What should I do with secured loan & secured cc and how to revive score from opening new accounts?

[elm1984]

I hadn't used my credit in a number of years and had absolutely no score. About seven months ago my credit union offered me a secured credit card ($500 limit) and a secured loan ($1000). I took both and quickly started to build a score. Two months later I qualified for an auto loan ($12,000) then about three months ago I got stupid (or at least I felt that way when my scores tanked) and applied for an Amex ($4000 limit), Citi ($1000 limit) and a Discover ($3500 limit). Trying to revive my scores now. (don't really need anything but just like the feeling of keeping my scores up and being ready in case I need to make a move.)

 

-Secured loan down to $500 and could pay it off anytime, I feel like its probably best to let this one finish its cycle in 5 months....?

 

-Secured card usually has a $2 balance (As with all my credit cards I just use them to pay bills etc and just pay them down to $2 before it cycles.) Should I close this card or just ask for it to be unsecured and the limit increased? I feel like I should ask for it to be unsecured and limit increased but not sure if I should do that now while my scores are down or give it a while until my scores rebound. My only thought about doing it now is that I wouldn't hit my credit in 6 months with yet another hard pull.

 

Open to any and all suggestions about the secured card/loan as well as any tactics to revive my scores. (lost between 50-80 points across the board on my thin/clean file)

[Zanshiro]

OK, where are you seeing your scores dropping? Are they actual FICO scores, or are they FAKO (Credit Karma, Sesame, Quizzle, etc?) FAKO scores drop a lot from inquiries, such my initial question.

 

Here's my 2 cents for where you are currently, at least, others will surely chime in also.

 

The secured credit card with the $2 reporting is great, if nothing else is reporting. Does that card graduate to unsecured after a certain period? And the secured loan, I would pay it off, because with the auto loan, it's doing very little to nothing for your score anymore, and freeing up that money lets other things become available.

 

Do you have balances on any of these cards that you attained recently? (Amex, Citi, Discovery?) One thing that will help your score is the building up over time, as it sounds like you have a newer and "thin" credit file, so when you opened those new cards, it likely dropped your average age of account to a few months, with several newly opened lines. Gardening is your friend!

 

For a breakdown of the "points" in a score, you can look at the math, and see where your points are likely "missing": FICO 08 scoring breakdown: Payment history 35 % = 297.5 points / Utilization 30% = 255 points / Length of history 15% = 127.5 points / Types of credit 10% = 85 points / New Credit Opened/Inquiries (10%) – Add them together, 850! Figure each of these sections has roughly 5 various 'levels' inside of each, and smaller variances within each level. Such as utilization, main 'levels' are (>10%/>30%/>50%/>70%/90%+), if that makes sense to you?

[Kat58]

-Secured card usually has a $2 balance (As with all my credit cards I just use them to pay bills etc and just pay them down to $2 before it cycles.) Should I close this card or just ask for it to be unsecured and the limit increased? I feel like I should ask for it to be unsecured and limit increased but not sure if I should do that now while my scores are down or give it a while until my scores rebound. My only thought about doing it now is that I wouldn't hit my credit in 6 months with yet another hard pull.

 

I agree with Zan.

 

And to add/clarify, only let 1 card report with a small balance. I would not close the secured card.

[centex]

The only way closing the secured card makes ANY sense is if you HAD to have that $500 for some other reason. Otherwise, you are gaining more from the age by keeping it open and included in the utilization ratio portion of the score equations. There is likely also nothing that precludes one from adding TO the secured amount if the lender would not otherwise unsecure it...this makes sense if trying to avoid the stigma that comes with toy cards.

 

Paying off the loan has the potential to move you to a different bucket if there are no other loans open and active. But given the reference to an auto loan, it makes little sense to keep a note loan open just for the sake of having it open.

 

Scores, no matter HOW derived, are necessarily going to drop as part of the rebuilding process. However, they rebound on the back end as those new accounts season a little bit. They also rebound as one manages utilization, which is a per card AND overall total as well as number of cards with balance calculation.

 

The other important thing here is to remember that SOME scores are to be ignored in their entirety...

[elm1984]

The scores are from CCT and are FICO 8.

 

I was told that they typically unsecure their secured cards after 12 months. I don't need to cash out. I can add to it any time if that would help me. I can push it up to $2500 by making a deposit.

 

I was unsure if the $2 was per card or overall so I have been letting them close with $2 each. CCT has still be showing 0% utilization (I think in error). So $2 on one card will get me 1% utilization across the board?

 

By paying off the secured loan with potential to move to a different bucket. Would that likely be better or worse? I only have the secured loan and the auto loan.

[Zanshiro]

There's a master thread of higher limits beget higher limits ( https://creditboards.com/forums/index.php?showtopic=509099&page=1) - Generally speaking, pushing the secured card higher to use as a "prybar" for other higher limits can help you attain better CLIs as well with other lenders. So yes, I'd probably pay the secured loan in full, and likely $2 on one card would get you a 0% utilization. (Utilization: Amount owed divided by total amount available: In that case: 2/9000 = 0.000222, or 0.02222% )

 

Putting the freed up funds into the secured card that graduates would thus open the door potentially to other cards granting higher limits. Are any of the ones that you have currently rewards-based cards? What *are* the current FICO 08 scores?

Edited October 19, 2017 by Zanshiro

[elm1984]

I get the math on %, so I guess my question is whether $2 reporting on one card is good or is it 1% utilization I'm aiming for to get the greatest point returns.

 

My first run with the unsecured cards netted better than I had expected. (Not sure it's good but better than expected.) Amex $4000CL, Citi $1000CL, and Discover $3500CL. Applied for them in that order same day.

 

My scores went from: Experian 802, Equifax 767, Transunion 776.

 

To: Experian 723, Equifax 686, Experian 732 just after getting these cards.

 

Does that seem right? No negatives from anywhere. Most pulled from Equifax. Amex still doesn't show as an account on any of the reports.

 

Opening these accounts took my average age of account from 2.6 years to 2 years.

[centex]

I get the math on %, so I guess my question is whether $2 reporting on one card is good or is it 1% utilization I'm aiming for to get the greatest point returns.

 

My first run with the unsecured cards netted better than I had expected. (Not sure it's good but better than expected.) Amex $4000CL, Citi $1000CL, and Discover $3500CL. Applied for them in that order same day.

 

My scores went from: Experian 802, Equifax 767, Transunion 776.

 

To: Experian 723, Equifax 686, Experian 732 just after getting these cards.

 

Does that seem right? No negatives from anywhere. Most pulled from Equifax. Amex still doesn't show as an account on any of the reports.

 

Opening these accounts took my average age of account from 2.6 years to 2 years.

So you took some hits because of the new inquiries and the average age of accounts having decreased. However, it also sounds as though balances reported on more than one card. Utilization, as I noted above, looks not just at dollar amounts and percentages, but also takes into account the number of accounts with a balance. The amount of the balance is irrelevant...the computer sees a one dollar balance on each account for that purpose just as it does each card at its limit.

 

When trying to start out or starting to rebuild, fluctuations are going to occur. it is a fact of life. Don't sweat the small stuff...and without a major purchase on the immediate horizon, don't sweat the scores.

[Tyra]

I was unsure if the $2 was per card or overall so I have been letting them close with $2 each. CCT has still be showing 0% utilization (I think in error). So $2 on one card will get me 1% utilization across the board?

If you have been letting all cards report with a balance, you might gain something like 20 points if you only let one card report a balance. The amount doesn't have to be $2 and it doesn't have to be 1%. Any amount between those two will likely be fine. If you have the funds, a couple months before the secured card is scheduled to unsecure I would add as much as I could to it. Some banks will then leave the limit at whatever it is when it unsecures. You get your money out and the limit stays the same. They don't all work that way though.