How Many CC's Would You Recommend?

[onthefence]

Hello all-

Our CH 7 BK was discharged at the end of December 2010. DH and I have since been approved for Capital One credit cards (his limit is $1000, mine is $750). We will be using these cards for rebuilding.

I know that many of you have suggested an Orchard Bank card - I just don't know if I want to open an account with a low limit (that many have stated does not increase) with a large annual fee, knowing that I would close it in a year or two.

I have also read some good things regarding the Hooters mastercard on the forum. While I am not so sure I could carry that one in my wallet, I could pay some utilities with it. Does anyone know if they regularly increase credit lines? Or how long past discharge you should wait before applying?

I suppose my question is do you really need more than one credit card to start rebuilding your credit? We do not have car payments, but my husband has a student loan payment. Our mortgage was included in our BK, we are, however, continuing to stay and pay - not sure if Chase will report that we are paying or not - that is something I will need to check into.

Our long term plan was to start a relationship with a credit union and sometime down the line apply for a credit card with them.

One last thing, and this is probably irrelevant but I wanted to ask anyway, does it matter if you have visa cc's, mastercard cc's, or both? Or does only Amex appear differently on your credit report?

I know you all have an opinion, and I would seriously love to hear them!

[AngelinaCat]

We were Discharged August 13. 2008, and closed November 3, 2009. We have no credit cards, and do not want any. We have a debit card attached to two of our accounts, that we use the credit side on. When there is no money in the account, the card doesn't work. But as far as an actual credit card? For us the answer is 'No'. It is too easy to fall back into the habit of charging and then paying later. As Flamingo has posted in her signature: "A credit card is a snake in your pocket."

I know that some situations will require a credit card, and if you must carry one, just make it ONE. Just my $.02.

[HHM]

Start with ONE. Preferably one without an annual fee, but your credit situation will determine whether that is possible.

You use that ONE card to start reestablishing credit usage. (i.e. charge $50, pay it off each etc). Then in about 9-12 months, you will probably start getting more mainstream credit card offers. Accept one of those offers. (don't worry about interest rate, you will not carry a balance).

2 CC is usually enough. It is not the number of accounts, per se, it is "usage" of credit that has the most impact.

[onthefence]

We were Discharged August 13. 2008, and closed November 3, 2009. We have no credit cards, and do not want any. We have a debit card attached to two of our accounts, that we use the credit side on. When there is no money in the account, the card doesn't work. But as far as an actual credit card? For us the answer is 'No'. It is too easy to fall back into the habit of charging and then paying later. As Flamingo has posted in her signature: "A credit card is a snake in your pocket."

I know that some situations will require a credit card, and if you must carry one, just make it ONE. Just my $.02.

I agree that credit can be dangerous - but we want to start rebuilding our credit - so that is the purpose of our cards.

As far as the debit card - we were denied a check/debit card from a bank that we had an account with due to our bankruptcy - I found that very interesting as it did not come with a line of credit, just a check card. We did not bk any bank accounts, nor do we have anything negative on our chexsystems reports. I guess we have been fired by that bank!

[onthefence]

Start with ONE. Preferably one without an annual fee, but your credit situation will determine whether that is possible.

You use that ONE card to start reestablishing credit usage. (i.e. charge $50, pay it off each etc). Then in about 9-12 months, you will probably start getting more mainstream credit card offers. Accept one of those offers. (don't worry about interest rate, you will not carry a balance).

2 CC is usually enough. It is not the number of accounts, per se, it is "usage" of credit that has the most impact.

Thanks, HHM. As always, great non-sugar coated advice!

[Logan]

You should get 3 trade lines total if you want a mortgage someday--so 1 or 2 credit cards minimum. Personally, I got new CC's quickly out of BK since it helps with length of time for credit reporting and I currently have 3 and have been added to 2 of my wifes cards as an authorized user which helps with credit reporting.

The most important thing you can do is pay your bills on time.

Logan

[onthefence]

Thanks, Logan. I go back and forth about applying for another credit card so soon. Yes, it would help with the length of time, but I don't want to apply for something like the Orchard card with the high annual fee and low credit limits that never really increase.

Since filing, haven't paid a single thing late!

[HHM]

In the grand scheme of your credit, 9-12 months is meaningless. As best as I can figure, credit history length works on 10 year cycles. You get a boost about every 10 years or so. So, you don't need to "rush" out and get 3 CC's right after BK for purpose of credit history length.

What is more important is your usage and "Quality" of credit. Having 3 high interest, sub prime CC's, in the "long run" is likely worse than only having 1 sub prime CC (right out of BK to get some usage) and then picking up prime CC's about 9-12 months after BK.

Also, we are talking minimal differences that maybe swing your score 10 points here and there. Whether you have 2 CC or 3 CC, doesn't actually matter that much. Keep in mind, once your score hits 740, there is nothing more you get for having a higher score above 740.

[Logan]

In the grand scheme of your credit, 9-12 months is meaningless. As best as I can figure, credit history length works on 10 year cycles. You get a boost about every 10 years or so. So, you don't need to "rush" out and get 3 CC's right after BK for purpose of credit history length.

Agree, but I applied for many cards over the 1st year to begin reestablishing credit an had up to 9 inquiries on my credit report. I now have all the credit I need and the inquiries are dropping like flies so I am finished rebuilding credit after 3 years since nothing but time will really change my credit score now.

Logan

[Logan]

Also, we are talking minimal differences that maybe swing your score 10 points here and there. Whether you have 2 CC or 3 CC, doesn't actually matter that much. Keep in mind, once your score hits 740, there is nothing more you get for having a higher score above 740.

If you want a mortgage you're going to need at least 3 trade lines. Something to consider.

Logan

[stormy]

I have a Capital One CC and I don't want any more; it has a low limit of $500 which is perfect for me. I also have my car loan which I reaffirmed so that's all I'm doing for now. My credit score wasn't that bad when I looked at it last month especially since my bankruptcy hasn't been closed that long.

[Amy26]

I don't agree that it takes 10 years for an account age to make a difference. Your accounts will start to gain benefit as soon as the account is at least 6 months old. Then you will get bonuses about every 6 months after that. Its not gonna be like 30 point jumps or anything but everything helps. The overall metric that is important is your "average age of accounts" metric. This takes all your accounts and caculates the average age. Based upon your average age and a few other factors, you will be placed into scoring buckets. This is why someone with not so great credit with a very low average age of accounts could have a better score than someone who has fair credit and a very high average age of accounts.

Typically, consumers with higher average age of accounts have better credit. So, if you're in a scoring bucket with those people (especially us BK people) then scores will be slightly lower. If you're in a bucket with people with a low average age, they typically have less steller credit (on average) according to the models.

But Logan is correct the ideal minimum number of major credit cards is 3. Store cards don't help so much as major ones. Also, people tend to like having more cards (even if they aren't using them) to help with Utilization. If you only have 1 or 2 cards ...and lets say you have 2 cards with a 300 limit. Your total limits are only 600 dollars and even if you charge very little your utilization could potentially spike quite high depending on when things post to your credit and payments etc...

[iswmle]

I am bumping this thread because I find it most helpful. Sometimes when I read these forums my head starts feeling like it is spinning over the 3, 4, 5 credit cards people are applying (and getting!) so soon after their BK. I waited over 3 months to apply for a cc, and only did so because I was in a position where I had to rent a car. I was declined for most CCs, usually not because of my BK but because of my income was too small (I am single and make about $22,000 a year). o_O I think there may be something funky on my credit report I am not aware of. I finally ended up with a $300 cl with Credit One.

Recently I got a secured Addison Ave. card with a $1000 credit limit. I am confused on what is considered prime vs. subprime. Would a credit union be considered subprime? I am also not sure how to further proceed once I get the card... Should I keep it, use it regularly, PIF every month and then try to apply for unsecure in the next year? Or should I give it a couple of years? I have been diligent about saving at least 10% from every check and can spare another $1000 that I could put to the card to increase my cl, but I would rather stash it in a CD with my bank.

I just want to do what I can to help my credit score. Although I am not planning on taking on a mortgage for the next 6-8 years, I DO want to eventually be a homeowner and have my credit and savings in tip top shape when I go looking for a house.

[discombob1]

If it helps, I am going the route suggested by HHM. I got a Cap1 with 500 CL and no annual fee for the first year. Fee only goes up to $19 after first year. I have a few retail cards tbat survived BK and a student loan. That's all I'm doing for now. In about a year I hope to get offers for prime cards and will get one then. I also expect to replace my car in a few years. I may finance a small amount on that though I am saving cash for it right now. I don't expect to want to buy a house for about 5 years and my scores are already in the mid-600's.

[iswmle]

I am also doing HHM's plan. The Credit One and Addison card will be the only cards I have for the next few years. I think I will try to apply for the unsecured Addison after one year, mostly because I want to move my funds somewhere that yields higher interest. TBH even having a need for two credit cards is one too many for me at this point in my life. I don't have much of a need for it, and my primary focus right now is building a savings (though I do need to start looking at repairing my credit more deeply). I have a few federal student loans that I will be consolidating in the next few months, and thankfully my car is amazing and fully paid for.

It just seems like in the effort of repairing credit people are soooo eager to jump right back on the cc merry go round. I see the importance of it, but is having so many credit cards that very beneficial over having one or two? I am honestly curious.