$3-$5K to "invest" with NFCU to continue to rebuild our credit, where to put it?

[cammyfive]

Some background:  DH and I are both 14 and 20 months post CH7 Discharge and have both re-established with revolving and installment credit.  I, as recently as this past Saturday, traded my car in on a new Honda and was approved with Honda Financial at a decent rate.  Her scores are in the lower/mid 600s across all CRAs ans FICO versions and mine are in the mid/high 600s with EQ FICO Autp 08 being a 703.  We each have 3 credit cards and do a PIF or AZEO every month and I end up paying mine off a couple times a month with the $1500 limit on my larget one (Fortiva).  We have both tried to pre-qualify on the NFCU website but neither of us do for any card other than the secured card.

I'm not opposed to the secured card at all as my goal over the next 12-24 months with them is to establish the strongest relationship possible with them.  We have joint checking with them, a savings account each, and I started a CD last month and will contribute $300 a month over the next 11 months to max it out.  I actually tried to obtain an auto loan with them before going with Honda Financial but was flat denied with "this application for credit doesn't meet NGCU guidelines".

So towards the beginning of next month I'll receive my bonus from 2020 and it will be fairly large.  After using a good bit of it to replenish our 3-6 month emregency savings account and a couple of home decor items for our home, I'll have maybe $5K leftover.  Since this money is a true "bonus" beyond what we budget I won't miss it if I have to tie it up with a NFCU secured card for 12 months or whatever.  My question, specfically, is should I use this approx $5K all in a secured card or should I split it up to say $2500 in a secured card and $2500 in a secured credit builder loan or maybe put a portion somewhere else with them?

TL;DR - What would you do with $5K to most effectively rebuild a relationship with NFCU?

[Gunnerboy]

I opened a Money Market Savings after opening checking and CC.

[coldfusion]

You've already addressed the first question I would have asked - prioritization of sufficiently funding your emergency cash reserve.  Kudos for that. 

At this point I would probably put say $2500 toward a secured nRewards card and the other $2500 as a payment directly against the principal on the auto (installment) loan, as lowering the utilization rate on the loan should have a direct positive impact on your credit scores.  You already have an installment loan by virtue of the car loan so there is no scoring benefit to be gained by opening a shared secure loan and you're already earning brownie points by having checking/savings and dumping money regularly into a CD. 

In 6 months try to refinance that car loan with them.    That will be a good guage on how well you are progressing both in a general sense and in how NFCU perceives you as a customer.

[cammyfive]

Good advice, thanks!

I was trying to think through how much of a deposit on a secured card would equate to a future credit limit when it does graduate to an unsecured card in hopefuly 6-12 months.  

[coldfusion]

With NFCU it's about laying groundwork and then working your way up.   The roadmap would look something like getting the secured card, letting it graduate, and then after a period of months of regular use and PIF behavior apply for a 2nd card since it has the potential for a significantly higher SL than your first card, keeping in mind that you will also want to maintain spacing between each step and factor in at least consideration of the refinancing of your auto loan.   If things break your way CLI requests wouldn't be much of a stretch either down the road a bit.

You've already accepted that this will be a 12-24 month process which is a reasonable expectation, just maintain a measured pace and don't try to do too much too fast.

[Anonymous]

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@coldfusion wrote:

At this point I would probably put say $2500 toward a secured nRewards card and the other $2500 as a payment directly against the principal on the auto (installment) loan, as lowering the utilization rate on the loan should have a direct positive impact on your credit scores.  You already have an installment loan by virtue of the car loan so there is no scoring benefit to be gained by opening a shared secure loan and you're already earning brownie points by having checking/savings and dumping money regularly into a CD

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While most of the advice offered was very good, not enough information was given regarding the before and potential after balance on the auto loan with a $2500 payment to say whether or not it would have a positive impact on OPs credit scores.  The majority of the time such a payment will have no impact on credit scores (unless 9% aggregate loan utilization is crossed), so I just want to make sure the OP doesn't plan on it, execute the payment and expect a gain that never comes. 

[cammyfive]

The plan with the auto loan is to make double payments each month.  I financed it for 5 years so that my "real budget" would be to pay the 5 year amount * 2 every month.  While re-fi'ing with NFCU down the line would be beneficial from a mathematical perspective, by planning to pay off the loan in 2.5 years instead of 5, it's not the highest priority.  

Applying the other $2500 against the loan is always good but I'd like to diversify that amount a bit as I'll be paying half that amount every month on the car anyway.  My goal with NFCU is to utilize their savings products for short to medium term goals - the Starter CD with a rate 3.44% is freaking awesome - and *eventually* obtain two medium to high limit ($15k-ish) unsecured cards with them so that all of our daily and misc expenses can be put on them and then PIF'ed once a month a day or so before the due/statement date.  I haven't seeen much talk about folks using NFCU for a mortgage but I'm certainly open to that too when our down payment goals have been reached around 1.5 to 2 years from now.  

I may throw $2500 all at once in the Easy Start CD to max it out and then the remaining $2500 to the secured card and be pleasantly surprised with the return of $5k plus interest in 12 months along with hopefully an unsecured decent limit card.