Improve Scores-Increase Current Secured Credit Card Limit Or Open Additional Card?

[easymoney]

Hello,

I am in an active CH13 and currently have a secured credit card with a low credit limit of $200 that has been open for 18 months. It has a 100% on-time payment history and has been paid in full each month.

In an effort to increase my credit scores, would I be better off opening a new secured credit card (with a low credit line of around $200 as well) or increasing the credit limit on my existing secured credit card? (My BK attorney stated either scenario is fine in my BK district.) I could also increase the credit line of one or both secured cards if that would help my credit scores as well. Any thoughts or recommendations would be appreciated.

[justbroke]

Both. (I defer to shipo ...)

I think the best score is 3 revolvers and no (repeat no) store cards. Practice AZEO which means all-zero (balances) except one. So always let 2 report (statement cut) at $0, and the other one report a balance. However, and here's the big caveat, never let any card report more than 28.9% and ideally the one card reporting a balance should be less than 8.9% for the maximum results.

shipo 's guide on improving your score also includes getting a share-secured loan (known as an SSL) at a credit union. This expands your profile to include an installment loan.

WARNING: you must comply with your Order Confirming Chapter 13 Plan. In some instances you may need permission to obtain credit. There are some questions as to whether a secured card or secured installment loan are really debt/credit.

[shipo]

I agree with justbroke's summary. There is however one wrinkle, while your Chapter 13 is active, don't expect much in the way of score improvement (you'll get some, but it won't be earth shaking), however, once you get your discharge you'll be off to the races.

[flashoflight]

easymoney
Good timing on this thread. I'm a little ahead of you. I've been trying to improve my credit while in an active 13 and it's been a challenge. I hope other active CH13s have some data points because I think I've hit the ceiling of what's possible in an active 13. I would do AZEO if shopping for a car loan or mortgage. Otherwise keep life simple and pay down balances completely prior to the statement date. When credit lines are small, you have to pay it down to keep utilization down.

Here are my datapoints:

Navy Federal is CH13 friendly only with the nRewards secured card. Don't bother putting in more than $200. After 3 months, it will be partially unsecured at $600. After 6 months, it will be $2000 unsecured cash rewards. My gut feeling is that the cash rewards may be bucketed. This is the only card I have that has car rental coverage. After the $2k unsecured, getting another unsecured card at Navy without going through nRewards will result in a denial for the sole reason of bankruptcy. So no flagship card for me.

Penfed is CH13 friendly after 2 years. Unsecured. PowerCash card is a good choice. SL is $2500. Penfed will do soft pull personal loans to see rates and terms. For CH13, they go up to $20k and the rates can be as low as 8%. You can pay ahead of schedule like an SSL. Don't know yet if Powercash is bucketed.

Figure and Upstart might have attractive rates for personal loans despite the non-discharged CH13. Figure charges a 3% origination fee though and I don't know if it can be paid forward like an SSL.

Credit One, Ollo, and Mission Lane are all first year CH13 friendly for unsecured credit. Some of Ollo and Mission Lane offers have no annual fee. Have heard Credit One will go to $6k nowadays but mine is half that. Ollo can be $4k SL. The 5% cashback card for Credit One can be profitable despite the $99 annual fee, which is what I hold.

Capital One was IIB and won't forgive after 2 years even for a secured card. My denial reason is "presence of a non-discharged bankruptcy" rather than the status of previous accounts so the IIB may not be the reason Cap One won't touch me. Same for a Capital One auto loan even though I don't need a replacement car, knock on wood.

Synchrony was IIB and will forgive after 2 years for a store card. Lowe's is a good Sync store card because it comes with 5% off, access to 20% off coupons from the dark web that require payment using the Lowes card, and a 1-year return policy for most items.

Comenity was not IIB and they give out store cards early in the CH13. Generous CLI so far to $7k.

Dell Financial (web bank) was not IIB and their SL can be generous (above $4k).

Burned Citi, Chase, Discover, BofA, USBank/ELAN, and Amex. Won't touch these. Looks like I will be collecting credit union Visas and Mastercards for the rest of my life.

Apple Card has been difficult. Only got accepted with the shopping cart trick with a limit of $500. CLI denials all the time. Looks like a five year old charge-off is preventing CLIs. CLIs can be requested with a chat bot. Speaking of Goldman, Marcus won't touch me.

For mortgages, there are a few lenders that will do FHA manual underwrite. You will need court and trustee permission to get a mortgage or to refinance. The replacement mortgage will report like a regular mortgage unlike my pre-petition mortgages. Find a mortgage broker who does CH13 mortgages.

I don't have access to any AU or surviving pre-petition tradelines. Have not tried renting an old tradeline but my gut says it won't work to get a $10k Visa during the CH13 because banks can tell the difference between AU and a joint owner.

Having higher limits on the store cards don't seem to translate into high Visa/MC limits. The presence of a non-discharged BK, a single pre-petition charge off, and the lack of age on my oldest OPEN account is hurting me. I am considering a temporary $5k or $10k secured Visa at a bank that is confirmed to graduate secured cards for the higher $5k or $10 amounts, but that ties up a lot of money and I suspect I won't get an unsecured $5k+ Visa out of it. But maybe I'm wrong. Who knows.

[justbroke]

+1000

[easymoney]

Thank you to each of you for your feedback! It is very much appreciated!

[5yrplan]

Credit cards and credit Scores aren’t needed. You can succeed and prosper financially without them. Bankruptcy should have taught you debt is dumb.

[shipo]

Credit cards and credit Scores aren’t needed. You can succeed and prosper financially without them. Bankruptcy should have taught you debt is dumb.

You continue to miss the point; credit, like a chainsaw, is a tool, use it properly and you will be MUCH better off, use it carelessly and you will hurt yourself.

[celticsfan]

It was mentioned Penfed will approve after 2 years. They are part of my Chap 13 but they sold off to another company. Would I have a chance with Penfed since they sold my chap 13 debt to LVNV funding?

[justbroke]

Many credit unions will forever block a member from credit products if the credit union suffered a loss. They may allow demand deposit accounts (checking/savings), but no credit products. Some debtors have been able to get back into the good graces of the credit union by repaying the discharged debt.

If PenFed is like any of the others, such as USAA or Navy Federal, I would think that you would be blocked from credit products forever.

[5yrplan]

There’s another option don’t worry about your debt score. Think outside the normal box for a minute. Having a good credit score doesn’t mean you have money it means you’re good at being in debt. Go debt free. Save up a large emergency fund like $15K then be your own credit card. You can live and prosper without a debit credit rating. You can even become a millionaire without using credit. You’ll use a debit card and pay cash when you buy. You can also get a mortgage without a debit credit rating it’s called manual under writing. Using credit makes the banks rich not you. Think about having your monthly income without any lender payments to make. The only debt you should have is a mortgage on your primary residence. Give it some thought. Credit and credit ratings is a enormous bank marketing tool that’s totally unnecessary.

[shipo]

Once again 5yrplan show a complete lack of understanding regarding the differences between debt and credit. A wise person would ignore such advice.

[5yrplan]

Debt is dumb. Inflation is making it even more dumb. We’ve been there. You’ve filed so now it’s good time to learn how to live without credit. Cut every expense you can and increase your earnings and save. Pile up as much cash as possible. At the very least get an emergency fund built so when Murphy calls you can cover it without going into debt. Stop living pay check to paycheck. Save and prosper. The normal the Jones’s are broke.

[justbroke]

5yrplan but that's what most post-bankruptcy people do. Learn to budget. Use credit as an advantage, not a crutch. Increase savings. Payoff your house. Don't buy a new car every 4 years. Everyone should have a 6-month emergency fund. Everyone should be also saving (in addition to the emergency fund). Everyone should fund a retirement account. The list goes on.

At the same time we can and do leverage credit. Even if I get a mortgage manually underwritten with no "traditional" credit, the underwriting still looks at other accounts (phone, cellular, gas, electric and other utilities to establish "credit"). The mortgage note, itself, is credit. For those that work and travel for work, credit may be necessary to fly, checking into a hotel, and almost always to rent a vehicle.

There's a credit spectrum that one can be on. The credit companies call these customers transactors and revolvers. Don't be a revolver. Transactors, which have traditionally flocked to cards like the American Express charge card, don't every pay interest. They get a tangible net benefit from using the card(s). In many cases, they don't even pay an annual fee and yet receive usable points or cash back.

On the other side of the spectrum are the revolvers. There are two types of revolvers. I call them the 20% and the 90%. The 20% never use too much of their credit line and limit it to about 20-30% of their credit line. The others, the ones in trouble, are the 90%ers. They are at or over 90%, go over their limit from time to time, and rely heavily on credit.

An individual can use credit as an absolute advantage (transactors) or a crutch (90% revolvers).

There's just no simple answer as just use cash all the time. There are different profiles of people that have different responsibilities, goals, and jobs.

[5yrplan]

Then there is risk you must protect your finances from risk. Accidents, injuries, unemployment, break downs, recessions, pandemics.