't.

I'm coming out of BK, so I have credit history...it just ain't pretty! That and I had to BK a few ccs along with my other debt, so Capital One and GE won't touch me, I figure. It's going to be a slow and steady climb. Glad for yours and everyone else's responses, here and elsewhere. Such a great community!