Q: How soon can you get an unsecured credit card after bankruptcy? I’m a few months out and want to rebuild my credit and get one that’s unsecured as soon as possible.

A: Getting unsecured after a bankruptcy is definitely an uphill battle, but it’s not impossible. Before I talk about the best technique, there are a few things you want to keep in mind:

• Stay away from creditors that were part of your bankruptcy
  Example: If a Bank of America credit card was part of your chapter 7 or chapter 13 bankruptcy filing and they lost out on thousands of dollars, the last thing you want to do is hit them up for an unsecured credit card afterward (or at least not for quite a while). As a general rule of thumb, when you’re in the early stages of rebuilding your credit, it’s probably best to stick with banks that were not burned in your bankruptcy filing.

• Be realistic with your expectations in today’s credit environment
  Yes, it’s been a while since “the great recession” but that doesn’t mean banks went back to doing business like they used to (giving credit to anyone with a pulse). Creditworthiness has to be proven now more than ever. An unsecured credit card after bankruptcy discharge probably won’t happen immediately. You’ll likely have to start with a secured card for at least a little while, but some are a lot better than others (which we’ll discuss in a moment).

• Don’t use a high percentage of your credit limit
  Whether you end up getting a secured or unsecured credit card, it’s very important that you don’t use a high percentage of your credit limit. Why? Because a small part of your FICO score is the credit utilization ratio (what percentage of your credit limits you use). Most people wrongly assume that the more they spend, the better… that’s not how it works.No one knows the magic ratio since that information is FICO’s secret, but the consensus is that using more than 10% to 30% of your credit limit at any given time will negatively impact your score. So spending above 30% of your credit limit should be avoided. Keep in mind that even if you pay your balance in full every single month, the amount reported to the credit bureaus is the balance listed when your billing cycle closes (before your payment is made).

How to get an unsecured credit card?
As mentioned, getting one right after a bankruptcy discharge probably won’t happen. You will likely have to start out with a secured card and then transition to an unsecured card.

• If you are less than 18 months out it’s going to be difficult to get an unsecured account. And if you’re at this stage, you don’t want to just randomly start applying for unsecured cards and hoping for the best, because each credit application results in a hard pull inquiry (a credit check) which can adversely impact your score for up to 12 months. Being that you’re already at the bottom, the negative effect on your score will be quite trivial. But still, it’s best to avoid that, right? This is why I recommend you check out these affordable secured cards if you fall under this category.
• If you are more than 18 months out then your chances of getting approved for a basic unsecured account are better (although you may have to wait ’til ~24 months out). When I say “basic” I’m talking about a no-frills credit card without a rewards program (and you don’t see a lot of those nowadays). You can view the best ones here.

Something to keep in mind: If you get an unsecured card… great! If you get a secured card… that’s also great! Either type will work just fine credit building purposes, assuming you use it responsibly and the account reports to all 3 credit bureaus.

How does the Fingerhut credit card work and help you build credit?

The process of building or rebuilding credit is a catch-22. You can’t build your credit without having credit accounts, and you can’t get credit accounts without a good credit history. A Fingerhut credit account can help you break out of that cycle.

Here are the advantages:

• Easy Approval - Fingerhut often says yes when others say no. The process is quick and easy and after approval you can start shopping right away. Their website says you may get a Fingerhut credit application decision in as little as 5 seconds after submitting!

• Your Account Is Reported To Credit Bureaus – Your account is reported to multiple credit bureaus. By making your payments on time, you build a good history. This potentially may help boost your credit over time. Your good payment history can also earn you greater spending power from Fingerhut.

• No Hidden Fees - Credit cards for people with bad credit can sometimes cost hundreds per year in fees. This often makes it hard for people to rebuild credit. However a Fingerhut credit account charges you no annual fees and no application fees.

• Low Monthly Payment Option – You have the ability to buy what you want now and spread out the purchase into monthly payments.

Go here to find out how you can get a credit decision in as little as 5 seconds

Frequently Asked Questions:

Q: What type of products does Fingerhut sell?
A: Fingerhut sells thousands of products in all sorts of categories – electronics, apparel, health and beauty, jewelry, tools, sports, and the list goes on. Many of their items are unique and you probably won’t see them at your local store.

Q: Is the Fingerhut credit card like a regular credit card?
A: No, you use your Fingerhut credit account for purchases made from the their catalog and website. Your account information will be printed on a card for your convenience so you reference the information while ordering.

Q: Can I set up automatic monthly payments with Fingerhut?
A: Yes! You can set up automatic monthly payments from your checking, saving, bank debit card, or bank credit card. It’s highly recommended to do this if you think you might ever forget to mail your payment on time.

Q: Does Fingerhut do credit line increases?
A: Fingerhut reviews customer credit accounts on a regular basis to see if they are eligible for a credit line increase. Things like your payment history, your external payment history, and credit score might help in obtaining a possible increase.

Here are the disadvantages:

• As mentioned above, this can only be used for purchases from them. So think of this as you would a store credit card, not a Visa or MasterCard that can be used everywhere.
• The APR is high. Like department store and gas station cards, expect the interest rate to be in the mid-20′s. So pay your balance in full to avoid interest charges.
• Depending on what you buy, the price may not always be the lowest out there. However there are many items which are a good deal, it just all depends on what you’re shopping for.

Verdict?

Is everything perfect about it? No. But at the end of the day, the ability to apply for Fingerhut credit, even if you have bad credit, is a major advantage.

Since it has no annual fee and a quick application process, I recommend getting an account with them and using it for credit building purposes.

These days there are few major credit cards available to those with poor credit and the ones that do exist usually charge very high fees. So a Fingerhut credit account is a good tool to use for building credit history.

Here is the current Fingerhut signup promotion for 2012

Almost all of the FINA gas stations are in Texas, but they also have a few locations in OK, AR, LA, AZ, NM, & CO. But regardless of your state, here’s how the FINA credit card operates…

FINA “Flash Cash” gas rewards vs. the competition

The FINA gas card’s “Flash Cash” program operates is sort of confusing, so please bear with me.

You earn 1 point per dollar spent at FINA gas stations. This is what you get for them:

• 500-999 points = $5 coupon
• 1,000-1,499 points = $10 coupon
• 1,500-1,900 points = $15 coupon

The coupons come with your monthly statement and $15 is the most you can earn per month. Unfortunately the points expire at the start of the 4th month so if you’re only spending one or two hundred per month on gas, your points might start expiring before you have enough to get a coupon.

If you run the numbers on the rewards, here’s the biggest drawback with the FINA credit card:

• You are only earning a maximum of 1% cash back.
• Ironically, your rewards are worth less than 1% for spending more in some situations. For example, spend $500 and get 500 points = $5 coupon. But if you spend $900 and get $900 points, you still only get a $5 coupon.

To sum it up, the FINA card is earning you a maximum of 1%. Meanwhile most reward credit cards on the market give you at least 1% so you would probably be better off using the card you already have.

If you want more than 1% there are several credit cards with 5% gas rewards.

FINA card = only worth it if you have bad credit

If you have bad credit then you probably won’t get approved for any of the gas credit cards that give a 2-5% rebate. In fact, there will be very few major credit cards that you will qualify for.

So if your credit is a mess, then applying for this card for FINA gas stations might be OK if you want to use it as a stepping-stone to building credit. The advantage is it has no annual fee, however there are several disadvantages to keep in mind while using it:

• Can only be used at FINA stations.
• Carries a high APR of 24.99%.
• The card issuer, WFNNB, doesn’t have the best reputation for customer service.

Written or last updated Jan 2012

Q: Does Chase have a secured credit card? The website doesn’t show the application.

A: Chase has always favored above-average credit scores, but over the last few years they have really ratcheted it up even further.

With the exception of their Slate card (for average credit) these days the credit score requirements for their credit cards are basically on par with American Express; you need to have excellent credit to be approved.

The Chase secured Visa and MasterCard was discontinued several years ago. I asked my local branch if Chase plans on bringing it back in 2012 and they said there are no plans for a secured credit card. Being that the last time they offered it was in 2005, I think it’s safe to conclude that we won’t be seeing one again.

My recommendation? HSBC, Capital One, and others offer secured cards with low fees and security deposits. Go here to compare secured credit card reviews.

When JP Morgan Chase acquired Washington Mutual a few years ago (2008) there was a brief period of time that a secured credit card was available through WaMu. However within just a couple months of the acquisition, Chase axed the card and mailed refund checks to the inherited cardholders (refunding their security deposit and pro-rated annual fee).

So is there any chance we will see a secured credit card from Chase bank again? Very highly unlikely and here’s why I say that:

• With the Fed keeping interest rates at all-time lows, deposit accounts are no longer money makers for the banks. Why would they want to pay you interest when instead, they can borrow from the Fed for next to nothing? For this reason, having a secured card with a deposit of say, $500 to $2,000, is no longer enticing for banks. Simply put, there’s more money to be made elsewhere… such as with premium credit cards.
• When it comes to premium cards, in many regards Chase is tied with American Express nowadays. Because of the heavy advertising I’m sure you already know about their Sapphire, but they also issue cards for luxury hotels Hyatt and Ritz-Carlton and a high card called the Palladium. In short, the Chase brand = premium cards, so I doubt they would issue secured credit cards because that might dilute the perception of their brand.

If a Chase bank secured credit card ever does come out, I will definitely update this post. But don’t hold your breath.

The Vantage credit score is a world apart from the FICO score. Make sure you know their similarities – and most important of all – their differences.

What is VantageScore?

Before there was VantageScore, there was FICO. Let’s talk about that first…

• In 1958 Fair Isaac Corp. created the first credit score model.
• In ’81 they created the first scoring models for credit agencies.
• In ’89 they launched the first FICO score for general-purpose.
• In a nutshell, FICO was first. It has been (and still is) the industry leader for credit scoring.

The big 3 credit reporting agencies – Experian, Equifax, and TransUnion – have to pay Fair Isaac to license their proprietary FICO scoring algorithm.  And being that FICO is the gold standard for lending/credit decisions, it’s not like they had a lot of choice… pay FICO or else.

So the 3 credit agencies decided to get together and create their own credit score model, the VantageScore, without the help of Fair Isaac:

• In March of 2006 the first version was launched. The VantageScore range is 501 to 990 (versus FICO’s 300 to 850).
• In October 2010 the second version – 2.0 – was launched. It still runs on the same score range, but (according to them) it offers “improved predictive performance.”

So this score hasn’t even been around a decade yet and thus far, lenders have failed to adapt it on a wide scale. To put things in perspective, according to FICO’s website, their scoring models are used by more than 90% of the largest lenders.

Who uses VantageScore?

That, my friend, is a good question, because it’s hard to answer!

In 2006 Fair Isaac Corp. filed suit against VantageScore Solutions, LLC alleging that they were trying to drive Fair Isaac out of the credit scoring industry. Within the 52-page court order, it’s claimed that VantageScore’s marketshare was only 5.7%.

In the years since it has gone up but by how much, it’s anyone’s guess. In 2011, Craig Focardi of TowerGroup (a financial research and advisory services firm) said on CreditCards.com that he believes it has less than a 10% market share.

Of course VantageScore, on the other hand, tries to paint a rosier picture in their press releases and the like, saying that it is used by:

• 4 of the 5 major financial institutions
• 5 top credit card issuers
• 2 of the top 5 auto lenders
• 1 of the top 5 mortgage lenders

I am not disputing that information is true, but my question is this: How often are the 4 of the top 5 major financial institutions using VantageScore vs. FICO? I believe that would give us a clearer picture as to who uses Vantage credit scores.

VantageScore vs. FICO score?

Here’s a review of the basic similarities and differences between them:

(1) Score Range

I already mentioned the different number ranges, but here’s a detailed breakdown for Vantage:

• 901 – 990 = A, Super Prime
• 801 – 900 = B, Prime Plus
• 701 – 800 = C, Prime
• 601 – 700 = D, Non-Prime
• 501 – 600 = F, High Risk

The nice thing about this range is that it’s clean and easier to understand by going on a 501 to 990 scale which corresponds to letter grades (a concept even the novice will grasp).

On the other hand, FICO does not have a neat breakdown like that by category. However for a ballpark comparison, here is what I consider the levels to be on FICO (please note these are my personal opinions only and that’s it):

• 770 – 850 = Excellent credit.
• 730 – 769 = Great credit. If you’re in range of this, you probably can get approved for the top cash back and travel reward cards.
• 700 – 729 = Good credit. This will not be good enough for some of the best credit cards.
• 640 – 699 = Fair credit. Even if you’re on the upper end of that scale, it might not be good enough to get approved for many credit cards.
• 581 – 639 = Bad credit. Some unsecured cards (i.e. department store, gas station) might be available to you, but by and large you might be stuck with secured, too.
• 300 – 580 = Very bad credit. If you want a credit card, secured will likely be your only option.

My opinions on the FICO score ranges may be more stringent than what you see elsewhere, but that’s because I’m basing it directly off of consumer feedback. For example, even though some other people consider a 750 FICO to be “excellent” I don’t feel that’s appropriate, when I hear from people with that FICO getting denied for some cards.

In my book, the definition of “excellent” means you should be able to get anything you want and in today’s economy, it takes higher scores than in the past.

(2) Components

The formulas for both FICO and VantageScore are secret, so no one can tell you exactly how they are calculated. However both companies do provide some basic information as to the general categories and how they affect your score:

For a more detailed explanation of this, check out my post about highest credit scores.

(3) Experiences

Aside from the differences in scale, is a Vantage vs. FICO score the same thing? Or is it more of an apples-to-oranges comparison?

From the experiences I have read on the forum and elsewhere, here are some theories I have:

• FICO weighs payment history more heavily than Vantage. This probably explains why it seems to be easier (as in, faster achievement) of a high Vantage versus achieving a high FICO.
• I have a friend with a nearly 22 year-long credit history, but only one open credit account and the last activity on that account was 5 years ago. His Vantage? 801 (B). With that same data set, I can’t imagine the FICO model would be so generous in calculating the equivalent of something in their “B” neighborhood. Vantage reportedly gives less weight towards current balances, which would explain why someone with a good (but not recently used) credit profile can still rank relatively high.
• FICO seems to more heavily favor having a diverse mix of both installment loans and revolving credit (i.e. credit cards). On the other hand, I have seen feedback/reviews from consumers who are only using one or the other but still have a high Vantage.
• Vantage seems to take into account your credit limit amounts amounts instead of just the debt to credit ratio (which is how some suspect FICO works). So having high credit limits might help your Vantage.
• FICO can be brutal on blemishes. However under some circumstances, Vantage seems to be more lenient with them, especially if they are not recent.

*Remember the above are theories only and may or may not be true. No one can know since the formulas are secret.

(4) Conversion

So how do you convert between the two?

Well as mentioned above, even though they’re quite similar, they don’t weigh things the same. Therefore since these are two different algorithms, a VantageScore vs FICO score conversion is not possible!

Now some people say a formula for converting between them is to multiply Vantage by 0.86 (since FICO’s top score of 850 is just about 86% of 990). Or to convert from FICO to Vantage, you multiply by 1.16 (which is 990 divided by 850). Yes, those might give you a ballpark approximation, but more often than not these formulas seem to yield drastically unexpected results.

Bottom line: It’s not like converting Celsius to Fahrenheit. We are talking about different models, each distributing the scores in a different manner. Try the conversion for kicks, but not accuracy.

(5) Distribution

So what percentage of the population has a given Vantage or FICO?

This was calculated out based off information found in this myFICO booklet (PDF) and on Experian’s VantageScore site, thanks to this post.

It may not be an apples-to-apples chart of score distribution, but it’s probably the closest possible, given that there aren’t any other ranges and percentages which have been publicly released that I am aware of.

How important (or not) is this score to you?

Admittedly, I am pretty tough on criticizing the VantageScore, but the main reason for that is because it’s not widely adapted yet. I do think there are aspects of it which are better than FICO. For example, it’s easier to understand the number ranges and I think FICO weighs diversity of credit too heavily (hey FICO… not everyone needs installment loans).

However until Vantage is more heavily used, I’m not going to pay much attention to it. Twenty years from now it might very well become the market leader… or not, who knows? But what I do know is that as it presently stands, FICO is by far the #1 player so that’s where my attention and focus will gravitate.