Should I apply for a CC?

[sah2]

I just got discharged 7/20. Got a car loan, mostly because I needed a car, but also to rebuild credit. Should I apply for a credit card also to rebuild credit? Is this helpful or not? I currently am an Authorized User on my husband's Amex, which is listed on my credit report as an account in good standing. We are also paying our mortgage and are in good standing with that too. I don't really NEED the credit card, as I plan to use debit and cash for most everything, and can use the Amex in emergencies or for those places that don't accept debit or put a hold on your account (hotels, car rentals, etc.). I also don't want to fall down into that slippery slope again. Honestly, the only reason to get a card is for rebuilding credit. Is it necessary/helpful, or do I have enough already?

[Pandora]

... I don't really NEED the credit card, as I plan to use debit and cash for most everything, and can use the Amex in emergencies or for those places that don't accept debit or put a hold on your account (hotels, car rentals, etc.). I also don't want to fall down into that slippery slope again. Honestly, the only reason to get a card is for rebuilding credit. Is it necessary/helpful, or do I have enough already?

I think you answered your own question here

You just purchased a car - you're rebuilding your credit.

[prestlrp]

Hello, can I ask who you received financing with for your car loan, im in a similar situation need a car and dont know where to turn

[sah2]

I ultimately went straight to a dealer and they got it for me through Capital One. I did have a cosigner, and even with the cosigner some of the banks they applied for rejected me. I had tried Capital One blank check and Up2drive (without the cosigner) and was initially rejected. The whole thing was such an ordeal, I am so relieved I got the car.

[Never_Again]

I would never mind on the credit card. A commitment to pay cash for everything, plus an emergency fund, will do more for your financial future.

It is amazing how many hoops people will jump through, and how much money they will spend, just to try to manipulate a 3 digit number which really is no reflection of financial health, merely a reflection of how much debt you incur, and how well you pay it.

[Cathold]

Can I ask if you got the car loan after discharge or before?

[sah2]

I got it after.

[empowered]

I've seen numerous sigblocks on posters in this forum that say "never again" on the issue of credit cards. I thought that it was generally believed that to build and maintain good credit, you should have one.

Responses to this thread seem to suggest that people believe it's not really necessary. Is that true? What do you do instead? Are there people on this list who haven't already bought houses who are successful in rebuilding their credit and purchasing a house with a post-bankruptcy history that does not show the responsible use of a credit card?

Just wondering what my own path should be. At this point, I'm thinking of trying to grow a savings account for emergencies and wondering about car loans as well. I'm old enough so that I should already have made significant contributions to a 401K but I have none and with the events of the last years am wondering whether I should bother with a 401K if there is not significant employer donation behind it. I'm also single and have to rely on myself for any kind of cushion.

Thanks.

[Never_Again]

My user name is not necessarily "never again" as far as credit cards go, but it certainly is "never again" as far as incurring debt!!! No car payments, no credit card balances carried over, I am paying off my home mortgage, etc.

You can buy a house without a credit card. It is not as easy, but with 25% down, and taking the time to find a lender who will work with you, it can be done. If you find a personal lender at a bank, they may very well understand the situation. After all, you have been through bankruptcy, and an aversion to debt is not a bad thing!

If your sole concern is rebuilding credit, you will, in all likelihood, need a credit card to do so. But a credit card does not necessarily mean debt. If you charge 10% of your available credit line each month ($1000 line - $100 in charges), and pay it off when the statement arrives, you will build credit quite nicely. You also will not pay any interest as well, and, with the right card, you will not have an annual fee.

The slippery slope comes in when people fall back into their old habits. If you are building an emergency fund, and savings, you are obviously developing discipline not to spend more than you earn. If you keep that attitude with a credit card, you will be fine. The first time that you can not pay that card off when the statement arrives (not by the due date... having the cash in hand (or checking account) to pay the bill immediately!), you should close that account, or at the very least, stop using it until you have the situation under control.

When you fall into the habit of using the float, as in the bill arrives on the first, and is due the twenty-fifth, so even though you don't have the money on the first, you will definitely have it by the twenty fifth, so you think that you are OK - That is the start of the slippery slope!

If you keep an old fashioned paper checkbook registry, make an entry in it every time you use the credit card, subtracting that amount. Then, when the bill comes, the money is there. This way, you can use the card to rebuild your credit, and NOT be in debt.

And stay away from those car payments! They are the surefire way to sink your financial ship long term. Save up, and buy a car.

You should also be working towards putting 15% of your income into retirement savings. This is more important then building your credit! Since you don't have significant employer contributions, put in enough to get the match, and put the rest in a Roth IRA up to the limit. If you still aren't at 15%, go back to the 401K. Keep a smart portfolio (seek advice and educate yourself on this), and you will minimize your risk. Any retirement money that is long term should be invested more aggressively.

Good luck to you, and to your success!

[jadams]

It is amazing how many hoops people will jump through, and how much money they will spend, just to try to manipulate a 3 digit number which really is no reflection of financial health, merely a reflection of how much debt you incur, and how well you pay it.

But a credit card does not necessarily mean debt.

I think the key is know your limits and everything in moderation. After you've very firmly righted your financial house with an emergency fund and a savings plan, take slow baby steps. If you grow your savings quicker than you grow your access to credit it will remove much of the risk and temptation. No need to revolve unplanned expenses on the card since you have savings to cover them.

A reasonable credit score still has many advantages to those living on debt free cash basis. I think there are legitimate reasons to want "good" credit, besides some ill guided lust for debt.

For example this evening I just ordered some new clothing. I've been putting it off for a long time, I've long since allocated the money for it, and I shopped around to make sure I got the best value for my budgeted expense amount.

By combining four discounts that are available only to this particular store's credit card holders I was able to get an additional 15%, 10% more off that, waive the $8 shipping charge, and earn enough bonus rewards points that I will have $20 in store gift cards arriving in about 30 days. Combined with the already reduced clearance prices, I'm very happy at the value.

The money is already saved, and the bill will be paid in full as soon as it arrives.

I think this was a smart use of credit, and if I practiced the rabid avoidance of credit some here seem to suggest -- I don't think it would have been a smarter financial decision.

But it did take a long time of adjustment prior to my bankruptcy, and careful planning post-bankruptcy, for me to be in the mental and financial place for this to work. Take it slow, and prioritize saving and planning.

[Flamingo]

They key here is your own personal situation and what YOU want to do. Right now you already have a car loan that was difficult to get...it will be the same with a credit card at least for the near future. Time is your friend after discharge...racking up hard inquiries on your credit report so soon after a BK discharge works against you. They stay on your credit reports for 2 years and a Chapter 7 is on there 10 years. The BK shows your uncreditworthiness and that is why the difficult as to getting any loan or credit cards. Look at it this way...how quickly would you lend money to someone who was just recently discharged from bankruptcy? If you take the emotion out of a situation, you can view it as a business situation/decision.

If you have the need to obtain a credit card that is up to you. Just realize your probability of getting denied is high and reread what I said above about hard inquiries. It will take you several years to totally rebuild your credit and trying to do it all at once is the worst thing you can do.