Why are secured cards never discussed as a means to rebuild credit?

[LSUTiger32]

I just don't get it. If the goal is to rebuild credit why not do it the safe way? I get that every person has changed and they would never make the same mistakes again, but reality tells us that doesn't always happen. I believe it is something like 15% of people who file BK end up filing again.....and that is an enormous number when you figure in the amount of time in which one would have to wait to file again. There is not a person in the world that could tell me that if they have a credit card and they have an emergency that the emergency isn't going on the credit card unless they have an emergency fund. And of course, if you have an emergency fund there is no reason to have anything other than a small secured card.

To not do it with a secured card tells me that it's not as much about rebuilding credit than it is about just getting some credit cards again because you can't live without them.

DISCLAIMER: THIS POST IS NOT SPEAKING OF ANYONE ON HERE PERSONALLY. I AM NOT MAKING A CLAIM ABOUT YOU (THE READER) SO DON'T GET IN A TIZZY ABOUT IT.

[backtoschool]

it does make US nervous...within 8 weeks we have the three cards

1500
1300
2000

in a ny minutes.....but as bts explained ...we never stopped paying our cards for reasons i don't really want to bore you with...so actually, by the time we filed the cc's did not have a negative payment histories to reflect. it's the only thing we can figure out.

our current fico scores ....well actually a month ago or so were 690 and 685....



exactly, just curious why?? now i'm a bit scared...LOL!!!

You are getting high limits because your credit was perfect leading up to bk Tobee43. As to being afraid of high limits, well I think about credit and money so differently now than I did in my pre-bk days, that I am not afraid of using those limits. I even charged a new apple laptop on one of the cards when I first got it, and I paid it off as soon as the charge hit. I am not looking for credit to supplant my income, I am merely trying to re-establish my credit history and I will never carry a balance. Ever.

Now some would say that I will be tempted, but I disagree. I live near the best bakery in town. It doesn't mean I buy a chocolate cake every day and eat it whole (yum). I have some very good bottles of wine for when I have guests over. I am able to keep them in my wine rack unopened instead of guzzling them and passing out. Same with my credit cards. I only use them to create a history and I pay them off in full every month. New habits can be learned post bk.

[tobee43]

Good point, although I do have an unsecured credit limit of $300 which I was somewhat disappointed at by when I first got it back in January. But looking back, I'm glad it has a low limit. I'm surprised at the people getting $1,500 or $2k or even $3k limits either right after discharge or within a year of it. That would make me a little nervous.

it does make US nervous...within 8 weeks we have the three cards

1500
1300
2000

in a ny minutes.....but as bts explained ...we never stopped paying our cards for reasons i don't really want to bore you with...so actually, by the time we filed the cc's did not have a negative payment histories to reflect. it's the only thing we can figure out.

our current fico scores ....well actually a month ago or so were 690 and 685....

CCsAreEvil
I'm surprised at the people getting $1,500 or $2k or even $3k limits either right after discharge or within a year of it. That would make me a little nervous.

exactly, just curious why?? now i'm a bit scared...LOL!!!

[Meh]

I knew what got me into the BK situation to start with and once you make the decision that you're not going back there again then you just don't no matter how much credit you have available. I have about 3k worth of avail credit total and im using 1200 of it now. I could pay every bit of that back right now but I want to hold a bit of a balance because personally I still think that holding a balance shows better than paying in full every month. I'll pay it down enough to keep the utilization under 15% before the due date. This credit thing is really just one huge game. You have to get in debt and show you can sustain debt to be offered more chances to get into debt but those that have never had any debt are cast in a negative light credit wise, go figure.

[CCsAreEvil]

I don't know how people can say they learned their lesson until they do something to prove it. A low limit secured card does everything a unsecured card does for your credit rebuilding and makes it impossible to get back into the same situation.

Good point, although I do have an unsecured credit limit of $300 which I was somewhat disappointed at by when I first got it back in January. But looking back, I'm glad it has a low limit. I'm surprised at the people getting $1,500 or $2k or even $3k limits either right after discharge or within a year of it. That would make me a little nervous.

[LSUTiger32]

I think many do go this route, but want more than one positive trade line. I do not believe a secured card is any better than an unsecured one, except for the fact that you can have a larger "credit limit" more quickly, which will allow you to get unsecured cards with larger limits more quickly.

Good to hear that, I wish more people would exercise this option. I don't know how people can say they learned their lesson until they do something to prove it. A low limit secured card does everything a unsecured card does for your credit rebuilding and makes it impossible to get back into the same situation.

[backtoschool]

So some of them do designate on your credit report that it is secured? It doesn't sound like that makes a difference, it should still be a revolving credit tradeline on your report. So why don't more people go this route I wonder?

I think many do go this route, but want more than one positive trade line. I do not believe a secured card is any better than an unsecured one, except for the fact that you can have a larger "credit limit" more quickly, which will allow you to get unsecured cards with larger limits more quickly.

[LSUTiger32]

So some of them do designate on your credit report that it is secured? It doesn't sound like that makes a difference, it should still be a revolving credit tradeline on your report. So why don't more people go this route I wonder?

[kyfreshstart]

You're also stopping the "rating" of the good credit card account that you've closed too. "Months reviewed" stops completely, therefore never close a credit card... unless you have alot of other/additional SEASONED credit card limit available.

PS - Having too much available credit can also start to score AGAINST you, because you're becoming a huge risk (as you could go on a huge spending spree & then file BK as an escape 6 months later). Remember... a credit score was originally (and is still professionally) known as a Bankruptcy Risk Indicator Score.

[backtoschool]

One reason why closing an account lowers your score is because it lowers your overall available credit therefore (in a sense) increasing your "overall" debt-to-available-credit ratio.

And this is why the FICO scoring system sucks BALLS! I said it... BALLS! Here's an example:

A person with a $1k limit but has a $950 balance will obviously show he/she's has 95% utilization! which will result in a lower score.

A person with $100k limit (across multiple CCs) but has let's say $25k charged up may actually show a better FICO score even though they may have overextended him/herself. This person's only showing 25% utilization.

Go figure.

It also hurts average age of accounts, since usually people are closing an older card with less favorable terms, because they have since obtained better cards with better terms. In Flamingo's case though, I don't think it is going to matter since she has all the credit she wants or needs and has established cards at favorable terms.

[CCsAreEvil]

I don't know how true this is, but I've heard some people say that closing a credit card account can actually hurt your credit score?

One reason why closing an account lowers your score is because it lowers your overall available credit therefore (in a sense) increasing your "overall" debt-to-available-credit ratio.

And this is why the FICO scoring system sucks BALLS! I said it... BALLS! Here's an example:

A person with a $1k limit but has a $950 balance will obviously show he/she's has 95% utilization! which will result in a lower score.

A person with $100k limit (across multiple CCs) but has let's say $25k charged up may actually show a better FICO score even though they may have overextended him/herself. This person's only showing 25% utilization.

Go figure.

[platter]

I've heard that to establish credit, that it's not good to pay it off every month. I heard that it's too easy just to pay it off, it doesn't show to them any 'responsibility' of being able to make a monthly recurring payment, without being late and being able to pay the minimum due and even more. They want to see a running time line of responsible, stable credit card usage with a balance. That's on a secured card with Bank of America that my husband got and then they were able to raise his limit and I think it's unsecured now. He's been very responsible and has only kept a about a $1,200 limit for about six years or so. He's never anxious to raise it either. I need to pull a credit report though.

Paying them off is good too...so I don't know for sure what looks best. Depends on situation, maybe?

[platter]

I don't know how true this is, but I've heard some people say that closing a credit card account can actually hurt your credit score?

I've heard that if you must close a CC account, make certain that it's noted, "Closed at customers request" so that it doesn't just appear as "Closed", as if the company had to close it for some reason.

[Nicollette]

I plan to close the Orchard Bank card due to its annual fee and I only kept it since when the BK came off our credit report, we had very little long-term credit showing and that card really helped.

I don't know how true this is, but I've heard some people say that closing a credit card account can actually hurt your credit score?

[Flamingo]

What we did within six months after discharge was obtain two regular credit cards (Orchard Bank and Washington Mutual which is now Chase) and only use them now and then and pay off in full many days prior to the due date. We still have those cards both started with low limits and the Chase card been changed over to a better card as our credit improved and the BK came off our credit reports in 4/09. Those two cards, along with paying our mortgage on time and any and all other bills, utilites, etc. pushed us in no time to credit scores in the high 700's. Our credit is excellent now and we are bombarded with offers from everywhere to open cards. We do not. On top of that, we still receive junk mail bankruptcy stuff so it is pretty ironic.

I plan to close the Orchard Bank card due to its annual fee and I only kept it since when the BK came off our credit report, we had very little long-term credit showing and that card really helped. So there are good reasons for one or two credit cards, secured or unsecured, on your reports. The key is to be smart and prudent - not crazy. It's how one handles their finances and money. and time, after discharge that will pull them through to get that house, car, etc. And always save money on the side somewhere...one should have at least a 3 to 6 month cushion of monthly income on hand not to be touched. While that sounds impossible to some, it really is not once you are discharged and can get back on your feet. All it takes is the lessons learned from filing and a bit of self-control and will power. Those of you reading this that are several years beyond discharge will know exactly what I am saying.