Need Advice Regarding Timing (CC or Car?)

[Anonymous]

Hello there. For some quick background, I am 24 yrs old, living with parents, and I work a busy 40-50 hour week and am expecting a $10k/yr promotion to bring me up to about $35k or so a year. My scores are 736 EQ, 715 TU, and 744 EX. My dad is very no-no about anything credit cards but obviouly it is very difficult to obtain any sort of credit without them or even get lower rates on auto loans, etc, without. I have a secured card through my bank ($300 limit) in which I use to simply build credit but I have not had the card for very long (9 months).

Lately I have been considering whether or not to get a second card in order to purchase a new laptop and then pay it off over 12 months or so in order to further build the credit. After getting that new CC (high limit, hopefully), then I would cancel the secured card and go from there. Where the timing comes into place is that at the end of March, my car will be toast. It barely runs as it is and I know it would not be worth putting any more money in to get emissions passed and all that jazz. SO that being said, I am looking at buying a new (used) car. I have time to save and whatnot as I can drive the other vehicles we own, but at some point, I will need to get a car of my own.

Priorities is not the issue as I know the car is more important, but I need some advice on timing. Obviously, if I want either or, that will involve a hard pull on my accounts. Would it hurt me to get a card first and then 2-3 months down the line apply for financing on a used car with a hard pull (let's just say $10-15k loan)? Or should I just save up for the car first and then get the card a few months later after my credit goes back up from an auto loan drop?

Also, knowing that my scores are pretty decent, would only running on 9 months of credit hurt my chances of possibly getting a higher limit card? Realistically, I only want about $2000, but since I know I have a young account, I fear I may only get approved for something like $1000. Any particular card I should aim for with the information provided?

Any advice would be greatly appreciated. I will respond whenever I can, you know, work and all.

[takeshi74]

---

@Anonymous wrote:

I have a secured card through my bank ($300 limit) in which I use to simply build credit but I have not had the card for very long (9 months).

Lately I have been considering whether or not to get a second card in order to purchase a new laptop and then pay it off over 12 months or so in order to further build the credit. After getting that new CC (high limit, hopefully), then I would cancel the secured card and go from there.

---

If you've only had a $300 secured card for 9 months I wouldn't expect you to get a high limit card though it's not clear what you mean by "high".  Words like that are very subjective so always be very specific versus assuming that your notion of the subjective word is the same as everyone.  Building credit is a long, slow process and you're just starting out with a very thin profile.  You'll need to gradually add cards to build your profile.  The general recommendation is at least 2-3 cards for scoring purposes.  If would have 2-3 cards after closing the secured card then consider closing it.

EDIT: Didn't see the $2,000 limit you mentioned.  It may be possible but we can't say for certain.  We're not underwriters and we don't know the specifics of the underwriting criteria for any product.

---

@Anonymous wrote:

Priorities is not the issue as I know the car is more important, but I need some advice on timing. Obviously, if I want either or, that will involve a hard pull on my accounts. Would it hurt me to get a card first and then 2-3 months down the line apply for financing on a used car with a hard pull (let's just say $10-15k loan)? Or should I just save up for the car first and then get the card a few months later after my credit goes back up from an auto loan drop?

---

With your credit profile you're going to have difficulty qualifying for good terms on an auto loan. Inquiries are generally a small factor but a credit profile like yours is going to see a bigger hit because it's so thin and so young. It will also see a bigger hit from new accounts. You'll want to finalize the auto financing first as a new card will have quite a bit of impact. However, you're probably going to have difficulty with the auto loan as well and even if you qualified you'd probably get very unfavorable terms with your credit profile. Ideally you'd build your credit profile, getting to 2-3 cards with the newest card being at least 6 months old and then look at auto financing. It sounds like getting a cosigner might not be an option for you but look into it if you can. Also see if you can pay outright for a used vehicle that doesn't require financing.

However, if you do decide to put off or find an alternative to financing a car in the near future you're probably at a good point to go for an unsecured card.  Just make sure that your secured card is reporting a very low balance (10% or less if you can swing it but not 0) before applying.

---

@Anonymous wrote:

Also, knowing that my scores are pretty decent, would only running on 9 months of credit hurt my chances of possibly getting a higher limit card?

---

It's never just about score.  Your entire credit profile and your income will determine the limits that you qualify for.  One card is a very thin profile.  9 months is no time at all in the credit world.

I'm sure none of that is what you want to hear but you'll want to set realistic expectations.

---

@Anonymous wrote:

Any particular card I should aim for with the information provided? 

---

Creditors/products can have different underwriting requirements but don't rely solely on the creditor/product.  I don't have suggestions but there are certainly other discussions about creditors and products that tend to have more lax requirements and others will definitely chime in.

---

@Anonymous wrote:

My dad is very no-no about anything credit cards

---

Credit cards aren't inherently a problem.  It's people misusing them that is the problem.  One can build credit with credit cards without incurring debt but that takes responsibility and treating the cards as if they are cash so one does not spend what one does not have.  Credit is must these days not just for large purchases but for renting, insurance, employment, etc.

[Anonymous]

Great responses by Takeshi, as usual.

I note that our OP writes (emphasis mine):

"I have been considering whether or not to get a second card in order to purchase a new laptop and then pay it off over 12 months or so in order to further build the credit."

It's common to think that making a large purchase on a credit card and then slowly/steadily paying it off over time (12 months, 18 months, etc.) will help you "build" credit.  Intuitively that seems like it would be the case.  But in fact it is not.  When the laptop is finally paid off, you will have no better credit than if you had bought a cup of coffee on the new card every couple months and then paid your card in full (after the statement printed).  And during the first 4-7 months, your credit score is likely to be far worse, since you will have increased your CC utilization and also the number of cards reporting a balance.

You write that you will for a while be able to drive other cars (e.g. owned by family members) after yours dies.  The key question is how long.  If you could survive that way for nine months, here is a reasonable approach:

*  Wait for three more months.  At that point your AAoA will be 1 year and you will be in good shape to apply for a nice card. 

*  After you are approved for your new card, your AAoA will drop to 6 months. 

*  Wait another six months and your AAoA will be back up to 1 year.

*  Apply for your car loan then.

It's crucial also that you understand how to maximize your score before an important credit pull (e.g. before you apply for the card and again before you apply for the car loan).  You will want to have one card showing a small positive balance (like $10).  All other cards (if you have any) should be reporting $0.  Are you doing that now?

And be sure to do what Takeshi says and do NOT cancel your secured card until you have at least 2 other cards you like (preferably 3).

[Revelate]

Sort the car first.

Then once obtained, go get two more credit cards.  Then refinance the car if needed six months after that and sit on your hands never missing a payment if all you need is the credit history.  A secured card counts the same as an unsecured one from a FICO perspective, I'd hang on to it for a while longer.

[Anonymous]

Hey guys, thanks for the advice. As it was late last night, I did forget to mention that the auto loan would have a co-signer no matter what as I do understand that getting a loan might be possible but at a horrible rate. The car is technically priority but I know my dad wants me to drive one of the other cars for at least a good 6-8 months before I get a new car, which is what spurred all of this.

I just figured, with the promotion on the way (literally less than a week away), I could hopefully report a good income to whoever I apply for a credit card to, and in turn, get a decent limit. I honestly don't even want anything higher than 1500-2000 realistically, my whole thing is getting the laptop and then paying it off in total less than a year, then I would have a good card that I could run a low utilization on and further build credit over time. My hope was that after I got the laptop paid off before the end of the year, I would get a car, which would profile me with 2 cards and an auto loan for a little diversity.

I think for now I will just hold out, I suppose. I always pay off my card and have zero marks against me, so I will probably wait another 2-3 months when my secured card is at a year, in which my bank says they will ask me if I want to convert it to unsecured with a higher limit (my bank told me typically for new users, they aim for about $1000 or so if I am in good standing). I guess I will just see how that pans out.

Thanks again to everyone for the advice!!