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Building Credit, what is the best secured card?

Building Credit, what is the best secured card?

Old Dec 21st 2009, 2:54 am
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Default Building Credit, what is the best secured card?

Hello,

Just getting my SSN and ready to build up credit - I am piggy backing on the wifes card too but thought it might help to have a secured card in my own name.

Does anybody know which cards would be best? I started looking and it seems a little tricky - some of the cheaper (lower APR and lower or no annual fee's) don't mention if they report to the credit bureau (which i'm guessing means they don't) also do some cards report to that the card is secured rather than just a credit card?

Thoughts anyone? Also any other means to start building credit would be welcome.

Matt Hague
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Old Dec 21st 2009, 3:37 am
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Default Re: Building Credit, what is the best secured card?

My immigrant husband got a secured visa card from Wells Fargo, where he opened his checking account. He used the card, paid off the balance each month, and after one year they unsecured the card and gave him a higher credit limit. It all got reported on his credit report.

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Old Dec 21st 2009, 4:02 am
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Default Re: Building Credit, what is the best secured card?

Originally Posted by MattHague View Post
Hello,

Just getting my SSN and ready to build up credit - I am piggy backing on the wifes card too but thought it might help to have a secured card in my own name.

Does anybody know which cards would be best? I started looking and it seems a little tricky - some of the cheaper (lower APR and lower or no annual fee's) don't mention if they report to the credit bureau (which i'm guessing means they don't) also do some cards report to that the card is secured rather than just a credit card?

Thoughts anyone? Also any other means to start building credit would be welcome.

Matt Hague
Stick with BoA, or Wells Fargo/Wachovia

You don't need to pay interest to build a credit score. Do a $500 one, spend $50 to $100 every month on it, pay off bill in full. Play this game for at least 7 months before applying for a real card.
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Old Dec 21st 2009, 4:06 am
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Default Re: Building Credit, what is the best secured card?

Originally Posted by Noorah101 View Post
My immigrant husband got a secured visa card from Wells Fargo, where he opened his checking account. He used the card, paid off the balance each month, and after one year they unsecured the card and gave him a higher credit limit. It all got reported on his credit report.

Rene
Paying off your balance each month is often not enough for a good credit score.
The archaic system used here means your credit profile is sampled once a month. So, lets say you have a $10,000 credit line and use $8,000 each month before paying it off in full - chances are you are going to been seen as constantly using 80% of your available credit, and as such a risk. Unless your lucky enough that your account is sampled just after your balance is paid.

You need to use you card to build up your credit limit, BUT, when it comes time to apply for more credit (ie a mortgage) you should stop using all credit cards for 3 months prior to the application and ensure they are all paid off with zero balance.

Its kinda catch 22, unless you know how to play the system. You need to use the cards to get the limit increased (higher limits mean lower debt to limit ratio), but you need to make sure the maximum available credit is available when you come to apply for more credit.

Bigger scores are given to those who hold accounts for a number of years, so piggy-backing on to a spouses credit card can instantly boost your own score.

I also started with a secured card (BoA) and was given a 'real' card within 12 months. When we bought our new home it was I that signed for the mortgage, and I'm the Brit. I'd only been here 4 years and my credit rating was 'manipulated' enough to make me the favorable borrower (I didn't have student loans, which helped).

Last edited by thinbrit; Dec 21st 2009 at 4:10 am.
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Old Dec 21st 2009, 4:31 am
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Default Re: Building Credit, what is the best secured card?

Originally Posted by thinbrit View Post
Paying off your balance each month is often not enough for a good credit score.
The archaic system used here means your credit profile is sampled once a month. So, lets say you have a $10,000 credit line and use $8,000 each month before paying it off in full - chances are you are going to been seen as constantly using 80% of your available credit, and as such a risk. Unless your lucky enough that your account is sampled just after your balance is paid.
This headline had me wondering! If you read it as you shouldn't pay off your balance in full every month, you've got it totally wrong! What it says is that you should not have a high balance with respect to your credit limit. Once again, the FICO algorithm does NOT care whether you pay interest or not. Rather it is worried about the ratio of balance to credit limit. Always keep it below 20%. So with a 10k limit, don't run it past 2k. With a 500 buck limit, don't pass the $100 mark at any time.
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Old Dec 21st 2009, 4:41 am
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Default Re: Building Credit, what is the best secured card?

Originally Posted by fatbrit View Post
This headline had me wondering! If you read it as you shouldn't pay off your balance in full every month, you've got it totally wrong! What it says is that you should not have a high balance with respect to your credit limit. Once again, the FICO algorithm does NOT care whether you pay interest or not. Rather it is worried about the ratio of balance to credit limit. Always keep it below 20%. So with a 10k limit, don't run it past 2k. With a 500 buck limit, don't pass the $100 mark at any time.
You got it totally wrong! I didn't mean don't pay off your credit balance each month. I meant simply paying off your balance in full would not guarantee a good score. I thought I'd made it clear, but perhaps not. Its not the act of paying off the balance, but more when it is paid compared to when your account is sampled.

scenario:
Fred has a $1000 limit and has a revolving balance of $500 (ie he always owes $500, he only ever pays the interest on it - HE IS ALWAYS IN DEBT)
Jim has a $1000 limit and uses $900 of that limit but pays the balance in full every month (ie HE PAYS OFF HIS CARD IN FULL)
If both clients are sampled the day before payments are due then Fred would be the 'better risk' in the eyes of the credit card company as he was only using half his credit. The fact Jim paid off his debt in full every month would not be recognized.

Alternatively Fred could have a $1,000 maxed out card for 29 of the 30 days and pay it off the day before his account was sampled and the previous balance would have no impact at all!

Its OK to use your balance, but to ensure the best results you should stop using it 3 months prior to applying for credit (3 months is not some golden rule, but it ensures the credit agencies have done enough samplings of your account that it made a difference). I've seen my score change much quicker than that, 3 months is just my cautious 'guess'.

Your credit score is transient, and you should aim to increase this score when its necessary to do so - ie a mortgage application, refinance, etc.

Last edited by thinbrit; Dec 21st 2009 at 5:01 am. Reason: added scenarios
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Old Dec 21st 2009, 5:07 am
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Default Re: Building Credit, what is the best secured card?

Originally Posted by fatbrit View Post
This headline had me wondering! If you read it as you shouldn't pay off your balance in full every month, you've got it totally wrong! What it says is that you should not have a high balance with respect to your credit limit. Once again, the FICO algorithm does NOT care whether you pay interest or not. Rather it is worried about the ratio of balance to credit limit. Always keep it below 20%. So with a 10k limit, don't run it past 2k. With a 500 buck limit, don't pass the $100 mark at any time.
That'll be where I am going wrong then BoA haven't upgraded us yet, but have been successful in securing another credit card.
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Old Dec 21st 2009, 5:10 am
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Default Re: Building Credit, what is the best secured card?

Originally Posted by sambapink View Post
That'll be where I am going wrong then BoA haven't upgraded us yet, but have been successful in securing another credit card.
hmmm, this is anecdotal, but using 20% of any credit card limit has never meant a raised limit....

I got lots of cards to build my score - took them all out early on to negate the impact when I actually needed to use my credit score. Some cards I used more (better rewards, I liked the store etc). The cards I actually used all increased their limits compared to the dormant cards I hold. Maybe anecdotal, who knows...

Last edited by thinbrit; Dec 21st 2009 at 5:13 am.
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Old Dec 21st 2009, 5:13 am
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Default Re: Building Credit, what is the best secured card?

Originally Posted by thinbrit View Post
hmmm, this is anecdotal, but using 20% of any credit card limit has never meant a raised limit....
Pay special attention to the questions asked in this estimator.
http://www.bankrate.com/calculators/...alculator.aspx

This was written by Fair Issac -- the people who control the algorithm.
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Old Dec 21st 2009, 5:14 am
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Default Re: Building Credit, what is the best secured card?

Originally Posted by sambapink View Post
That'll be where I am going wrong then BoA haven't upgraded us yet, but have been successful in securing another credit card.
Keep your balance under 20% on revolving lines. It'll do wonders for a fledgling score.
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Old Dec 21st 2009, 5:20 am
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Default Re: Building Credit, what is the best secured card?

Originally Posted by fatbrit View Post
Pay special attention to the questions asked in this estimator.
http://www.bankrate.com/calculators/...alculator.aspx

This was written by Fair [sic]Issac -- the people who control the algorithm.
Its my understanding the algorithm is not documented. Fair Isaac may claim fame to the FiCO, but aren't they just one of the at least 4 kids on the block?
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Old Dec 21st 2009, 5:22 am
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Default Re: Building Credit, what is the best secured card?

Originally Posted by thinbrit View Post
You got it totally wrong! I didn't mean don't pay off your credit balance each month. I meant simply paying off your balance in full would not guarantee a good score. I thought I'd made it clear, but perhaps not. Its not the act of paying off the balance, but more when it is paid compared to when your account is sampled.

scenario:
Fred has a $1000 limit and has a revolving balance of $500 (ie he always owes $500, he only ever pays the interest on it - HE IS ALWAYS IN DEBT)
Jim has a $1000 limit and uses $900 of that limit but pays the balance in full every month (ie HE PAYS OFF HIS CARD IN FULL)
If both clients are sampled the day before payments are due then Fred would be the 'better risk' in the eyes of the credit card company as he was only using half his credit. The fact Jim paid off his debt in full every month would not be recognized.

Alternatively Fred could have a $1,000 maxed out card for 29 of the 30 days and pay it off the day before his account was sampled and the previous balance would have no impact at all!

Its OK to use your balance, but to ensure the best results you should stop using it 3 months prior to applying for credit (3 months is not some golden rule, but it ensures the credit agencies have done enough samplings of your account that it made a difference). I've seen my score change much quicker than that, 3 months is just my cautious 'guess'.

Your credit score is transient, and you should aim to increase this score when its necessary to do so - ie a mortgage application, refinance, etc.
Just keep it below 20% all the time and you're good to go!

The nightmare scenario are the first-time home buyers who go and buy their new furniture on the never-never between signing the contact and escrow closing on their house. I've known mortgage loan officers who physically remove the credit cards off customers and make them sign an undertaking of which they give them a dozen copies in 24 point type that they will not take out any loan for any purpose whatsoever before escrow closes!
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Old Dec 21st 2009, 5:23 am
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Default Re: Building Credit, what is the best secured card?

Originally Posted by fatbrit View Post
Pay special attention to the questions asked in this estimator.
http://www.bankrate.com/calculators/...alculator.aspx

This was written by Fair Issac -- the people who control the algorithm.
I reiterate my original statements, made many many times. SAMPLING times!
Ask the question on Monday 1st and I owe $9000, ask the same question on Tuesday 2nd and I paid the balance off!
Algorithms are cool, especially if you know how to input data to get out data. Garbage in, garbage out...
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Old Dec 21st 2009, 5:25 am
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Default Re: Building Credit, what is the best secured card?

Originally Posted by thinbrit View Post
Its my understanding the algorithm is not documented. Fair Isaac may claim fame to the FiCO, but aren't they just one of the at least 4 kids on the block?
FICO do the most commonly used algorithm, and FICO wrote the calculator I linked to. The scores are pretty accurate, so accurate in fact that it is pointless for the average Joe to waste money on buying either their real score or the more common FakeO ones. That calculator gives you all you need to know and enough hints on how to increase your score.
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Old Dec 21st 2009, 5:27 am
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Default Re: Building Credit, what is the best secured card?

Originally Posted by thinbrit View Post
I reiterate my original statements, made many many times. SAMPLING times!
Ask the question on Monday 1st and I owe $9000, ask the same question on Tuesday 2nd and I paid the balance off!
Algorithms are cool, especially if you know how to input data to get out data. Garbage in, garbage out...
If you've got a 10k card, never let the balance go above 2k. If you've got a $500 card, never let the balance go above a hundred bucks. I don't know how I can explain it any other way.
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