Switching cards right after getting my first one?

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dreamymind
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Switching cards right after getting my first one?

Postby dreamymind » Mon Oct 12, 2015 8:12 am

Hello! I just turned 18 and my goal right now is to start building a credit score. I opened an account with Comerica Bank and got their college rewards credit card with a credit limit of $500. Comerica works with Elan Financial Services, which has really bad reviews that I read after opening an account with them (they also don't have a grace period so from what I understand they charge interest right after the purchase is posted). At this point I really want to change my credit card with proper research, but I am afraid it would hurt my score.

1) Will it hurt my score to apply for a second credit card at another financial institution considering that I got my first one a week ago? I also wanted to close an account with the first one. And by hurting my score, I mean long-term, like 6-12 months at least - I don't plan on taking out loans anytime soon so if my score suffers temporarily, it's not that big of a deal. I feel like it's more important to have a card that I feel comfortable with from the beginning.

2) Will I have a chance to get accepted for the second card or will it look very suspicious? And if I am denied, will it be on my record and will it hurt me?

3) What would you recommend to do at this point?

Thank you!


Vermonster
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Re: Switching cards right after getting my first one?

Postby Vermonster » Mon Oct 12, 2015 12:10 pm

A $500 limit card with Elan sounds like you just barely have enough of a credit file for someone to take a chance on you. I doubt you would be able to get much better with a second card. I would keep the card, and treat it right. You can learn a lot from a starter card that is designed to screw you over as much as possible. Pay it on time, in full, and watch your credit score grow.
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CarefulBuilder14
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Re: Switching cards right after getting my first one?

Postby CarefulBuilder14 » Mon Oct 12, 2015 12:35 pm

The Terms and Conditions state there is a grace period. There's just no intro 0% period.

https://online1.elancard.com/oad2/terms.controller?step=display&locationCode=7987&productId=35
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dreamymind
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Re: Switching cards right after getting my first one?

Postby dreamymind » Mon Oct 12, 2015 3:00 pm

CarefulBuilder14 wrote:The Terms and Conditions state there is a grace period. There's just no intro 0% period.
Vermonster wrote:A $500 limit card with Elan sounds like you just barely have enough of a credit file for someone to take a chance on you. I doubt you would be able to get much better with a second card.


You are right, this is my first card and I don't have any history at this point. However, I am not trying to switch to get a higher limit. I would like to switch because most of the reviews for Elan indicate poor customer service, and many complain about mistakes they do (like still charging their account after they cancelled auto pay, etc.)

From what I understand it is really beneficial to use your first cards for a longer period, in order to establish a long history; so I think I would just feel more comfortable working with a company with a better customer service, since it will be long term. I read reviews on banks and credit unions around me, and Consumers Credit Union has better ratings and comments, so now I feel like I want to be their customer instead..

CarefulBuilder14 wrote:The Terms and Conditions state there is a grace period. There's just no intro 0% period.

https://online1.elancard.com/oad2/terms.controller?step=display&locationCode=7987&productId=35


Oh ok, thanks! Still, overall their reviews are pretty bad.

So would it hurt me in any way if I got a new card with another bank and closed the current account? From what I understand it would temporarily lower my score (for like 3 months), but that is the only issue that I see right now. Is there any other reason not to switch?

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Vattené
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Re: Switching cards right after getting my first one?

Postby Vattené » Mon Oct 12, 2015 5:50 pm

I wouldn't trust such specific predictions about what it would do to a score. That all depends on the the individual credit profile. The biggest impact closing an account generally has on a FICO score is due to utilization. The history of a closed account will remain on your credit reports for 10 years.

Personally, I think you may be too eager to close it. Customer service is a valid factor to consider when applying for a new card, but you're already stuck with this account. How often will you interact with customer service anyway? It may not be the best rewards or a big name card, but having the option to earn rewards at all is pretty good for someone at your stage - many have to build up to the point of earning any form of rewards. As long as you are careful to always pay in full each month on time, this account won't cost you a penny and you'll likely have no need to get involved with customer service.

That said, I understand being uneasy after seeing others report they make clear mistakes. If you are set on trying to get another account, would you be opposed to keeping this account open and just not using it? There is no annual fee. You would need to monitor it for fraud, but other than that I see no downside in just keeping it open. I think it would actually benefit you to open a new account anyway, assuming you could. At 18 with no other history that is pretty iffy, though. Do you currently bank with a local bank or credit union? If so, your best odds may be there. You could also try for a store account, or perhaps the student version of a Discover card could be an option.
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takeshi
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Re: Switching cards right after getting my first one?

Postby takeshi » Tue Oct 13, 2015 8:36 am

dreamymind wrote:You are right, this is my first card and I don't have any history at this point. However, I am not trying to switch to get a higher limit.

Unfortunately, the intent doesn't really matter. A thin profile is a thin profile and the limit on the card you have indicates that creditors are very wary so your profile probably won't support much credit seeking activity at this point. I'd recommend working with what you have. 6 months is a general suggestion as a timeframe to establish at least some history and I'd recommend considering another card at that point.

dreamymind wrote:And if I am denied, will it be on my record and will it hurt me?

If denied you have a hard pull. That's it. Definitely make sure you're routinely reviewing your own reports. You can see how items are recorded by looking at them.

dreamymind wrote:So would it hurt me in any way if I got a new card with another bank and closed the current account? From what I understand it would temporarily lower my score (for like 3 months), but that is the only issue that I see right now. Is there any other reason not to switch?

We can't tell you that doing X will lead to a change of Y points for Z time.

Consider the standard factors:
http://www.myfico.com/crediteducation/w ... score.aspx

A new account reporting will drop your AAoA (Length of Credit History). You'll also incur another hard pull (New Credit). With your profile a hard pull will have a bigger impact than it would for someone with a thicker, established profile in good standing. As I stated above, your thin profile also won't support much credit seeking. You low limit on the card you have is a reflection of your credit and the concerns that your creditors have. For those reasons I recommend using this card for at least 6 months before worrying over another card.

Building and rebuilding credit is a long, slow process so make sure you're in the right mindset and have reasonable expectations. Once your profile is built adding new accounts won't be as big of a deal.

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Re: Switching cards right after getting my first one?

Postby Vermonster » Tue Oct 13, 2015 9:24 am

dreamymind wrote:You are right, this is my first card and I don't have any history at this point. However, I am not trying to switch to get a higher limit. I would like to switch because most of the reviews for Elan indicate poor customer service, and many complain about mistakes they do (like still charging their account after they cancelled auto pay, etc.)

So would it hurt me in any way if I got a new card with another bank and closed the current account? From what I understand it would temporarily lower my score (for like 3 months), but that is the only issue that I see right now. Is there any other reason not to switch?


The issue is not getting a higher limit. It's that a $500 limit indicates that Elan isn't willing to take much of a risk on you. Banks that have better CS, rewards, APR, ect, also have higher standards for who they offer credit to. Right now, it would be a stretch to call your profile thin. You have A profile, and that is a good start.

You definitely can take a shot at a better bank. I think Cap One is the best bet, but be prepared for an Annual Fee and lower limit, or potentially even a secured card. Regardless of what you do, keep this card open. It will help your account history, even if you spend nothing.

At 18, there is no reason you should be trying to rush your score. You'll have plenty of student and/or auto loans in the next few years to help with that :P
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