My first card and overall plan: What do you think?

pdxuser · ‎02-22-2008

I'm looking at my credit union's secured Visa as my first credit card. The APR is 11.75-19.25% (4.5 to 12% margin, adjusted quarterly) for both purchases and cash advances, with a 25-day grace period on purchases. There are no annual, application, minimum finance, cash advance or ATM withdrawal charges. Overages are $26, lates (more than 10 days) are $15 or 5%, whichever is greater, with no APR penalties. Minimum payments are 3% or $10, whichever is greater. The limit is two-thirds of whatever I secure it against. The card automatically converts to an unsecured Visa with otherwise identical terms after 12 consecutive on-time payments.

I'm pretty sure this is a great first card, and one I can keep for a long time, given that it converts to an unsecured after a year. Someone said to make sure that the conversion works so that it appears as a year-old card after conversion and as not two cards -- one new and one closed. Is there anything else I should ask and check about?

Since the only store I shop at regularly doesn't have a store card, I'm skipping getting one, and I'm not planning on getting another major until a lot later when I qualify for a rewards card I like. My ultimate goal is a good mortgage rate. The myFICO estimator for just one card would put me at 695-745 if I keep my balance below 10% for 6 months, with no advantage for getting more cards. Does anyone have any concerns with my one-card-for-now approach? I don't believe I will have trouble staying under 10% util, or even at 1% util, no matter how low the limit. I really don't need the card itself, just what it will do for my score.

Anonymous · ‎02-22-2008

1 card, good credit does not make - your file will still be considered "thin". If you are 20 years old, and have years ahead of you to build credit, then 1 card would be fine. But with no history, and a mortgage in your plans (unless they strictly go by the score number alone) I don't think 1 card is going to do it. To be viewed as credit worthy you need a good mix of credit, usually with a minimum of 3 credit products.

Anonymous · ‎02-22-2008

I agree with Stylin. You need minimum of 3 CREDIT CARDS and stay away from store CCs.

I believe you are reading many posts on this forum and you understand what Stylin and I says.

Message Edited by bunnyrabbit on 02-22-2008 03:57 AM

haulingthescoreup · ‎02-22-2008

I'd say start with the plan you described, and then plan to add another card after 6 months, and eventually one more. If your scores at 6 months allow you to get two good cards then, go for it, but I'm guessing you'd benefit by waiting.

If your overall goal is to have a minimum number of high-quality cards (good goal, BTW) and at some point a mortgage, it would be useful to get your cards within a narrow time frame (now - 6 months - 12 months) so that your account doesn't keep re-aging. Then by the time you go for the mortgage, you history will look very stable without recent credit seeking, and your scores will benefit as well.

* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007

Anonymous · ‎02-22-2008

@Anonymous wrote:
...and stay away from store CCs.

Message Edited by bunnyrabbit on 02-22-2008 03:57 AM

Bunny, why do you recc staying away from store/gas cards? When you have limited history &/or thin file, it's hard to get approved for unsecured bank cards. I do understand the ridiculous rates, but if someone is strictly looking to create good history and tradelines (as opposed to actually spending on the cards) do you still think they are bad?

Haulin' I wanna be a gardener so badly! Hunting is exhausting lol...

Anonymous · ‎02-22-2008

Sorry Stylin, I forgot to add "if you can". I didn't mean to make you up-set.

Anonymous · ‎02-22-2008

No Bunny! Not upset(?) at all - sorry if it read that way, I tend to have a 'dry' writing style :-)
I asked because I honestly wanted to know what you thought about them. I thought maybe there were some other 'cautions' I missed?...I definitely agree with avoiding them unless you gain some benefit from them. For some ppl it's rewards, discounts etc. In my case they just serve as 'pd as agreed' tradelines for history lol :-)

Anonymous · ‎02-22-2008

Forgive me Stylin, English is my second language and I am still learning it especially the words did not teach in school.

pdxuser · ‎02-22-2008

Thanks, all! One of the factors in going with just one card for now was seeing that the FICO score wouldn't be helped much by having more cards. That made me think that maybe playing for some points on the margins by getting more cards I don't need wasn't as important as simply getting only the cards I know I'm going to want in my pocket for a long time.

Also, about that mortgage, I was planning to first get the house with my aunt/uncle as the borrower and me as the co-borrower, but with me also making all the payments. Later I would refinance as the sole borrower. That's the point at which I would think my credit history would be important. If at that time I have just one card, but I also have this mortgage that I've been making all the payments on (as documented by my checks and a statement from my aunt/uncle), would my history still be considered thin?

If so (I was thinking one card made me look super-conservative with money), I could go for more cards.

Let's say the mortgage refinance is 3 years down the road. At that point, I want to have, what, three cards, all older than a year, which would also mean no hard pulls visible (don't they fall off after a year)?

So, how should I get there, should I try to get a couple nice cards after two years of my lone Visa? Or are nice card underwriters going to want to see a two-card history already, meaning maybe after a year of my first Visa I should either consider getting a store card again or perhaps apply for a national credit union's card, then a year after that go for a nice rewards card, and a year after that go for the mortgage?

Message Edited by pdxuser on 02-22-2008 10:36 AM

Anonymous · ‎02-22-2008

pdxuser wrote:
Also, about that mortgage, I was planning to first get the house with my aunt/uncle as the borrower and me as the co-borrower, but with me also making all the payments. Later I would refinance as the sole borrower. That's the point at which I would think my credit history would be important. If at that time I have just one card, but I also have this mortgage that I've been making all the payments on (as documented by my checks and a statement from my aunt/uncle), would my history still be considered thin?

Yes. One CC and one mortgage is a thin file. Three revolving accounts is a good number, as long as none of them are still new when you apply for the refinancing.

pdxuser wrote:

Let's say the mortgage refinance is 3 years down the road. At that point, I want to have, what, three cards, all older than a year, which would also mean no hard pulls visible (don't they fall off after a year)?

They fall off after two years, but stop affecting your score after only one year. If you get one card now, another one in six months, and another one in 12 months as HTSU suggested above, then in 3 years time you will have three accounts, average age of 2.5 years, none less than two years old, and zero inquiries showing.

How does that plan sound?