My friend's situation:
Age 24
Non-student.
Entire credit profile consists of only 1 card
Capital One Secured - $200 CL
Five statements have been cut. Sixth will come at end of June.
The most recent statement (5th one) has a utilization of 52%.
Currently, we're using Credit Karma to track credit score movement (I know it's not FICO but we're making do as a broad measure because it's free). Latest CK scores are TU = EQ = 637. Number of inquiries TU = 2, EQ = 3.
In evaluating what her next card should be, we decided on Discover it because of cash back and no FTF.
Questions:
- What are the chances of approval for Discover it with only one secured credit card on the credit report?
- In terms of timing based on number of statements, after which statement should my friend apply? The 6th? The 7th?
- In terms of utilization to optimize score, what should be the target utilization for the last statement prior to applying?
- What CRAs are pulled by Discover?
- What minimum FICO should one have before considering applying for Discover it?
Thanks in advance.
@Anonymous wrote:1. Chances are fine, Discover is ok with thin and young files
2. Number of Cap1 statements is not that much of a factor, so I would say after 6 months of history you'll be fine
3. Utilization is your biggest detriment right now. above 30% reporting makes you look more risky to lenders and lowers your FICO scores. Recommend between 1%-9% reporting before you apply for anything.
4. If you search the credit pulls DB you will see who they generally pull for your area. For me, they pulled EQ, but other people in my state have been TU pulled.
5. I would say you're fine to apply as long as report is clean, util is low, and scores are above 670 or so. Also, their prequalify link is a bit of a joke, but if you do it and it gives you a 3% range for APR you'll probably be approved.
I tested their prequalify and although a bogus name does get a "prequalified" page, the APR range was from like 11.x% to 23.x%, whereas my own info gave an APR range of only 13.x% to 16.x% (matching the junk mail they have been sending me 3-4x a week for the last few months). When I applied, I received the 13.x% APR.
+1
Very good response. I agree with the answers given.
@Anonymous wrote:
When I applied for discover, they offered me secured option that still gives the rewards. Is a secured card an option for your friend? ($200 minimum to start converts at twelve months) but I'm with everyone here keeping utilization low is a must. You can use your credit don't get me wrong just pay it down to $15 a few days before statement date then don't use it till statement comes out
When she first came to me for help, she had zero lines of credit with 1-2 inquires from failed applications.
Our master plan was:
- Start with a secured card (Capital One). Garden for 6 months.
- Apply for a second card, preferably unsecured with rewards (Discover it). Garden for 6 months.
- Apply for third unsecured rewards card (Citi Double Cash).
- Close the secured Capital One card. Enter the garden indefinitely.
We've accomplished step 1 and are on the verge of attempting step 2 within the next 30-45 days when the 6th statement cuts. I understand it's ambitious to try for no AF rewards cards with such a short history, but she's handled her account perfectly with no derogs.
The counter-offer of a secured Discover it card would be disappointing but we'd most likely accept it, especially if it will graduate after 12 months.
UPDATE ON MY FRIEND'S APPLICATION
Before her 6th Capital One Secured statement, we paid the balance down to $2 (= 1% of the $200 credit limit).
On her 6th statement, the reported balance was $2 and the credit limit had increased to $500.
About a week later, we checked Credit Karma, looking for a score jump. As we had hoped, TU and EQ both jumped to 678 (+40).
Visited Discover's Find My Offer page. The interest rate shown was a wide 10-11 percentage point range. Decided to apply anyway.
APPROVED for $1000 
The plan now is to garden for 6 months, then employ the same 1% utilization strategy on the 6th Discover statement and apply for her 3rd credit card, hopefully a Citi Double Cash card.
@brother7 wrote:UPDATE ON MY FRIEND'S APPLICATION
Before her 6th Capital One Secured statement, we paid the balance down to $2 (= 1% of the $200 credit limit).
On her 6th statement, the reported balance was $2 and the credit limit had increased to $500.
About a week later, we checked Credit Karma, looking for a score jump. As we had hoped, TU and EQ both jumped to 678 (+40).
Visited Discover's Find My Offer page. The interest rate shown was a wide 10-11 percentage point range. Decided to apply anyway.
APPROVED for $1000
The plan now is to garden for 6 months, then employ the same 1% utilization strategy on the 6th Discover statement and apply for her 3rd credit card, hopefully a Citi Double Cash card.
Congrats to your friend and to you for the guidance. Every 6 months, as long as your utilization is low, you can ask cap 1 for a CL increase. Its a soft pull, and if they don't approve the CLI they will send you a letter letting you know what you need to work on. I agree with one of the pror comments that Citi is tough on a thin file. As a contrary view, I would look at the Chase Freedom or Ultimate Freedom. Since Chase will block you if you try for one of their cards after haveing 5 new cards in a 24month period (the 5/24 rule), it may make sense to get the Chase card, wait another 6mos and then get the Citi.