I had two secured credit cards right after my Chapter 13 was discharged; I did end up closing one after only a few weeks, but not because of any redundency, I did it because at the time one of the secured cards was widely reported to take years to graduate, if ever, and because they were putting holds on my payments. With that said, based upon my experience and that of many of the posts I've read here, I suspect you are either not looking at FICO scores or there is something else going on. So, first question, where are you getting your scores from?
Vantagescore is very sensitive to new apps and utilization changes. It's not unheard of to have scores significantly differ from fico.
When I added accounts I noticed that Vantage scores dropped more than FICO, because I had several older closed accounts in my reports. Vantage only cares about the open ones. When you add a couple and you only had one to start with, you're going to see a drop from Vantage. Once you're done adding accounts the Vantage scores will start moving back up fairly aggressively. I had multiple secured cards, then when my scores moved up a bit I closed those from less desireable issuers that would never graduate and added a couple that would. My Vantage scores took a pretty big hit when I did that while FICO only dipped slightly. Now months later, Vantage scores are up to 700 while FICOs are around 670. Discover and FNBO secured cards graduated. Capital One hasn't graduated but they approved me for an unsecured Savor One. So the plan to switch out my secured cards has paid off.
@claus wrote:Hello,
I initially had an unsecured cc but wanted to facilitate the credit building so I applied for two additonal secured credit cards. I actually noticed my credit score took a dramatic hit (from 700s to 600s - I have no idea why) after a secured cc account was added to my credit history. My understanding is that secured cc shouldn't have any big negative impact to the credit score? (other than the usual minor impact of adding new account that should be offset by increase in credit line). Has this occured to anyone?
Also, does the strategy of having multiple cc's actually help building the credit history? In hindsight, maybe I just needed 1 unsecured cc and make consistent 6 to 12 months of payments? So the fact that I got two secured cc's are actually redundant? I watched a youtube video where the OP was explaining having unsecured credit card is much more beneficial to credit score and implying having secured credit cards on credit report is actually detrimental.
Thank you for your help.
Hey there and welcome!
Whenever a new TL is added to your CR whether it is a loan or a CC you will take a temporary hit. This is due to several factors including your AAoA being lowered and the potential addition of a new HP. Give it a few months and you'll see it begin to climb again. This is normal.
Multiple CCs: yes! General rule of thought around here is that having 3 revolvers whether secured or otherwise is the perfect number to get started. With 3 you can practice AZEO. Multiple revolvers with good payment history demonstrates to potential creditors you are able to manage multiple open TLs properly. Having only 1 revolver of any type does not bode well for obtaining an excellent FICO score. I think the only major time secured comes into play is with a manual review such as happens with a mortgage ... but others may have a definitive answer on that.
A secured CC is scored the same as a nonsecured CC with FICO from my understanding. Some will report as secured while others will not ... it's up to the OC and their own policy. FICO basically sees an open revolver, the CL, and most importantly your payment history. Keep the secured you have open and if possible add to their deposit account to increase the CL if you can and *need*. This will greatly help with your total availability. No need to have multiple thousands on the cards - I've seen plenty here with 1k total between 3 or 4 cards eventually reach the magical 800s. Keep the cards and after 12 months or so of ontime payments you should begin to qualify for an unsecured version. Many out there will eventually graduate to unsecured: Discover seems to be a popular option for this. Once you begin getting unsecured cards with a decent CL you can replace those secured that have a higher AF ... just get the new card prior to cancelling the old.
Payment history, total TL to calculate availability %, and age are the big three for a CC on your CR. 9% usage of $500 is viewed the same as 9% usage of $5000 as far as scoring.
Vantage scores: FICO is the one that matters. Vantage should really have the disclaimer "for entertainment purposes only" lol. Very very few lenders use Vantage as their sole decision making tool for CCs ... I can't think of any right off but others may know of some. Your FICO is the one that matters. Vantage whether from CK or your CC company or another online source - you'll find these swing madly with the wind. This is the usual. I've seen my Vantage go down while my FICO went up and vice versa - always good for a laugh. This is also why you will rarely see a Vantage score displayed proudly in any autosignature.
Other more seasoned may have something to add etc.
Again welcome!
PS - take the YouTube videos with a grain of salt - the creators are only after views and interactions; lots of garbage and incorrect info there. A secured card being "much more beneficial" does not hold weight. For accurate information you have come to the right spot. Use the search feature like crazy. Ask questions. You're guaranteed to get *accurate* and helpful information right here not to mention your own personal team supporting and cheering you on. Cheers! :-)
No prob. Again, the TL reporting as "secured" does not affect scoring. It's the fact it is a revolver: that's the bread and butter.