High Limit Secured Card Graduation

[vV35Hszm]

Here's a hypothetical question...

Let's say someone gets a large secured card like $10K.

If that person uses the card responsibly eventually the bank will graduate it right?

But if that person has a low income... say $30K, and wouldn't normally qualify for that much-unsecured credit, what does the bank do?

They could graduate it, not graduate it, or I guess graduate it and reduce the credit?  Does anyone have any experience in this?

[SOGGIE]

I would think that the amount of the deposit approved by the issuer would be according to income. If, for example, an applicant earns $10K annually (part-time), I could not see a lender approving a $5K deposit (50% of annual income) for a secured credit card account that graduates to unsecured.

[vV35Hszm]

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@SOGGIE wrote:

I would think that the amount of the deposit approved by the issuer would be according to income. If, for example, an applicant earns $10K annually (part-time), I could not see a lender approving a $5K deposit (50% of annual income) for a secured credit card account that graduates to unsecured.

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From what I have read you set your own limit with a secured card with the deposit.   Some people have no "income" but have savings, inheritance, insurance settlements, etc. so it makes sense.   The graduation is the tricky part.

[Anonymous]

When I got pre-approved online with Discover Secured it gave me a credit limit as to how much I can deposit.  $2000.

I read from someone else on this forum that said they deposited additional money right before their card graduated so they would graduate  with a higher limit.  

[SOGGIE]

OP's question is income-relative, not whether or not OP can set an amount for deposit.

vV35Hszm wrote "They could graduate it, not graduate it, or I guess graduate it and reduce the credit? Does anyone have any experience in this?"

So the concern here is (upon graduation) what would more likely be the bank's decision regarding credit limit relative to OP's income. My initial response addresses that as I have known others in the same sito to experience a reduced CL upon graduation of their card because the cardholder's income did not support the same limit it once did while the account was in secured status.

[SOGGIE]

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@vV35Hszm wrote:

But if that person has a low income... say $30K, and wouldn't normally qualify for that much-unsecured credit, what does the bank do?

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In such case, it is probably wiser for that person to open multiple secured card accounts (that will graduate to unsecured) as opposed to one single secured account with a high limit that their income may not support. The benefit to this is that the person will have more (say 4+ or so) unsecured accounts that will grow together--strengthening their credit profile. Hope this helps.

[Revelate]

It's really impossible to state as it depends on lender and probably on your own credit behavior: my own experience back in 2012, I had a BOFA secured card at 2K, I bumped it up to 5K, and I graduated at 2500.  In my case I floated a balance for a month trying to set a gnarly high balance, paid the whole thing off as soon as it reported, but they may have dinged me for it as that was their excuse for the reduced limit graduation (which I took anyway).

Really if I had to do it all over again I'd get 3 minimum CL secured cards, and 1 minimum amount 5ish year term share secured loan (and play the SSL reindeer games if possible) and call it good for a year.  Winds up being more beneficial FICO wise in the future when we're talking building over 3-4 years anyway, and we're still in a very relaxed credit market and I suspect will be there for a while.

[Anonymous]

That depends on the manner in which use the card and your income. To me, it makes sense to open multiple secured cards that are able to graduate. Doing so leaves your credit profile in a really better place than it was before. But your results may vary, of course.

[Brian_Earl_Spilner]

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@vV35Hszm wrote:

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@SOGGIE wrote:

I would think that the amount of the deposit approved by the issuer would be according to income. If, for example, an applicant earns $10K annually (part-time), I could not see a lender approving a $5K deposit (50% of annual income) for a secured credit card account that graduates to unsecured.

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From what I have read you set your own limit with a secured card with the deposit.   Some people have no "income" but have savings, inheritance, insurance settlements, etc. so it makes sense.   The graduation is the tricky part.

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Actually, most secured cards have limits based on your ability to pay. Just because wells Fargo offers up to a 10k secured card, doesn't mean everyone can get it. Hell, Discover has done hard pulls before if you wanted to add to your secured card later.

[SOGGIE]

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@Brian_Earl_Spilner wrote:

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@vV35Hszm wrote:

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@SOGGIE wrote:

I would think that the amount of the deposit approved by the issuer would be according to income. If, for example, an applicant earns $10K annually (part-time), I could not see a lender approving a $5K deposit (50% of annual income) for a secured credit card account that graduates to unsecured.

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From what I have read you set your own limit with a secured card with the deposit.   Some people have no "income" but have savings, inheritance, insurance settlements, etc. so it makes sense.   The graduation is the tricky part.

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Actually, most secured cards have limits based on your ability to pay. Just because wells Fargo offers up to a 10k secured card, doesn't mean everyone can get it. Hell, Discover has done hard pulls before if you wanted to add to your secured card later.

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@Exactly! The last thing a credit builder or rebuilder is looking forward to is a CLD upon graduation of a secured cc in the event the card issuer makes the determination that he/she lacks the ability to pay. That is why it is best to make smaller investments in multiple accounts. Once the the cardholder acquires higher income, he/she can request CLIs on each of the multiple unsecured accounts. If it were me, I would get 4 secured cards @ $1K each, a SSL @ $500 for a 4-yr term and invest any remaining funds in an account that would generate revenue.