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Credit Newcomer Seeking Advice: Please Help

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Absolution16
Frequent Contributor

Credit Newcomer Seeking Advice: Please Help

Hello to the community.  I just signed up for MyFICO 3B monitoring service last week, and decided to start participating in the forum community.

 

My situation is rather unique... or I think it is, so I thought I would ask away and seek for advice on what I should do for the next 24 months in order to prepare for what I think is inevitable.

 

Please scroll to the bottom if you don't want all the ugly details of my brief history and cut to the chase with my questions.

 

Brief History:

 

I have been, for the vast majority of my life, been living on cash spending.  It's certainly been strictly cash spending for the past 8 years.  Every spending has been via either cash, check, or debit card.   Except for a brief time period between 2006 and 2008, when I had a combination of 4 credit and store cards during that time.  However, I closed them down in 2008, and never used credit in any form until I opened up a secured card with Capital one in June of last year.

 

The reason was that I recently started up a business, and I realized that I needed to start establishing credit, not just for the business, but personally as well, because otherwise I wouldn't get anywhere.

 

Exactly on Jan 31 of this year, I went into Experian's website and looked at my credit report of all 3 bureaus by purchasing their "3-Bureau Credit Report."  At that time, my credit scores were 758 EX, 783 EQ, and 775 TU.  I immediately applied for Chase Sapphire Preferred.  I was sent an e-mail indicating that further review would be necessary.  A week later, a welcome e-mail arrived without letting me know what my credit limit would be.  It turned out I was approved for 16k CL.  Reason for the signup: I was lured away by the sign-up bonus, which in combination with my accumulated mileage, will get me a free round-trip ticket overseas.

 

Then, a friend of mine suggested that I get a good cashback card for more daily use, so I eventually ended up applying for AMEX Blue Cash Everyday on Feb 22, and got instantly approved for 1k.  (I still don't understand how there is so much variation in credit limit granted between the two cards)

 

At this point, I might have made a mistake.  I closed my secured Capital One card, thinking that I don't need it anymore, and most certainly, wanted my deposit back without paying that annoying annual fee.

 

Now, after reading numerous posts and blogs and information all over the web, I am beginning to worry and ponder what my best courses of action should be from now on.

 

After closing down my Capital One account, my FICO score took a dramatic hit:  EX 758 -> 651, EQ 783 -> 682, TU 770 -> 721.  I was so shocked.  Then I realized that maybe I was too hasty in closing down what is considered my oldest active credit line, even if it was a miniscule $901-CL secured credit card.

 

The bureaus have apparently updated my information by adding my Chase information (but not AMEX since the first statement has not been closed yet), and I could see that my EX is now at 717 (My FICO still showing 651, but Experian's site is showing 717), and EQ showing at 736 at MyFICO.  TU hasn't had an update, and I don't know if there has been an update.

 

It would seem that my score will get updated again once AMEX's first statement has been produced, for better or worse.

 

I feel so stupid for being so uninformed about how credit works, and how I have been ignoring it for so long time, but I feel that I should get started now rather than later.

 

MY QUESTION IS:

 

What are my optimal courses of action with the following information:

 

1) In my credit reports, I have total of 6 accounts showing, 4 of them all closed by fall of 2008.

2) The 5th account is the secured credit card that I had from June of last year, until I closed it in late Feb this year.

3) I just opened 2 new credit cards.  Chase information was posted with 16k CL and 9% utilization.  AMEX info hasn't been posted to any bureaus.

4) Hard inquiries within the last 12 months:  2 Chase inquiries (one for Sapphire Pref, and one for the business which I got denied), 1 AMEX, 1 for the now-closed Capital One, and 1 other when I applied with a new credit card processing company for my business.

 

My main concerns are:

 

1) My next report update will have 7 revolving accounts, but 5 of them has been closed already, and the other 2 I have just opened them this year.

2) Of the 5 closed accounts, 4 of them were all closed in 2008, meaning that by 2018, the information of those accounts will fall off my credit reports, which will most likely reduce my credit history dramatically.

 

 

Other Relevant Info:

 

1) I logged into my AMEX, and requested a CL incrase from 1k to 3k.  Got an e-mail stating that I should call them.  Given that today is Sunday, they were closed, so I plan to give them a call tomorrow.

2) I have spent about $700 into the card, but made 3 payments to them already, so the balance is currently below $80 right now.  1st Statement closing on 3/17.

3) I only plan to apply for one more credit card: Chase Freedom, to better utilize my Ultimate Reward Points, and to use it as my 2nd everyday card in conjunction with the AMEX card.

 

Thank you for reading all that boring history if you took the time to read all of that.  I wish I have found this place much earlier.  I regret that I have been ignoring credit for so long, but the good news is that I have no negative information such as missed payments, late payments, bankruptcies, charge-offs, etc.

 

Any advice, however short or long, would be greatly appreciated.  Thanks.

 

EDIT: The number of inquries stated above is based on Experian data.

 

For the last 12 months, I have 2 inquiries on Equifax and 1 inquiry on TransUnion, largely thanks to CapitalOne doing hard pulls on ALL 3 bureaus for credit card application.

 

I live in Orange County, CA, and it seems that pretty much any worthwhile credit card applications are gonna require hard pulls through Experian, so I am much more sensitive to them than the other 2 bureaus.  If I were to app for another credit card in the future, I would prefer applying with the bank that does not pull from Experian, but I have yet to see any that is worthwhile for me.

 

 

Message 1 of 19
18 REPLIES 18
SouthJamaica
Mega Contributor

Re: Credit Newcomer Seeking Advice: Please Help


@Absolution16 wrote:

Hello to the community.  I just signed up for MyFICO 3B monitoring service last week, and decided to start participating in the forum community.

 

My situation is rather unique... or I think it is, so I thought I would ask away and seek for advice on what I should do for the next 24 months in order to prepare for what I think is inevitable.

 

Please scroll to the bottom if you don't want all the ugly details of my brief history and cut to the chase with my questions.

 

Brief History:

 

I have been, for the vast majority of my life, been living on cash spending.  It's certainly been strictly cash spending for the past 8 years.  Every spending has been via either cash, check, or debit card.   Except for a brief time period between 2006 and 2008, when I had a combination of 4 credit and store cards during that time.  However, I closed them down in 2008, and never used credit in any form until I opened up a secured card with Capital one in June of last year.

 

The reason was that I recently started up a business, and I realized that I needed to start establishing credit, not just for the business, but personally as well, because otherwise I wouldn't get anywhere.

 

Exactly on Jan 31 of this year, I went into Experian's website and looked at my credit report of all 3 bureaus by purchasing their "3-Bureau Credit Report."  At that time, my credit scores were 758 EX, 783 EQ, and 775 TU.  I immediately applied for Chase Sapphire Preferred.  I was sent an e-mail indicating that further review would be necessary.  A week later, a welcome e-mail arrived without letting me know what my credit limit would be.  It turned out I was approved for 16k CL.  Reason for the signup: I was lured away by the sign-up bonus, which in combination with my accumulated mileage, will get me a free round-trip ticket overseas.

 

Then, a friend of mine suggested that I get a good cashback card for more daily use, so I eventually ended up applying for AMEX Blue Cash Everyday on Feb 22, and got instantly approved for 1k.  (I still don't understand how there is so much variation in credit limit granted between the two cards)

 

At this point, I might have made a mistake.  I closed my secured Capital One card, thinking that I don't need it anymore, and most certainly, wanted my deposit back without paying that annoying annual fee.

 

Now, after reading numerous posts and blogs and information all over the web, I am beginning to worry and ponder what my best courses of action should be from now on.

 

After closing down my Capital One account, my FICO score took a dramatic hit:  EX 758 -> 651, EQ 783 -> 682, TU 770 -> 721.  I was so shocked.  Then I realized that maybe I was too hasty in closing down what is considered my oldest active credit line, even if it was a miniscule $901-CL secured credit card.

 

The bureaus have apparently updated my information by adding my Chase information (but not AMEX since the first statement has not been closed yet), and I could see that my EX is now at 717 (My FICO still showing 651, but Experian's site is showing 717), and EQ showing at 736 at MyFICO.  TU hasn't had an update, and I don't know if there has been an update.

 

It would seem that my score will get updated again once AMEX's first statement has been produced, for better or worse.

 

I feel so stupid for being so uninformed about how credit works, and how I have been ignoring it for so long time, but I feel that I should get started now rather than later.

 

MY QUESTION IS:

 

What are my optimal courses of action with the following information:

 

1) In my credit reports, I have total of 6 accounts showing, 4 of them all closed by fall of 2008.

2) The 5th account is the secured credit card that I had from June of last year, until I closed it in late Feb this year.

3) I just opened 2 new credit cards.  Chase information was posted with 16k CL and 9% utilization.  AMEX info hasn't been posted to any bureaus.

4) Hard inquiries within the last 12 months:  2 Chase inquiries (one for Sapphire Pref, and one for the business which I got denied), 1 AMEX, 1 for the now-closed Capital One, and 1 other when I applied with a new credit card processing company for my business.

 

My main concerns are:

 

1) My next report update will have 7 revolving accounts, but 5 of them has been closed already, and the other 2 I have just opened them this year.

2) Of the 5 closed accounts, 4 of them were all closed in 2008, meaning that by 2018, the information of those accounts will fall off my credit reports, which will most likely reduce my credit history dramatically.

 

 

Other Relevant Info:

 

1) I logged into my AMEX, and requested a CL incrase from 1k to 3k.  Got an e-mail stating that I should call them.  Given that today is Sunday, they were closed, so I plan to give them a call tomorrow.

2) I have spent about $700 into the card, but made 3 payments to them already, so the balance is currently below $80 right now.  1st Statement closing on 3/17.

3) I only plan to apply for one more credit card: Chase Freedom, to better utilize my Ultimate Reward Points, and to use it as my 2nd everyday card in conjunction with the AMEX card.

 

Thank you for reading all that boring history if you took the time to read all of that.  I wish I have found this place much earlier.  I regret that I have been ignoring credit for so long, but the good news is that I have no negative information such as missed payments, late payments, bankruptcies, charge-offs, etc.

 

Any advice, however short or long, would be greatly appreciated.  Thanks.

 

EDIT: The number of inquries stated above is based on Experian data.

 

For the last 12 months, I have 2 inquiries on Equifax and 1 inquiry on TransUnion, largely thanks to CapitalOne doing hard pulls on ALL 3 bureaus for credit card application.

 

I live in Orange County, CA, and it seems that pretty much any worthwhile credit card applications are gonna require hard pulls through Experian, so I am much more sensitive to them than the other 2 bureaus.  If I were to app for another credit card in the future, I would prefer applying with the bank that does not pull from Experian, but I have yet to see any that is worthwhile for me.

 

 


My advice would be to

 

1. apply for a Capital One Spark card for your business

 

2. don't close any accounts any more Smiley Happy

 

3. when you have 3 accounts, let 2 of them report at zero balance, the other at 9% or less

 

4. then let time pass


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 2 of 19
Absolution16
Frequent Contributor

Re: Credit Newcomer Seeking Advice: Please Help


@SouthJamaica wrote:

My advice would be to

 

1. apply for a Capital One Spark card for your business

 

2. don't close any accounts any more Smiley Happy

 

3. when you have 3 accounts, let 2 of them report at zero balance, the other at 9% or less

 

4. then let time pass


Thank you for your advice!

 

I heard that Spark cards require excellent credit, and the fact that Capital One does hard pulls on ALL 3 credit bureaus make me nervous.  Shouldn't I wait a bit before applying for it?  If so, how long is ideal?  I don't want another inquiry put into my credit report, especially on Experian.

 

I also see that Capital One has Spark Classic for Business, which seems friendly to average credit.  Only 1% cashback earning rate, but the point is to get my foot in the door for business.  Maybe I might have better chance with that?

 

If there was another card I want to apply this year, would be the new Chase Freedom Unlimited which will come out next month.  Once I have that, I will be completely happy.  I don't plan on churning, and I only want to apply for cards that I want to keep for long term.

 

How detrimental was closing that secured card?  Now that I think about it, it was a card that I was going to close anyway, so just to make myself feel better, I started telling myself the sooner it was done, the better.....?

Message 3 of 19
SouthJamaica
Mega Contributor

Re: Credit Newcomer Seeking Advice: Please Help


@Absolution16 wrote:

@SouthJamaica wrote:

My advice would be to

 

1. apply for a Capital One Spark card for your business

 

2. don't close any accounts any more Smiley Happy

 

3. when you have 3 accounts, let 2 of them report at zero balance, the other at 9% or less

 

4. then let time pass


Thank you for your advice!

 

I heard that Spark cards require excellent credit, and the fact that Capital One does hard pulls on ALL 3 credit bureaus make me nervous.  Shouldn't I wait a bit before applying for it?  If so, how long is ideal?  I don't want another inquiry put into my credit report, especially on Experian.

 

I also see that Capital One has Spark Classic for Business, which seems friendly to average credit.  Only 1% cashback earning rate, but the point is to get my foot in the door for business.  Maybe I might have better chance with that?

 

If there was another card I want to apply this year, would be the new Chase Freedom Unlimited which will come out next month.  Once I have that, I will be completely happy.  I don't plan on churning, and I only want to apply for cards that I want to keep for long term.

 

How detrimental was closing that secured card?  Now that I think about it, it was a card that I was going to close anyway, so just to make myself feel better, I started telling myself the sooner it was done, the better.....?


1. The closed accounts continue to report so it wouldn't in and of itself have caused any big drop. Many folks here would tell you closing it was the right thing to do.

 

2. The old closed accounts dropping off of your report might have been a factor. See if any of them are listed; if some of them aren't, that could have hurt you, both in terms of average age of accounts, and age of oldest account.

 

3. When I first got approved for a Capital One Spark Classic I wasn't knowledgeable enough to even know what my credit score was, but I would wager that it was in the neighborhood of 600. So I seriously doubt you'll have a problem getting approved.

 

4. BTW it could be that closing the secured card hurt you in an oddball way. Generally speaking it's good to have at least 3 accounts, with more than 50% reporting at zero. If you have 2 accounts, you can't do that. You've either got to have both at zero which isn't good, or 1 at zero which isn't great either since it means you don't have less than 50%  at zero, or neither at zero, which is also bad.


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 4 of 19
jamie123
Valued Contributor

Re: Credit Newcomer Seeking Advice: Please Help

Building a rock solid high credit score takes time. It is a marathon and not a sprint. You need a long term plan and try to stick to it. You are however in a good position because you don't have any negative information on your reports. Your scores will bounce back quicker and climb higher.

 

You have a thin credit report with very few active accounts right now so it will take a few years to build yourself a thick file with high scores that won't drop much when you apply for new credit. That is why your score dropped so much recently. New accounts showed up and you have been nicked points until the new accounts age a bit.

 

My advice to you:

 

1. Open a 4 or 5 year share secured installment loan for $500 with a good credit union like Alliant Federal Credit Union (Chicago). This will give you installment loan history on your reports and will raise your scores anywhere from 10 to 30 points. Having installment loan history on your reports will also make it easier for you to be approved for certain types of loans in the future like an auto loan or mortgage. You should do this now.

 

2. Wait until your Chase credit card is 6 months old and then apply for another credit card from one of the so called prime banks. These banks would be:

 

AMEX

Bank of America

Chase

CitiBank

Discover

Wells Fargo

 

I would suggest applying for the Discover IT as your next credit card.

 

Wait one year and then apply for 2 more credit cards. You need a minimum of 3 open credit cards to achieve the highest scores but it is best that after a few years you actually have 5 to 8 open credit cards. I know you might not need that many credit cards but if you want to maintain high credit scores for the rest of your life it is best to have 5 to 8 open credit cards for the history that they build. They will keep your scores high when you do need to apply for more credit in the future.

 

Because you have a thin file most prime banks might not approve you for a new credit card with a high credit limit until your current cards have aged a bit. That is my reasoning for suggesting you wait until your Chase card is 6 months old before applying for the Discover card.


Starting Score: EQ 653 6/21/12
Current Score: EQ 817 3/10/20 - EX 820 3/13/20 - TU 825 3/03/20
Message 5 of 19
Absolution16
Frequent Contributor

Re: Credit Newcomer Seeking Advice: Please Help


@jamie123 wrote:

Building a rock solid high credit score takes time. It is a marathon and not a sprint. You need a long term plan and try to stick to it. You are however in a good position because you don't have any negative information on your reports. Your scores will bounce back quicker and climb higher.

 

You have a thin credit report with very few active accounts right now so it will take a few years to build yourself a thick file with high scores that won't drop much when you apply for new credit. That is why your score dropped so much recently. New accounts showed up and you have been nicked points until the new accounts age a bit.

 

My advice to you:

 

1. Open a 4 or 5 year share secured installment loan for $500 with a good credit union like Alliant Federal Credit Union (Chicago). This will give you installment loan history on your reports and will raise your scores anywhere from 10 to 30 points. Having installment loan history on your reports will also make it easier for you to be approved for certain types of loans in the future like an auto loan or mortgage. You should do this now.

 

2. Wait until your Chase credit card is 6 months old and then apply for another credit card from one of the so called prime banks. These banks would be:

 

AMEX

Bank of America

Chase

CitiBank

Discover

Wells Fargo

 

I would suggest applying for the Discover IT as your next credit card.

 

Wait one year and then apply for 2 more credit cards. You need a minimum of 3 open credit cards to achieve the highest scores but it is best that after a few years you actually have 5 to 8 open credit cards. I know you might not need that many credit cards but if you want to maintain high credit scores for the rest of your life it is best to have 5 to 8 open credit cards for the history that they build. They will keep your scores high when you do need to apply for more credit in the future.

 

Because you have a thin file most prime banks might not approve you for a new credit card with a high credit limit until your current cards have aged a bit. That is my reasoning for suggesting you wait until your Chase card is 6 months old before applying for the Discover card.


Thank you for your thoughtful and thorough advice on the subject.  Some questions for you or anyone else that may want to add to this:

 

1. I don't forsee any need for taking out any types of loans.   I have never done it before either.  What should I tell the banks/credit unions when I go in to look for a personal loan?  Are there red flags I need to avoid?

 

2. What is considered a good interest rate to take for such type of installment personal loans?

 

3. You suggested Discover It for my next credit card application.  Any particular reason for your suggestion?

 

4. I don't understand the concept of having more than 50% of my credit card balances reporting zero and having only one credit card showing 9% or less utilization.  Could you explain how and why this helps?

 

5. How do you juggle 5 to 8 credit cards?  For those cards that I don't plan to use often, is it safe for me to just set up an auto pay for one monthly transaction on certain low amount monthly activitiy and forget about it?  How long is too long for me to not put any charges before it is considered inactive or the bank sees a red flag? (Possibly taking adverse actions against me?)

 

Thank you again!

Message 6 of 19
Revelate
Moderator Emeritus

Re: Credit Newcomer Seeking Advice: Please Help


@Absolution16 wrote:

Thank you for your thoughtful and thorough advice on the subject.  Some questions for you or anyone else that may want to add to this:

 

1. I don't forsee any need for taking out any types of loans.   I have never done it before either.  What should I tell the banks/credit unions when I go in to look for a personal loan?  Are there red flags I need to avoid?

 

2. What is considered a good interest rate to take for such type of installment personal loans?

 

3. You suggested Discover It for my next credit card application.  Any particular reason for your suggestion?

 

4. I don't understand the concept of having more than 50% of my credit card balances reporting zero and having only one credit card showing 9% or less utilization.  Could you explain how and why this helps?

 

5. How do you juggle 5 to 8 credit cards?  For those cards that I don't plan to use often, is it safe for me to just set up an auto pay for one monthly transaction on certain low amount monthly activitiy and forget about it?  How long is too long for me to not put any charges before it is considered inactive or the bank sees a red flag? (Possibly taking adverse actions against me?)

 

Thank you again!


Jamie offered a wealth of advice regarding optimizing one's credit score based on specific triggers in the algorithm.

 

To expand a little:

 

1+2) It doesn't matter much, we recommend Alliant often as everyone who's used them has had good success if they followed the basic guidelines but there are plenty of others too just we know Alliant works as needed as it's very well characterized.  Basically open up a share secured loan for whatever the minimum amount is, for as long of a term as possible, and for your very first payment just turn around and pay 95% back, and then sit on it.  No autopay, no nothing, just an occasional small payment to keep any inactivity fee away.

 

This is purely for wins on FICO 8, but for people without installment history it's on the order of 20-45 points based on profile.  Cheap gimmick and since the principal is paid down so far so quickly the costs for doing so are incredibly low other than tying up $500 for a month (most will get released after the lump sum payment) which makes even an absurd interest rate effectively irrelevant.

 

3) I have no opinion either way, though the IT is a good card right now with it's 2x bonus points, no AF, monthly FICO score, and it's a good all around card currently though after the first year it loses the 2x and is just a 5% rotating card after that and the average consumer isn't that happy with tracking rotating rewards admittedly.

 

4) It's another FICO strategy, there's an element in the algorithm which does a fairly simple calculation on the number of revolving tradelines (credit cards, LOC's) reporting a balance out of the total number of revolving tradelines.  In basic terms the more you have reporting the lower your score, but of course it depends on how many you have, but only having 1 reporting is optimal for everyone regardless of how many they have.  You always want at least one card reporting a balance as no cards reporting a balance is a straight negative on all FICO algorithms.  You don't have to do this every month, but when you want to apply for something, this is how you put as much lipstick on the pig as possible.  

 

When you need to get clean you simply pre-pay the balance before the statement date and then let the statement cut at $0, then can go on using the card after the statement cuts if it's one of your primary use cards.

 

5) Autopaying bills is a wonderful way to keep a card active; otherwise I just grab the stack of cards once every 3 or even 6 months or so and just go through them in order putting a single small purchase on them.  It's not particularly cumbersome.

 

 

 

 




        
Message 7 of 19
axlm
Regular Contributor

Re: Credit Newcomer Seeking Advice: Please Help


@Absolution16 wrote:

@jamie123 wrote:

...


Thank you for your thoughtful and thorough advice on the subject.  Some questions for you or anyone else that may want to add to this:

 

1. I don't forsee any need for taking out any types of loans.   I have never done it before either.  What should I tell the banks/credit unions when I go in to look for a personal loan?  Are there red flags I need to avoid?

 

2. What is considered a good interest rate to take for such type of installment personal loans?

 

3. You suggested Discover It for my next credit card application.  Any particular reason for your suggestion?

 

4. I don't understand the concept of having more than 50% of my credit card balances reporting zero and having only one credit card showing 9% or less utilization.  Could you explain how and why this helps?

 

5. How do you juggle 5 to 8 credit cards?  For those cards that I don't plan to use often, is it safe for me to just set up an auto pay for one monthly transaction on certain low amount monthly activitiy and forget about it?  How long is too long for me to not put any charges before it is considered inactive or the bank sees a red flag? (Possibly taking adverse actions against me?)

 

Thank you again!


Answer to some points:

 

1) You don't actually need the loan for the money, is just a 'trick' for scoring purposes. I did it with Alliant ($500/48mos), and just told them I wanted the loan for credit building purposes. They were very nice to work with.

 

2) Rates are at 3-4% for secured loans, and you get 1% of interest on your deposit back. Also, you may want to pay it down fast for optimal scores, and that would further reduce your interest. More info here: http://www.alliantcreditunion.org/borrow/get-a-credit-union-personal-loan#compare

 

3) ...

 

4) Utilization is the second biggest factor affecting your score, and the less the better (except all cards zeroed!). Also say you have 5 cards. You only want max. 2 cards (less than 50% of your total cards) reporting a balance to the CRAs on closing date. But IMO, that's something you do when you want your absolute best scores (i.e applying for mortgages/loans), as it can be a hassle to keep track of it, or plan your card usage, spending and payments with that purpose.

 

5) You need to know all your important dates for each card, and keep track of them. If you are not comfortable doing it, my advice is don't do it until you are confident with it. Personally, I use an spreadsheet with all my credit data, and at least once per week I seat down and check everything.

 

Hope that helps!

 

Edit: Revelate was faster! Smiley Happy

 

 


Last update: NOV 2022

Message 8 of 19
SouthJamaica
Mega Contributor

Re: Credit Newcomer Seeking Advice: Please Help


@Absolution16 wrote:

@jamie123 wrote:

Building a rock solid high credit score takes time. It is a marathon and not a sprint. You need a long term plan and try to stick to it. You are however in a good position because you don't have any negative information on your reports. Your scores will bounce back quicker and climb higher.

 

You have a thin credit report with very few active accounts right now so it will take a few years to build yourself a thick file with high scores that won't drop much when you apply for new credit. That is why your score dropped so much recently. New accounts showed up and you have been nicked points until the new accounts age a bit.

 

My advice to you:

 

1. Open a 4 or 5 year share secured installment loan for $500 with a good credit union like Alliant Federal Credit Union (Chicago). This will give you installment loan history on your reports and will raise your scores anywhere from 10 to 30 points. Having installment loan history on your reports will also make it easier for you to be approved for certain types of loans in the future like an auto loan or mortgage. You should do this now.

 

2. Wait until your Chase credit card is 6 months old and then apply for another credit card from one of the so called prime banks. These banks would be:

 

AMEX

Bank of America

Chase

CitiBank

Discover

Wells Fargo

 

I would suggest applying for the Discover IT as your next credit card.

 

Wait one year and then apply for 2 more credit cards. You need a minimum of 3 open credit cards to achieve the highest scores but it is best that after a few years you actually have 5 to 8 open credit cards. I know you might not need that many credit cards but if you want to maintain high credit scores for the rest of your life it is best to have 5 to 8 open credit cards for the history that they build. They will keep your scores high when you do need to apply for more credit in the future.

 

Because you have a thin file most prime banks might not approve you for a new credit card with a high credit limit until your current cards have aged a bit. That is my reasoning for suggesting you wait until your Chase card is 6 months old before applying for the Discover card.


Thank you for your thoughtful and thorough advice on the subject.  Some questions for you or anyone else that may want to add to this:

 

1. I don't forsee any need for taking out any types of loans.   I have never done it before either.  What should I tell the banks/credit unions when I go in to look for a personal loan?  Are there red flags I need to avoid?

 

2. What is considered a good interest rate to take for such type of installment personal loans?

 

3. You suggested Discover It for my next credit card application.  Any particular reason for your suggestion?

 

4. I don't understand the concept of having more than 50% of my credit card balances reporting zero and having only one credit card showing 9% or less utilization.  Could you explain how and why this helps?

 

5. How do you juggle 5 to 8 credit cards?  For those cards that I don't plan to use often, is it safe for me to just set up an auto pay for one monthly transaction on certain low amount monthly activitiy and forget about it?  How long is too long for me to not put any charges before it is considered inactive or the bank sees a red flag? (Possibly taking adverse actions against me?)

 

Thank you again!


Questions, Jamie: just wondering as to the "6 prime banks" recommendation: (1) what makes them the 6 prime banks and (2) how does it help to use them rather than another bank or a credit union?


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 9 of 19
Absolution16
Frequent Contributor

Re: Credit Newcomer Seeking Advice: Please Help


@SouthJamaica wrote:


1. The closed accounts continue to report so it wouldn't in and of itself have caused any big drop. Many folks here would tell you closing it was the right thing to do.

 

2. The old closed accounts dropping off of your report might have been a factor. See if any of them are listed; if some of them aren't, that could have hurt you, both in terms of average age of accounts, and age of oldest account.

 

3. When I first got approved for a Capital One Spark Classic I wasn't knowledgeable enough to even know what my credit score was, but I would wager that it was in the neighborhood of 600. So I seriously doubt you'll have a problem getting approved.

 

4. BTW it could be that closing the secured card hurt you in an oddball way. Generally speaking it's good to have at least 3 accounts, with more than 50% reporting at zero. If you have 2 accounts, you can't do that. You've either got to have both at zero which isn't good, or 1 at zero which isn't great either since it means you don't have less than 50%  at zero, or neither at zero, which is also bad.


1.  I am glad to hear that.  When I closed my secured Capital One account, all my scores across all 3 bureaus dropped by an average of 90+ points.  I was not very happy with myself at the time.  Since then the scores have recovered somewhat, but nowhere near what I had at the end of January.  I am hoping that my scores will recover in time.

 

2.  The old closed accounts (excluding the Capital One) were all closed by the end of 2008.  They are still being reported, but once they fall off in 2018, which is 2 years from now, I may take a huge hit in AAoA, unless I do something now.  Even then, I am afraid that my scores at that time will take a huge hit again?

 

3.  Here is the situation with the business.  I applied for Chase Ink Plus along with the Sapphire at the end of January this year.  Got approved for Sapphire for 16k, but got rejected for the Ink.  Chase's reasoning for the rejection initially was that I had too many accounts with them.  That Sapphire was the very first credit application that I ever made, so I was confused.  I called and asked for a recon, but then got rejected again with a second letter stating that:

 

   - Past due history on one or more accounts

   - Business file reports paid/unpaid liens/judgments or delinquent accounts

 

Personally, I don't have any of these, so they must be related to my business file.  My business was under a previous owner's name (C Corporation), so these transactions must have taken place before I took over the business.

 

I am NOT sure what to do with these.  I understand that it is relatively easier to get approved for the Spark Classic Business card, but then, with Capital One pulling from all 3 bureaus and such negative remarks on the business, I am not even sure if I can get approved for even that card (which is quite frankly, unimpressive in terms of benefits)

 

4.  I may have pulled the trigger too early again, perhaps, but I applied and got approved with Barclaycard Arrival World Mastercard with 1.5k limit last week.  I knew for certain that they would pull from TransUnion (Every single banks in California seem to want to pull Experian:  Citi, Chase, AMEX.......) and I only had one inquiry in TransUnion (which was that CapitalOne).   What made it even more enticiing for me was that the date of the inquiry was exactly 1 year from TODAY, so even with the new inquiry on TransUnion due to the new app to Barclaycard, I would effectively only have ONE ding for an inquiry on my TransUnion report starting tomorrow. 

 

Anyways, since I now have 3 cards, I am planning to use the AMEX and Barclay for my personal needs, and use the higher limit Chase card strictly for business.  I am going to make sure that my AMEX and Barclay continue to report $0 balance every month, but my fear is that, I may have to keep utilization on my higher-limit Chase card at right below 20%.  I am aware that everyone's been suggesting utilization rate below 10%, but is something like 19% detrimental?  25%?

 

Thank you for your advice and I hope to get more feedback and tips from you.

Message 10 of 19
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