Need advice for helping a friend start over with credit

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dimond_dj
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Need advice for helping a friend start over with credit

Postby dimond_dj » Thu Mar 17, 2016 6:53 am

I'm helping out a friend who's starting over after a divorce and having a house foreclosed. This was about 4 years ago, he's never used credit cards and recently went to buy a used car and learned he would have to get a predatory loan for people with bad credit.

I told him I was getting a new start with a secured credit card and he's interested but I don't know it I want to recommend First National Bank of Omaha. The stories I've heard about them, I'd get something else in a heartbeat if I could then cancel may card with them and get my money back.

The 2 that impress me the most are Citi and Bank of America. My mom swears by Wells Fargo and won't use anything but their Platinum Visa, but to get their secured card you have to open an account with them. Capital One seems to be easy to qualify for but then you are stuck with a secured card until you cancel. Cards like Open Sky don't check your credit, but would that be very smart?

Myself, I'm stuck. All I can do is wait a year then try to get a WalMart card because they are easy to get, then I'll have to bit the bullet and shop at WalMart. The reason I look at a little better secured cards first is because I was told you don't want to close your oldest card but most starter cards are crap, usually they have a high annual fee and hold your security deposit hostage until you cancel. I'm setting myself up to be in a situation where I will have to keep applying for new credit and then cancel my oldest and possibly second oldest card. I was hoping to give my friend some better advice than what I had when I applied for a secured card.


takeshi
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Re: Need advice for helping a friend start over with credit

Postby takeshi » Thu Mar 17, 2016 9:07 am

dimond_dj wrote:The reason I look at a little better secured cards first is because I was told you don't want to close your oldest card

I don't recommend worrying too much over that. Oldest account does play a part but AAoA seems to be the a bigger factor. I've closed what was my oldest card at the time multiple times in the past. You don't have to hoard credit to build credit. Ideally you'd want to keep your oldest cards around as long as possible to build AAoA but closed accounts in good standing will typically continue to show up on reports for 10 years after closure and factor into AAoA.

dimond_dj wrote:I told him I was getting a new start with a secured credit card and he's interested but I don't know it I want to recommend First National Bank of Omaha. The stories I've heard about them, I'd get something else in a heartbeat if I could then cancel may card with them and get my money back.

You can find stories about any creditor out there. Certainly consider stories but at this point rely on first hand experience as the account is already open.

I have no idea what prior discussions on secured cards are like on this site or if they would be useful resource, however, there are certainly more active sites that definitely have had recent discussions on secured cards that you may want to refer to.

Don't rely on what you perceive to be easy to get. If you have no use for a Walmart card then don't get one.

Kevin86475391
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Re: Need advice for helping a friend start over with credit

Postby Kevin86475391 » Sat Mar 19, 2016 12:01 am

takeshi wrote:
dimond_dj wrote:The reason I look at a little better secured cards first is because I was told you don't want to close your oldest card

I don't recommend worrying too much over that. Oldest account does play a part but AAoA seems to be the a bigger factor. I've closed what was my oldest card at the time multiple times in the past. You don't have to hoard credit to build credit. Ideally you'd want to keep your oldest cards around as long as possible to build AAoA but closed accounts in good standing will typically continue to show up on reports for 10 years after closure and factor into AAoA.

I very much agree with this and was about to say the same thing. If an older card is expensive to keep and not serving you well I would definitely recommend closing it. Any hit to your AAoA will likely occur 10 years in the future and be quite marginal - especially since you will have had an additional 10 years time to build your profile and account history. I definitely think this is one area where people tend to over-worry.

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Vattené
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Re: Need advice for helping a friend start over with credit

Postby Vattené » Sat Mar 19, 2016 11:31 am

Defaulting on a mortgage - even four years ago - will seriously drag him down, probably until it completely falls off his profile. I wouldn't expect to be able to qualify for a loan that isn't predatory. It's going to take time to come back from something like that.

Definitely don't get a Walmart card if you don't shop at Walmart. Most store cards have similarly loose underwriting criteria. I like to recommend them over secured cards because, provided you always pay them on time, they will never cost you anything. Pick a major retailer where you do shop, and chances are they have a store card. You don't even have to use it regularly, either. The important thing is being able to get a credit line of some sort and treating it responsibly.
-Vattené
FICO-8:
EX - 809 (11/16) | TU - 803 (11/16)
Primary Cards:
American Express EveryDay - $20,000 (10/14)
Discover it - $23,000 (2/14)
AU on Barclay Sallie Mae - $10,000 (8/15)
plus several store accounts of varying usefulness now

dimond_dj
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Re: Need advice for helping a friend start over with credit

Postby dimond_dj » Sun Mar 20, 2016 5:47 pm

Aren't secured cards easier to get than any store card? I've been declined for a WalMart card 3 times and a JC Penny card twice. I applied for the FNBO secured card and was approved.

My mom wanted me to go with Wells Fargo because that's what she has, but they wouldn't look at my application unless I opened a checking or savings account there and I didn't want to do that. I wasn't going back to Capital One, several years ago I applied and was approved for a rewards card with a $500 limit and $39 annual fee. I only used the card a couple times, paid it off then cut it up. Later I learned that they had sent me to collections for around $200! Could just not paying the annual fee have done that? I told them it wasn't my bill but they said it was and nobody would listen. I don't think Capital One will ever want to hear my name mentioned again. Just too bad, Capital One has an okay starter business card but as long as the business is in my name, might as well forget it.

Should i advise my friend to try starting with a couple store cards? I've heard lots about Bank of America and I wish I would have tried applying with them but I didn't. I've heard of people applying for a Platinum card and being approved for a partly secured card with a $99 deposit and $500 limit. I'm not sure if it would be best to apply for the Platinum card first then see what they offer or the fully secured card first?

For years my mom has preached just one credit card and only one, but I do see a clear advantage to having several, I wouldn't trust FNBO not to freeze my account when I'm 500 miles from home on Sunday afternoon and leave me stranded until I can call the bank on Monday morning. I'd much rather have a major credit card than a store card just for the simple idea of being able to use it at more than one place, but I think I've left myself set up so my next application will have to be for a store card, then after I get a major credit card, I can stop using it.

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Vattené
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Re: Need advice for helping a friend start over with credit

Postby Vattené » Mon Mar 21, 2016 4:20 pm

I'm assuming here, but I'd think secured cards are easier to get, though there are probably exceptions. Take a simple secured card where the credit limit equals the security deposit, for example. There is very little risk to the bank. You could max it out, never pay them back, and they would already have your money. Store cards are pretty easy to get when it comes to credit cards - the limits are lower, the APRs are sky high so if you don't PIF they are very profitable to the issuing banks, and they encourage higher spending at their cobranded stores. There is always the risk that they don' get paid back, however.

Store cards are good for builders and rebuilders. I got my first with no credit history at all at probably 18 or 19, but I could see someone getting turned down for one with seriously negative things on their profile, like a recent bankruptcy. I know that doesn't describe your friend, but it may be difficult for him to get a store card, I don't know. Personally, if I were him I would apply for one and see if I could get it. A wasted inquiry won't hurt him too much in his current position.
-Vattené
FICO-8:
EX - 809 (11/16) | TU - 803 (11/16)
Primary Cards:
American Express EveryDay - $20,000 (10/14)
Discover it - $23,000 (2/14)
AU on Barclay Sallie Mae - $10,000 (8/15)
plus several store accounts of varying usefulness now



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