Low Limit Unsecured, or high limit secured?

[eu_phorix]

Hello All,

I applied for 2,500 credit card yesterday with my credit union, and they're response was an offer of a $500 unsecured card.

I'm wondering if I should push for more information on getting a secured card instead, or just take the 500 unsecured.

Here's my thought:

If after 2 years
(1) My unsecured card has been increased in limit to 2,000.
(2) I get a secured card now with 5,000 I have in bank, then after 2 years it rolls to unsecured.

Which would be the better route? I know secured looks bad on the report, and I think I'll find they DO report secured..but 500 limit is very low, and I suspect it won't grow much compared to if I let a secured roll over with a high amount.

Thanks for your input everyone!

[BK'd-Betty]

Personally, I'd do both! The more positive T/L's you have reporting the more your scores will go up.

[BK'd-Betty]

BTW - Orchard Bank offers secured cards that report as UNsecured.

[HHM]

I assume you are posting here because you filed BK at some point, correct?

If so, I am a little troubled with your quibbling over the balance...you really should not be USING credit cards. In that respect, I'd get the low limit unsecured.

Actually, it is a false assumption that more is better with credit reporting. You do want to have more than one account, but variety (i.e. credit card, car loan, mortgage) is better than having a bunch of credit cards on your report, also, if you have too many credit cards, than your available balance becomes too high, and that dings your credit.

In the long run, following a BK, time heals your credit report, not the number of dinky credit cards you have on your credit report.

[eu_phorix]

Thanks for the replies...

I should explain that I'm not "dissapointed" or "quibling" over the offer, however, I know that if I make poor decisions in accepting credit, I may end up extending the time it would otherwise take me to rebuild my credit.

Yes I claimed chapter 7 bankruptcy in 12/2005. I applied for a credit card yesterday, and am supposed to go in Monday to sign the papers to accept the offer of a $500 unsecured credit card.

What I'm wondering is if it would be better at this juncture to instead of taking the 500 unsecured, to instead go for an unsecured card, and put $5000 on it..so that in 12-18 months when it rolls over I would have an unsecured card with a $5000 limit.

I have plenty of cash at this point, and am unconcerned with getting credit cards for purchasing power, only for the purpose of building my credit. So the $500 unsecured card will look like a very low limit card to other creditors when I apply for another card with Capitol One in 6-10 months.

This is the crux of my post...would a higher balance secured card be better at this juncture, or the 500 unsecured card. I plan on going in Monday or Tuesday to either sign the application or to instead ask for a secured card off this application.

Thanks

[HHM]

Answer, probably not. Also it is a fairly poor cash management to set aside $5K as security for a credit card, put that money to work for you, stocks, mutual funds, something, anything that will give you a return on investment, don't waste it on security for a lousy secured credit card.

Do you have a car payment? Do you have a mortgage? Do you have student loans.

Also, if you read though some of the posts on this forum, good credit card offers will start to come in. I know some in this forum started with a $300 unsecured card, and 6 months later are now getting offers for $5,000 unsecured cards. Don't worry about it, get the $500 unsecured card, use it a little bit, and you will start getting other offers within 6 months.

[BK'd-Betty]

It will probably happen sooner than 6 months!

I just started cleaning up my credit and rebuilding - about mid November 2006. I couldnt get any prime cards - so I did the 1-2 sub prime card thing.

Credit scores steadily rising - and the offers in the mail are getting better. Just this week I applied and was approved for a Mastercard with a $5,000 limit, no annual fee card (from a pre-approval). I just activated it and will be closing all the crappy ones tomorrow. This is all the unsecured credit I want, or need.

However, I believe I would have never received this offer if I had not paid my dues with the sub primes first. But that is just my opinion, I have no facts to substantiate my claim.

[BK'd-Betty]

This is great advice - wish I had thought about it before I replied the first time!!!

Answer, probably not. Also it is a fairly poor cash management to set aside $5K as security for a credit card, put that money to work for you, stocks, mutual funds, something, anything that will give you a return on investment, don't waste it on security for a lousy secured credit card.

[HHM]

I just activated it and will be closing all the crappy ones tomorrow. This is all the unsecured credit I want, or need.

Only close them if they charge annual fee, or other type of fees (i.e. inactivity, etc), or call them and see if you can get the annual fee taken off. Otherwise, just leave the accounts alone. Closing accounts will probably ding your credit a little, but it will recover.

[BK'd-Betty]

Yeah, I thought about that too - I know my credit will take a small hit for closing the accounts, but the ones I have do charge an annual fee and outrageous interest. (of course, I am not carrying a balance so I guess the interst doesn't matter for now)

I don't plan on applying for anymore credit anytime soon as I don't plan on buying a home again anytime in the forseeable future. I may need to buy a car in 2-3 years but that's about it.

I don't want to get anymore credit cards - so I think I can take the ding and it will correct itself over time.

I will call the other cards to see if I can get the AF waived, but doubtful since they're all only about 3 mos old - but you know, since I already paid the AF for the year, might as well keep them open until renewal time and try to get the fees waived (now that I think about it).

Thanks HHM - you are always so clear thinking and down to earth! I try to read everything you write here!

Only close them if they charge annual fee, or other type of fees (i.e. inactivity, etc), or call them and see if you can get the annual fee taken off. Otherwise, just leave the accounts alone. Closing accounts will probably ding your credit a little, but it will recover.