I was left with one open account...is it worth using it?

[littlejuanito]

I was left with a DELL Computers charge account. I have $1500 available credit. Should I buy a few things, not too expensive, and work on building back my credit? I read a couple of posts where some of you said it was better to go with a CC, is this correct? I don't wanna be applying for loans and be getting denied since I had about 8 enquiries this past two weeks.

[StaciMM]

You're in the right frame of mind to 'plan' your inquiries. Researching ahead of time, to find out what you're most likely to be approved for, is better than random application sprees.

If the Dell account is still open, and you could buy something small-I'd say do it. From all I've heard, it is good to have several accounts open, and variety is good. Once all is said and done, I'll have 2 installment loans (student loans), 2 credit cards, and 2 store accounts.

My first recomendation would be Orchard. You can certainly get their secured card, if you can't get approved for their unsecured. And, they'll open a secured card w/ $200 deposit-which is the lowest I've seen. In order to move on to being able to get other accounts, having a couple reporting is very helpful.

[littlejuanito]

Thanks staci! but how does the whole secure CC work? I know I have to put $200 and that will be my available credit right? Do I still pay interest charges on that? And how do I get my $200 back, say if I don't wanna use it anymore?

[StaciMM]

For Orchard's secured card, there is an annual fee of $35. (But I paid an annual fee of $59 for an unsecured...) You send them $200, it goes into a savings account, and you have $200 limit on a card. You can increase it - such as sending them another $300 and then your card has a $500 limit.

Orchard will review your account after 18 months, and may unsecure it then (sending your deposit back). Or, if you close the account, you'll get your deposit back.

One nice thing about them-they do a pre-app of sorts, without pulling your credit report (well, only doing a soft pull) and they let you know which account you're most likely to be approved for. I was able to get a $300 limit card a month after filing (2 months before discharge) and I included a Household account in the BK! (That is Orchard's parent company.) I think what did it for me is I had 2 4 year old student loan tradelines reporting paid as agreed.

[StaciMM]

Ps-Yes, if you carry a balance, you pay interest.

[littlejuanito]

Thanks for the info staci.

[SinkingFast]

If your looking to build up to mortgage approval post BK, I read at Fannie Mae they look for 4 positive reporting lines of credit. They like to see one non-revolving type such as a mortgage or rent payment. If you rent from a non reporting landlord, you must prove your rental payments with copies of signed leases and cancelled checks or copies of money orders as proof of payments made. They also like to see car payments as a "secured" non-revolving type of payment. A couple CC's or a CC and a store account beyond that are all that's needed for Fannie Mae approval.

I thought it was interesting that they (Fannie Mae) addressed the issue of interest rates and fees. They said they know that people will incur higher fees and interest rates as a result of having filed BK. That makes some people reluctant to apply for and use CC's or finance an auto. But, Fannie Mae also said they won't even consider you for mortgage finance post BK unless you've reestablished yourself.

I know a couple that filed BK 20+ years ago. They'd take one look at the rates or the fees and the rates and they wouldn't finance. They had a relatively new car when they filed BK and they didn't buy another one for about 10 years. My girlfriend said it literally took them about 7 years before anyone would give them a decent rate on a CC or a car loan.

You gotta play the rates and fees games to reestablish your credit or no one will lend to you for anything.