More Credit Rebuilding Questions

[Carmella]

I have read information on this forum but have questions. My current situation. Married. Husband and I have two car loans and HELOC in both of our names. My husband will likely retire in 1-2 yrs, but work part time. I still have about 7-8 yrs before I can retire, but plan to work longer.

I have 1 credit card, not a secure credit card. I have procrastinated getting more credit cards because I would love to live without them.

My CC is with Ally and now has $4,500 limit. I have gotten several increases without even asking. Should husband and I both have 3 credit cards a piece, not joint accounts? Do we need any secure credit cards since we have many offers with unsecured credit cards?

Once we have the credit cards should we keep a balance on them? I think I have read there is a recommended balance in the past, but I didn't find that info in the few threads I read now. Do we need to have balances on each credit card? I really do not want to have possibly 6 credit card bills to pay monthly.

Basically, what should we have/do to improve the credit score especially as it relates to credit cards. I think we are fine with installment loans, but partly worry we have too much debt with two car loans.

I no longer have the Sunbit loan. I have been lazy and used Klarna online. Using a credit card would be more beneficial, but I like Klarna since I only need to verify and don't need to type in all those numbers, expiration, and the code. I have thought about putting the credit card NOT the debit card in Klarna so it will be a credit card purchase.

I do not believe Klarna is negative on the credit report because it's not reported, but it doesn't help the credit score. Would attaching it to the credit card be a win-win and I can still be lazy?

The reason I am concerned with credit score is that we probably will be moving within 3-5 years and most likely renting and want to have a decent credit score. I have been dragging my feet too long and need to at least get husband his own card and to get another one for myself.

[shipo]

What you "need" and what will give you maximum FICO scores are somewhat different:

• What you "need" is what works best for you financially
• What will give you maximum FICO scores are a minimum of three credit cards for each of you, of which one needs to show a trivial balance (like as low as $5.00), once again, for each of you.

I now have eight credit cards (with a totally unnecessary $99,100 of total credit line, a tenth of that would suffice) and use them as follows:

• 3-cards in the proverbial "sock drawer"; I use these a few times per year to keep them active, otherwise they collect sock fuzz
• 1-card which is an airline card; it gets used when I travel, so months with no use, and months with heavy use
• 3-cards used to their best rewards advantage but always kept at a zero balance for reporting purposes
• 1-card, oddly enough my first after my bankruptcy, which typically gets heavy usage every month and I always pay it down before the monthly statement cuts, but try to leave about $50 for reporting purposes

What the above model does is two things:

1. I get maximum "revolving account" scoring points for having at least three cards
2. I get maximum "usage" and "utilization" points for allowing one card to report a low/non-zero balance
   1. Note: on the odd occasion when a latent charge doesn't hit my account before the statement date for the one card I typically have reporting, my score immediately drops by anywhere from 15 to 25 points because of what is known as the "All-Zero" penalty; the FICO scoring model doesn't actually penalize you, what it does is erase any bonus points for credit activity.
   2. The good news regarding this type of a score drop is as soon as another card reports a trivial balance, your scores immediately rebound

Long story short, yeah, I'd get a total of three cards for the both of you; your scores will take a short term hit from the applications and the new accounts, but in less than a year you should be back where you started, and when the one year anniversary hits for your youngest card, your scores will pop nicely.

[Carmella]

Thanks, shipo We can handle having total of 6 cards and if we each have one with a small balance that is easy to track. And it's easy enough to use each of the other cards periodically.

I want us to have a good credit score since we may move in a few years, end up renting and need to figure out the car loans to refinance or when I trade my car in to get a one I really want instead of "the only car I could buy due accident during the pandemic/supply chain shortage and BK13"

[shipo]

Thanks, shipo We can handle having total of 6 cards and if we each have one with a small balance that is easy to track. And it's easy enough to use each of the other cards periodically.

I want us to have a good credit score since we may move in a few years, end up renting and need to figure out the car loans to refinance or when I trade my car in to get a one I really want instead of "the only car I could buy due accident during the pandemic/supply chain shortage and BK13"

Yeah, makes sense. For the first three and a half years of my Chapter 13 I was driving what I call an appliance; a car to get me from point A to point B, but with no soul. When it died in 2018 I had to scrape my pennies together, but in the end I had just enough to pay cash for an 11-year old car with 114,000 miles on it, but at least the car had some soul and panache; it lasted until I got my current ride nearly three years after my discharge. It was good to walk into a dealership and essentially demand the absolute lowest interest rate they could offer; at a time when five to six percent was pretty normal, I got 2.49% because of following the above recommendations to boost my FICO scores.

[Carmella]

shipo

I literally scanned the UR code on a preapproved offer from Discover and immediately received $11,000 credit.

I keep procrastinating since I don't want credit cards.

My question now: We need to get a washer and dryer soon. If I get a card from Home Depot or Menards with a deal x number of months/no interest would that cover as one of the 3 credit cards I should have. Although, Discover has 0% interest for the first 18 months I could tap into that and buy the washer and dryer, pay most of it off to keep a smaller balance to be paid before interest hits.

I may be better off getting Care Credit since I will need dental work and using that as my 3rd card instead of a Home Improvement store card.

And question about my husband, would a Gas Card, like Speedway be good for 1 of his 3 instead of only the big names MC, Visa, Discover?

[shipo]

As a general rule, store and gas cards are not as impactful on FICO scores, and not as advantageous when it comes to applying for other cards and loans. Sure, often store cards sound like a good deal, but then you hear the stories of poor treatment from the likes of Synchrony and Comenity (my guess is they own in excess of 90% of all such cards) you might well get cold feet when applying for their cards (I know I did). In your shoes I'd certainly go with the Discover card and leverage the 0% financing for the washer and dryer, but read the fine print, many such offers require you to pay the card to zero before the interest starts otherwise they have a sneaky way of hitting you with interest. The safest thing to do would be to say, get the card this month, make your purchases and pay them down between now and February of 2026, and then in that same month, make another charge to show as a balance.

[Carmella]

Oh, I had several cards linked to Synchrony and Comenity during BK. Some didn't start out that way , but were bought or merged with them over the years.

I am familiar with the interest deals to pay off to avoid interest. Since the balance is more than enough for a washer and dryer. I am torn I wanted a good old fashioned set which is very durable, but a little more costly, but if we are moving in a few years it's probably best to get a decent set, but not the "best."

As far as my husband a MC or Visa can work just a good as a gasoline credit card.

When I need dental work I may apply for CareCredit which is Synchrony just because they always have deals for no interest for 6-12 months, sometimes 18 months. The Discover card has an introductory deal with no interest on purchases. My daughter has a card like this and when she was in college/not working enough to afford dental procedures we paid them off and they are very transparent about the fees and make it clear as day when you must pay it and they list the amount of interest you will owe if you pay after that date.