Next Step In Acquiring Credit?

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3 posts
Salaryman
 
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Next Step In Acquiring Credit?

Postby Salaryman » Sun Mar 08, 2015 6:12 pm

Hi everyone! I started working in January 2014 but had never had credit (everything from car insurance to what little loans I had were in my parents' name). The best I was able to qualify for was a $200-300 credit line with a security deposit of about $50 to Capital One.

Since then I've applied for Discover IT, Chase Freedom and probably a couple others - was rejected for all of them. CapitalOne's credit tracker shows only two hard pulls though (I assume one from card applications and another for a credit check for my apartment. I was bumped up to $500 credit limit in June, but still couldn't get approved for cards other than Bank One (which I stupidly applied for only to realize later it had high fees, was not Capital One and had no interest grace period). Cancelled Bank One as soon as I activated it. Currently my credit score is 711, with huge hits to it (according to Capital One) coming from my minimal free credit available ($400-450 since I utilize only about $50 a month) and my 1 year credit history.

I'd like to maximize my long-term wealth by shifting my spending from my debit card to the optimal rewards credit cards for all of my purchases (ideally). Should I apply for anything else at this time? Or just wait it out?

Thanks in advance!


LessIsMore
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Location: Vader, WA

Postby LessIsMore » Sun Mar 08, 2015 10:23 pm

What follows is less of a recommendation as it is an option to consider. At age 56 (I'm 64 now), following a costly divorce, I was forced to file a Chapter 13 bankruptcy in 2006. I didn't check my credit score at that point. But I knew it had to be in the subterranean range - similar to a young person just starting out. The "moment" my Chapter 13 was discharged in 2011, I applied for (and got) a secured VISA card through Unitus Credit Union. I don't know whether any other card-issuer offers the same deal - but Unitus said that after 12 on-time monthly payments, the card would automatically convert to an unsecured card and that I'd get my security deposit back. And just like clockwork, that happened.

I opted for a $1k secured credit limit - but they allowed up to $3k. Beyond the secured deposit, there were no fees of any kind. If you can find such an offer and can afford to put-away that kind of money for a year, I'd go for it. No one but you and the bank knows that it's a secured card. To CRA's, it appears to be just another credit card. And if you keep the card active and make on-time payments, that goes a long way toward putting positive notes into your credit files. FWIW, I still have that card. Recently, though, they doubled my credit limit to $2k - and to do it (their policy), they had to switch me over from a "Classic" VISA to a "Rewards" VISA. No complaints here (grin).

In July 2013, as required by law, Chapter 13 notes were removed from the files of all CRAs. And armed with a clean credit record and two years worth of positive notes from one credit card, I began to apply for other cards. As of today, I have 14 credit cards with a TCL of $34k - all unsecured, none with an AF (or security deposit requirements).

The most important thing to consider is your "reason" for acquiring credit. If you want to use credit to enhance your lifestyle (like my ex-wife) by buying now and paying later, you can get into credit trouble very easily. But, if your intention is to use it to acquire rewards for purchases of everyday things and pay off balances every month, you'll be miles ahead of a lot of people in how they use credit (and your scores will have nowhere to go but up).

I'm not an expert on "rewards" cards. A lot of others in this forum are more knowledgible than me on that. I have a few rewards cards. To me, for everyday expenses, the most valuable has been the co-branded Amazon.com VISA (a Chase Bank card). That's because I live in rural Washington state and end up doing a lot of Amazon purchases. But, rewards are given even for non-Amazon purchases, too. Discover IT card is also good about that. But I'm only talking about my situation. Your situation is probably completely different and other rewards cards may be more appropriate.
"People with a clever plan can assume the role of the mighty."
Paul Kantner

takeshi
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Location: US

Postby takeshi » Mon Mar 09, 2015 9:01 am

Salaryman wrote:Should I apply for anything else at this time? Or just wait it out?

You'll want 2-3 cards to build with. You need to look at the reasons for denial and you may need to get additional secured cards. Once you've built a bit you can begin to replace them with unsecured cards.

Salaryman wrote:CapitalOne's credit tracker shows only two hard pulls though (I assume one from card applications and another for a credit check for my apartment.

There are 3 major CRA's. IIRC, CO's tracker is based on TU. The hard pulls may be with the other CRA's. Make sure you're regularly monitoring all 3. If you haven't pulled all your reports then do so and review them. If you have derogs then work on addressing them. If your revolving utilization is over 30% then get it in check. With low limits it will be very easy to end up with high utilization reporting. However, you can reduce reported utilization by reducing the balance just prior to report date which is statement date for most cards.

Salaryman wrote:I was bumped up to $500 credit limit in June, but still couldn't get approved for cards other than Bank One (which I stupidly applied for only to realize later it had high fees, was not Capital One and had no interest grace period). Cancelled Bank One as soon as I activated it.

Be much more careful with your research. Opening an account not only incurs a hard pull but reduces your AAoA.

Salaryman wrote:I'd like to maximize my long-term wealth by shifting my spending from my debit card to the optimal rewards credit cards for all of my purchases (ideally).

I'm not sure you can really improve your wealth by switching to credit cards. Credit cards are not assets. You can, however, improve your credit.



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