Why are secured cards never discussed as a means to rebuild credit?

[LSUTiger32]

Just wondering if anyone has personal experience using a small secured credit card to re-establish credit. I don't want any of them, but if I were going to get one it would obviously be secured. Why does it always have to be a unsecured card that leaves the ability for you to get back into the same mess with credit? Far as I know a secured card reports the same on a credit report that an unsecured card does. Maybe I am wrong, but just looking to hear some alternatives to the credit orgy going on around here. I have my alternative, but trying to put another option on the table for people.

[backtoschool]

Just wondering if anyone has personal experience using a small secured credit card to re-establish credit. I don't want any of them, but if I were going to get one it would obviously be secured. Why does it always have to be a unsecured card that leaves the ability for you to get back into the same mess with credit? Far as I know a secured card reports the same on a credit report that an unsecured card does. Maybe I am wrong, but just looking to hear some alternatives to the credit orgy going on around here. I have my alternative, but trying to put another option on the table for people.

I have a 5k secured card with my credit union that I use for business travel. It reports as a 5k credit line on my credit report.

[Meh]

The first card I got after discharge was a secured card from a local CU with a $500 limit. I have raised the limit to 1300 and will continue to the max of $3000. I have had them for a year so I plan to call in and ask about a graduation to a unsecured card soon. If that happens i'll take the money I had securing this card and get another secured car. For me the secured cards are two fold. They act as a means and motivation for stashing money in a savings account, and it's an active credit line. I think it's smart for people to get as large of a limit on the secured card as they can before applying for unsecured cards or you risk being stick on "Toy Credit Limit Hell".

[backtoschool]

The first card I got after discharge was a secured card from a local CU with a $500 limit. I have raised the limit to 1300 and will continue to the max of $3000. I have had them for a year so I plan to call in and ask about a graduation to a unsecured card soon. If that happens i'll take the money I had securing this card and get another secured car. For me the secured cards are two fold. They act as a means and motivation for stashing money in a savings account, and it's an active credit line. I think it's smart for people to get as large of a limit on the secured card as they can before applying for unsecured cards or you risk being stick on "Toy Credit Limit Hell".

I agree. The larger your secured card limits, the easier it will be to get a credit card in the future with a real "normal" sized limit.

[LSUTiger32]

Good to hear some people are taking this route......would love to hear more stories.

[CCsAreEvil]

I thought that secured cards are possibly reported slightly different than regular unsecured cards. Can someone chime in on this?

If there's no difference based on other's stories, then I may convert to this route.

The obvious negative is that you need the money up front and "in a sense" is locked into the secured card... but this route might even be the only solution for people wanting to immediately (within months of discharge) re-build credit.

[tobee43]

Just wondering if anyone has personal experience using a small secured credit card to re-establish credit. I don't want any of them, but if I were going to get one it would obviously be secured. Why does it always have to be a unsecured card that leaves the ability for you to get back into the same mess with credit? Far as I know a secured card reports the same on a credit report that an unsecured card does. Maybe I am wrong, but just looking to hear some alternatives to the credit orgy going on around here. I have my alternative, but trying to put another option on the table for people.

yes, we are just waiting for some more time between our discharge and going to the credit union to set one up...that will be our "BIG" credit limit card....because we really do want to buy this cute little house!

we were going to approach them in a few months...only because some banks still frown on it, we are uncertain how our credit union will react. we will propose the card be secured by a cd...we'll see what happens.

prior to bk we opened 2 accounts one at a cu and one at a small local..we need your business type of bank...so we hope one of them will do it.

[backtoschool]

I thought that secured cards are possibly reported slightly different than regular unsecured cards. Can someone chime in on this?

If there's no difference based on other's stories, then I may convert to this route.

The obvious negative is that you need the money up front and "in a sense" is locked into the secured card... but this route might even be the only solution for people wanting to immediately (within months of discharge) re-build credit.

Some banks report their secured cards as "secured" on the credit report, but this should not hurt your score, it is just a notation. Many banks and credit unions report secured cards the same way they report unsecured cards. My CU reports the card as it would any charge card, there is no secured notation.

[Flamingo]

What we did within six months after discharge was obtain two regular credit cards (Orchard Bank and Washington Mutual which is now Chase) and only use them now and then and pay off in full many days prior to the due date. We still have those cards both started with low limits and the Chase card been changed over to a better card as our credit improved and the BK came off our credit reports in 4/09. Those two cards, along with paying our mortgage on time and any and all other bills, utilites, etc. pushed us in no time to credit scores in the high 700's. Our credit is excellent now and we are bombarded with offers from everywhere to open cards. We do not. On top of that, we still receive junk mail bankruptcy stuff so it is pretty ironic.

I plan to close the Orchard Bank card due to its annual fee and I only kept it since when the BK came off our credit report, we had very little long-term credit showing and that card really helped. So there are good reasons for one or two credit cards, secured or unsecured, on your reports. The key is to be smart and prudent - not crazy. It's how one handles their finances and money. and time, after discharge that will pull them through to get that house, car, etc. And always save money on the side somewhere...one should have at least a 3 to 6 month cushion of monthly income on hand not to be touched. While that sounds impossible to some, it really is not once you are discharged and can get back on your feet. All it takes is the lessons learned from filing and a bit of self-control and will power. Those of you reading this that are several years beyond discharge will know exactly what I am saying.

[Nicollette]

I plan to close the Orchard Bank card due to its annual fee and I only kept it since when the BK came off our credit report, we had very little long-term credit showing and that card really helped.

I don't know how true this is, but I've heard some people say that closing a credit card account can actually hurt your credit score?

[platter]

I don't know how true this is, but I've heard some people say that closing a credit card account can actually hurt your credit score?

I've heard that if you must close a CC account, make certain that it's noted, "Closed at customers request" so that it doesn't just appear as "Closed", as if the company had to close it for some reason.

[platter]

I've heard that to establish credit, that it's not good to pay it off every month. I heard that it's too easy just to pay it off, it doesn't show to them any 'responsibility' of being able to make a monthly recurring payment, without being late and being able to pay the minimum due and even more. They want to see a running time line of responsible, stable credit card usage with a balance. That's on a secured card with Bank of America that my husband got and then they were able to raise his limit and I think it's unsecured now. He's been very responsible and has only kept a about a $1,200 limit for about six years or so. He's never anxious to raise it either. I need to pull a credit report though.

Paying them off is good too...so I don't know for sure what looks best. Depends on situation, maybe?

[CCsAreEvil]

I don't know how true this is, but I've heard some people say that closing a credit card account can actually hurt your credit score?

One reason why closing an account lowers your score is because it lowers your overall available credit therefore (in a sense) increasing your "overall" debt-to-available-credit ratio.

And this is why the FICO scoring system sucks BALLS! I said it... BALLS! Here's an example:

A person with a $1k limit but has a $950 balance will obviously show he/she's has 95% utilization! which will result in a lower score.

A person with $100k limit (across multiple CCs) but has let's say $25k charged up may actually show a better FICO score even though they may have overextended him/herself. This person's only showing 25% utilization.

Go figure.

[backtoschool]

One reason why closing an account lowers your score is because it lowers your overall available credit therefore (in a sense) increasing your "overall" debt-to-available-credit ratio.

And this is why the FICO scoring system sucks BALLS! I said it... BALLS! Here's an example:

A person with a $1k limit but has a $950 balance will obviously show he/she's has 95% utilization! which will result in a lower score.

A person with $100k limit (across multiple CCs) but has let's say $25k charged up may actually show a better FICO score even though they may have overextended him/herself. This person's only showing 25% utilization.

Go figure.

It also hurts average age of accounts, since usually people are closing an older card with less favorable terms, because they have since obtained better cards with better terms. In Flamingo's case though, I don't think it is going to matter since she has all the credit she wants or needs and has established cards at favorable terms.

[kyfreshstart]

You're also stopping the "rating" of the good credit card account that you've closed too. "Months reviewed" stops completely, therefore never close a credit card... unless you have alot of other/additional SEASONED credit card limit available.

PS - Having too much available credit can also start to score AGAINST you, because you're becoming a huge risk (as you could go on a huge spending spree & then file BK as an escape 6 months later). Remember... a credit score was originally (and is still professionally) known as a Bankruptcy Risk Indicator Score.