Gosh, the things they don't teach you in school. Luckily, this post isnâ??t regarding rebuilding bad credit â?? itâ??s simply building nonexistent credit. I'm relatively young (21) and in the process of building my credit history. At age 17, my mother co-signed for me on a CapitalOne card â?? the CL on this card has since doubled (to a maximum of $2,000, which they wonâ??t increase further since it was a co-sign), and after a little talk to CapitalOne customer service, they agreed to lower my APR from 19.8% to 9.9% since I hadnâ??t missed a payment during my entire 3 year account length. Unfortunately, I recently noticed that CapitalOneâ??s â??Co-Signâ?? card is merely an AU â?? Iâ??m only listed as an Authorized user on an account that has only one card â?? mine. At any rate, I hope that itâ??s still building my credit regardless. My FICO scores seem fairly decent â?? Equifax reported a 720 FICO, Experianâ??s fake score reports a 750, and TransUnion FICO reports as 714. Now, on to account negatives. In the past 12 months, Iâ??ve managed to accumulate a plethora of hard inquiries to my accounts. I believe Iâ??m at 3 for Experian, and 8 each for TransUnion and Equifax. Yeah, ouch. Pre-Qualified offers suck. This is what happens when you donâ??t read first. Youâ??ve no doubt guessed that all of those inquiries were also rejections. Insufficient credit history, lack of a checking account (even though I have a savings), too many recent inquiries, etc. Sigh. I guess having 4 years of an AU doesnâ??t help a newbie as much as I thought it would. Another huge reason for denial was I didnâ??t pay down my balance on my card before applying â?? balance was around $1,500 (bought a few toys and tried to keep a revolving balance to build credit, even though I had the money available), lowering my FICO score to around 660. I just put a payment in and lowered the balance to around $10, which raised my scores tremendously. So my question is, â??What should I do?â? As a first step, Iâ??m thinking of getting another AU from my mom, a $14k CL she never uses. From that point, should I apply to particular sub-prime cards? Possibly the main reason for denials was too high of a balance? Should I wait 12 months for the INQs to fall off? Should I go on a rampage? Iâ??m getting frustrated with the denials. I donâ??t NEED the credit line for anything, but I need to build credit either way.
call the cras and dispute some inquiries. dont dispute all though because you dont want a fraud alert put on your cr. apply for a subprime card like household/orchard bank. you have to get something to start. if that is turned down then you have to get a bon card or some other easy to get store card. first make sure some inquiries are off though and the correct balance is reported to the cra's. you need a report from each cra to dispute anyway. just get them for free because you were turned down credit in the last 60 days. after you have a second card on your credit report, you should in theory have sufficient credit to start getting better cards. dont apply for bad preapproved offers because as youve learned its just a waste of an inquiry.
I'm afraid to dispute the inquiries because I really did make them - I'm deathly afraid of getting any negative remark on my report. I'm also very cautious about what cards I get. Many people have told me that an optimal number is 4 or 5, and I shouldn't go above that - because of this, I was hoping I wouldnt have to waste 1 or 2 of those on crappy high-apr super-subprime cards...any suggestions for mid-range cards? I now have a 4-year $2k AU and 8-year $14k AU on my record, and all balances are around $10. Any suggestions on a fairly decent subprime card that I'd be eligible for? I was hearing some negative things about household/orchard bank. Also, how many INQ's should I wait to drop off before reapplying? It's painful waiting 6 to 12 months at a time just to hear a single 'no' response. I really want to start building ASAP, as these things do take time...and the sooner I start, the more time will build up.
Did you try opening up merchant lines instead of general v/mc lines? Traditionally they are a lot easier to obtain then v/mc's would be. You may want to try Target & WalMart lines to get started. Use these to get your credit built up, and a payment history on non-AU accounts shown in your report. Your report scores may take a slight hit for these new inq's, and the new tradelines, but in the long run the benefit of having your own lines reporting your own payment history as your own should outweigh any temporary hits.
I appreciate everyone's help here, you guys are great! Yep, 2 of the inquiries on Equifax and TransUnion are Best Buy and Sears - they both queried 2 agencies (EQ and TU), resulting in 4 additional INQs on my credit reports. And another two fat denials in the mail. Sorta gets on my nerves when I, with a 4 year never-late credit history, get denied for a Sears card when the 16 year old kid living next to me gets approved for one without any history whatsoever. Something isn't right...but my reports all look fine and error free. I was trying to stay away from merchant lines, though - if possible, I'd like to stick with V/MC cards...I don't want a ton of open accounts. But if having nothing but AUs on my record is going to keep me from getting even a subprime, I'm probably going to have to get a Wal-Mart card or something. Is it common for AU's to not help when it comes to obtaining CCs? Would too many recent inquiries be the sole factor in a lender's credit card refusal? Could my high balance have been their true sole reason for denial? Ugh.
I would first try a store card like Target or Walmart and even Sam's here has a credit line on their cards if you qualify. Or try a gas card (Texaco or Chevron) and then pay those in full every month and that will help build up some more history and also put a mix in it too.
Also, how about a Cap 1 card in your own name? You should be able to come by that fairly easily. Since they report to all 3 bureaus every month, it should help build your credit as well.
Right - student card is out of the question because they require active enrollment, as well as student ID, with a current college. Cap1 agreed to remove my mom's name from my co-sign card, but they said there could possibly be some 'terms'. We'll see what they do, tonight. They're either going to simply remove her name clean, leaving me with a 4-year history, or they're going to kill the card and issue me a new one (my mom had a few words to say on this issue, as she was asking what the point of my previous 4 years of history would have been if I'm going to lose it). My only beef with Cap1 is the lack of limit reporting - I deliberately nearly maxed out my previous card so a high limit/balance would be reported - it's going to suck if they remove my record and make me do everything again. So now I'll have one Cap1 in my name, plus a $14k prime AU. Think this is enough to start? Or should I still go for a Gas or Commercial Store card before applying for something like CitiBank, Chase, etc?
Ariok, Do you have access to some cash, say like $1000, that you can lock for a while? Open up a CD with a credit union with that money for a 6 month period. With that CD as security, ask for a secured loan from the credit union, for the exact same period: 6 months. Take the loaned money, and repeat the same process in as many credit unions as you can be a member of. I had the same problem with my wife ... young when we were married, and no credit history .... so I followed the above procedure, and 6 months later, her scores are all above 700. Make sure that the credit unions report to the bureaus, and do not pull a hard inquiry to lend your own money to you. Ask them upfront these 2 questions. I suggest credit unions, because, in my experience, only credit unions and small community banks are willing to do this. Large banks (think Fleet, Wachovia, Citi) want to pull your report to lend your own money back to you. Best of luck.
Thanks again for your help. I am not making a tremendous amount of cash right now, so I'll probably only get one $1,000 secured loan. I don't want to chance getting burned with the interest on multiple loans, so I'm sticking with one. I'll start looking today. How many credit cards and/or loans do you typically need before you can apply for one of the big dog prime cards like AmEx or Discover? I'm trying to make a little plan and gauge how long it's going to take for me to build an outstanding credit history.
Hi Ariok, You seem to misunderstand -- you don't need $3000, to open up three $1000 secured loans!! $1000 should be enough. When you take a secured loan, you get back $1000 from the first credit union right? Take the same $1000 and go to the second credit union. You get $1000 back from the second credit union, and use it at the third credit union. Theoretically, you can do this as many times as you can and willing to. Also, you are not going to get burned interest wise. My credit union offered a secured loan at 2% above the CD rate (underlying security). So, for about $10 in interest over 6 months (Interest paid = $16, Interest received = $6) my wife had an A+ tradeline reporting on all her reports! Imagine the same effect multiplied 3 times.. atmost it's going to cost you $30. Just about the same amount of annual fee, or even less, on an unsecured card like Orchard Bank, and without the crappy interest rates. In about 6 months, you should have great credit. The ONLY catch is that you have to be vigilant enough to pay the installments on or before they are due on all the loans. I had BillPay through my credit union, so I paid my wife's installment loans from my account; I scheduled payments at least 15 days before they are due, so that the interest bite is reduced by half. Once scheduled, the transfers take place automatically. Lastly, you said you have 8 to 12 inquiries on each of your reports; with a thin credit file, and so many inquiries, it's unlikely that you are going to get approved for anything but subprime cards. I'd advise you to stay off from applying (even gas cards and store cards) for about 6 months, do what I suggested above, and 6 months later, watch all the prime offers rolling in!
Actually, now I remembered my original concern when it comes to this type of building. Please correct me if I'm wrong. I was under the impression that money was LOCKED into CD accounts. This is problematic because I technically need twice as much money to pay the loans back. 1.) Say I set aside $1,200 cash for credit building. 2.) I deposit $1,000 in CD1. I have $200 cash left. 3.) I take out a loan with CD1 as collateral, so I'm back up to $1,200 cash. 4.) I deposit $1,000 cash into CD2. I have $200 cash remaining. 5.) I take out a loan with CD2 as collateral, so I'm back up to $1,200 cash. 6.) I deposit $1,000 cash into CD3. I have $200 cash left. 7.) I take out a loan with CD3 as collateral, so I'm back up to $1,200 cash. Now the fun starts. 8.) Month 1, I have to pay, let's say (just to make things quick and less technical) 16% of each loan. That's $160 times 4. $640. I have $560 cash left. 9.) Month 2, I have to pay 16% again. $160 times 4 is another $640. I have -$80 cash left. Uh oh... 10.) Month 3, I have to pay another 16%. $160 times 4 is another $640, so I'm down to $560. By month 6, this is -$2,480. And I started with $200 more than I thought I needed. My problem is that the CD's are locked, so I can't take money out of them to pay off the loans. Unless there's a way around this? Thanks for all of your help!
stagger the new accounts 1 month apart. Open up regular savings accounts at each credit union if you are worried about CD's all you need is your original deposit amount, you are going to be using that to pay off the installments the method described is tried and true, it will only cost you a few dollars in interest
Hi Ariok, I did not realize it, but yes you need to be earning at least enough money to pay off the monthly installments as they come due. Good point!! I had direct deposit into my credit union, and I scheduled payments, so I did not even realize that my monthly income enabled timely payments on 3 installment loans for my wife. Well, I learnt something new, and am sorry I did not think this more deeply than I ought to. As pd says, stagger your loans a month apart, and use savings account as underlying security instead of a CD. My credit union was offering 3.3% margin for the savings secured loan instead of 2% margin for CD secured loans; I went with the CD option. Best of luck!
