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

[pdxuser]

PS: One of the reasons I want to avoid getting an unnecessary store card or whatnot would be because I want to avoid canceling them later when I have better credit and better cards. But upon reading more, it seems like the only drawback to canceling cards is that it reduces your util and overall amount of credit. It doesn't seem to reduce your average credit age, if I'm reading correctly. I don't think I have to worry about the util -- like I said before, I'm pretty sure I can make my usage as tiny as it needs to be; the cards aren't for me, they're for my credit report.

That said, there just seems like there's something undesirable about having the carcasses of lousy credit cards piled up at the bottom of a credit report. Am I missing something?

[Anonymous]

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pdxuser wrote:

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?

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I know you know about this, since you mentioned it yourself, but I just wanted to emphasize the point one more time.  Since the reason you are looking for credit now is for mortgage shopping in a few years time, this is a VERY, VERY important point.

Make absolutely sure that when they graduate your secured card, you will keep the same account with all the history rather than getting a brand new account.  Mortgage brokers are notoriously antsy about too many new accounts.

[Anonymous]

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pdxuser wrote:

PS: One of the reasons I want to avoid getting an unnecessary store card or whatnot would be because I want to avoid canceling them later when I have better credit and better cards. But upon reading more, it seems like the only drawback to canceling cards is that it reduces your util and overall amount of credit. It doesn't seem to reduce your average credit age, if I'm reading correctly. I don't think I have to worry about the util -- like I said before, I'm pretty sure I can make my usage as tiny as it needs to be; the cards aren't for me, they're for my credit report.

That said, there just seems like there's something undesirable about having the carcasses of lousy credit cards piled up at the bottom of a credit report. Am I missing something?

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Why cancel them then?  Just because you wouldn't use them any longer doesn't mean they need to be canceled.  You'd just have to use them every couple of years so the store doesn't cancel them unilaterally.

[pdxuser]

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cheddar wrote:

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?

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I would be cool with that, if I could get the cards I want that fast. The secured card I want now doesn't convert to unsecured until after a year. While the FICO score doesn't care about the secured status (according to other users, I don't know the sourcing for that), the card is titled "Secured Visa," so I'm guessing the word "secured" will show up in the tradeline. If that's the case (or even if it isn't), would it be difficult getting a rewards card in 6 months? Would I be eligible perhaps for a national credit union's Visa at that point? It would be pretty redundant to have two CU Visas, but at least I wouldn't dislike either of them. And then six months after that, would it still be difficult to get a rewards card, with only a year's history and an average age of 9 months?

[pdxuser]

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cheddar wrote:

Make absolutely sure that when they graduate your secured card, you will keep the same account with all the history rather than getting a brand new account.  Mortgage brokers are notoriously antsy about too many new accounts.

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Is that the key word, "graduate," that I should look for? What's the alternative?

[pdxuser]

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cheddar wrote:

Why cancel them then?  Just because you wouldn't use them any longer doesn't mean they need to be canceled.  You'd just have to use them every couple of years so the store doesn't cancel them unilaterally.

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I thought there was some downside to having inactive accounts open. Too high a credit-to-income ratio, maybe? Possible inactivity fees? Anything else?

[pdxuser]

Oh, another question: would having a very low overall credit limit be considered a bad thing, similiar to having a thin history, showing that I haven't handled much risk? I believe there's such a thing as CLs that are too high for a loan officer's comfort, but is there such a thing as CLs that are too low for them?

[Anonymous]

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pdxuser wrote:

I would be cool with that, if I could get the cards I want that fast. The secured card I want now doesn't convert to unsecured until after a year. While the FICO score doesn't care about the secured status (according to other users, I don't know the sourcing for that), the card is titled "Secured Visa," so I'm guessing the word "secured" will show up in the tradeline. If that's the case (or even if it isn't), would it be difficult getting a rewards card in 6 months? Would I be eligible perhaps for a national credit union's Visa at that point? It would be pretty redundant to have two CU Visas, but at least I wouldn't dislike either of them. And then six months after that, would it still be difficult to get a rewards card, with only a year's history and an average age of 9 months?

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It is true that FICO doesn't care if a card is secured.  You can count on that.

The card's title is irrelevant, too.  Only the name of the card issuer will show up on your report, not the name of the card itself.

There are several cards you will be eligible for with only 6 months of history.  Orchard Bank and Capital One cards come to mind.  These cards will not grow with you, but they will serve their purpose in helping you establish history.

CUs have rewards cards, as well.  The choice between getting  rewards card vs. getting a card from another CU doesn't even come into play.  If you want a rewards card after a year, a CU would be good place to look.  Do you have a car?  Penfed has a card that gives you 5% back on gas purchases.

[Anonymous]

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pdxuser wrote:

Is that the key word, "graduate," that I should look for? What's the alternative?

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No, there is nothing in particular to "look for."  The term "graduate" applies in either case.  You need to ask the CU's member services representative about their procedure to eventually unsecure a secured card.  Ask them if the unsecured card will report as a new TL or if it will inherit the history of the secured card.  You want the latter.  After that, all you can do is hope that person knows what s/he is talking about.

[Anonymous]

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pdxuser wrote:

I thought there was some downside to having inactive accounts open. Too high a credit-to-income ratio, maybe? Possible inactivity fees? Anything else?

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Nope.  No downside other than:

1) FICO will stop counting the cards in its utilization calculation after a certain amount of time.  The theories on this timer period range from 3-6 months.  Use them every now and then to avoid this happening.

2) The issuer will unilaterally close an account due to inactivity after a certain period.  This varies from issuer to issuer, but for store cards it's usually uite a long time.  I've seen stories of some cards that stayed open and inactive for 2 years.

I've never heard of a store card that charges inactivity fees.

A high credit-to-income ratio may be a factor at the extreme.  With only three cards, how high do you really expect that ratio to be in your case?