Trying to get a credit card to repair my credit

[Anonymous]

So, a few years ago, I had great credit. I was approved for anything I wanted. My wife and I got new cars, a new house, etc. But, then I started making bad financial moves and took out a lot of debt. We had about $40,000 in credit card debt alone, not including our house and car loans. (We had a couple life emergencies that led up to the $40,000 debt.) About a year ago, I was stressed out from the debt and knew I had to do something about it. I had to get myself out of this mess. So, first I tried to apply for a debt consolidation loan and was denied. I was getting charged crazy interest on my debt.

After researching what I could do, I came across this debt resolution service. The way the service works is you need to voluntarily stop making any payments to the creditors. This makes them desperate and willing to negotiate. After a few months of no payments, the creditor contacts the debt management company and they attempt to settle your debt at a fraction of what you owe.

Now, 3 out of the 4 so far have settled. I still have one credit card that had $14,000 on it that never settled and they charged off the debt. I dont know why they have never came after me.

I know I need to repair my credit. We need to upgrade houses. We bought a 3 bedroom house. But after we moved in, we ended up gaining custody of my wife's sister's kids so, now were a family of 7 living in a 3 bedroom house.

So, a few days ago, I was in the credit karma app and I got a pop up for a credit card that it said I had very good approval odds. I applied and was accepted but only was approved for a $300 limit. I need more than that. I budget myself $400 a month for spending money. My plan is to charge the $400 every month and pay it back every month.

So, earlier I discovered a secured credit card. Never heard of them before. But I guess I pick my credit limit. Then i send them that amount of money and they put it in a dedicated savings account I can't touch. If I fail to pay back my credit card, they already have my $1000. I applied for a $1000 limit secured credit card. I assumed since I'm fronting the $1000, why wouldn't they approve me?

Well I applied and I received an email stating they're reviewing my app. I figured it would be a guaranteed approval. I called their customer service and the person I talked to said I could still be denied. Why would they deny me? What do they have to loose?

[Jnbmom]

What secured card did you apply for? There are several out there some good some not so good. Discover is a good one that will eventually unsecure where others will not .

As far as paying a company, most of that you can actually do on your own, you don’t need a paid middleman .

You mention you have 400 “spending money” I suggest you put that into an emergency fund and have some savings. You can charge a tank of gas a month and still build your credit .

[AllZero]

Who is the lender of said secured card?

[Anonymous]

Merrick Bank

[Anonymous]

No, the $400 a month isnt emergency money. It's the money I budget every month to fill my car with gas, buy lunch, and just basic life stuff.

We do have savings. We usually have around $4,000 in our checking. At this exact moment, there's over $8000 in our checking.

[AllZero]

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@Anonymous wrote:
Merrick Bank

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There's lots of Data Points on Merrick. Good luck on your application. I think you should be okay.

[Anonymous]

Also about my $400 a month I use for spending money, I dont know if that sounds a lot to most people. $400 a month is about $100 a week. It costs me $50 a week to just fill my car with gas. That leaves me with $50 a week for random expenses. To me, that's pretty tight.

I budget $400 a month for myself and $400 a month for my wife for the same reason. She has a full size Yukon which is not cheap on gas.

[randomguy1]

The cold hard truth is you need to manage your finances better and stop living beyond your means. New cars, new house, 7 children, Yukon, and a few thousand in the bank. You need to evaluate your standard of living or you are at high risk to default again on debt in the future. 

[Anonymous]

Well, I say we got a "new" house.  It wasn't a newly built house.  I moved states for a new job.  When we first moved, we were renting a small condo.  This was before we got the two little ones.  But, my wife hated living on a second floor condo.  When we applied for a mortgage loan, they actually said I was approved and there was no limit of how much I could request.  Although my loan person I was working with said I could loan up to 500k without question.  Anything more than that will probably be closer scrutenized.  I thought I did a financially smart decision at the time.  I was approved for 500k but we started looking for houses in the 100k - 150k price range.  I wanted the cheapest mortgate payment we could get.  We were strapped for cash at the time.  Our condo rent was $1400 and I figured if I got a house, the mortgage payment would be less.  Finding a house in the 100k-150k price range was really hard in the area we live in.  The only way we could get a house that cheap was to move about 2 hours or more from my work.  That wasn't going to work.  So, we upped it to 200k and got a house in that price range.  Still way less than I was approved for.

At the time when we moved into the house (2015), I was still driving my Impala I owned since brand new from 2004.  It had 250,000 miles on it.  My wife had a 2006 Montana that was getting close to 200,000 miles on it.  My impala was suprisingly better shape than the Montana.  But, we now had a family of 7, and the Impala only seated 5.  We were having a lot of days where my wife had to drive them somewhere during the day.  But I had to pick them up at night.  So, my wife would drop them off.  Then we'd meet half way through the day and swap cars so I could pick them up after work.  That was getting old real fast.  That's when I got the 2016 Buick Enclave which seated 7.  It wasn't new.  I did buy it used with 30,000 miles on it.  My wife's car did work.  I guess we didn't need to upgrade it.  But it was falling apart.  Rust holes in the doors and the back hatch.  Her glovebox door would fall off everytime you opened it because the hinges broke.  (I tried to fix it but had no luck.  I didn't see any hinges, but somehow it was connected at the bottom before.)  So, I had the door connected to the dashboard connected at the bottom with tie straps.  It worked, but really red neck.  So, my wife was a little jealous that I had a new car.  That's when she got the 2015 Yukon.  Not new.  We bought it in 2018.  So, it was 3 years old when we got it.  The Yukon seats 8, which is nice when we go on long road trips or we have a +1 when traveling. 

So, that's my justification for the house and cars.

[CreditInspired]

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@randomguy1 wrote:

The cold hard truth is you need to manage your finances better and stop living beyond your means. New cars, new house, 7 children, Yukon, and a few thousand in the bank. You need to evaluate your standard of living or you are at high risk to default again on debt in the future. 

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Please stay on topic and remember to be friendly, supportive, and respectful (FSR).  OP didnt ask the forum "what he needs to do." He asked "why a secured card needed to be reviewed since there was a deposit in place if one defaulted."