157 People Helped
Member Since: April 2014
About Me: Weet weet.
I live in Texas, where laws are very favorable for consumer --- no wage garnishments, large homestead provision, etc. I never filed for bankruptcy, as my income didn't warrant it (SSD & essentially no chance of any increase beyond that) & near all of my assets were covered by Texas' consumer bankruptcy law. Statute of limitations has now passed on any lawsuit (3 years in Texas, from last payment -- and remember folks, do not pay a single penny to a credit card company or collection agency if you go down the no bankruptcy route as it resets the seven year 'falling off' period & the 3 year statute for lawsuits). Now I simply wait for all these derogatory marks to fall off. 6 unpaid credit cards & 65K unpaid debt (not proud of this, just stating facts). As of the time of this writing, I have approx. 28 months left until I hit the magical 7 years.
I applied for the Capital One secured card and was denied, reason stated was the derogatory information on my credit file. Tried a First Progress card after that, and was also denied. Didn't want another hard inquiry, so went ahead and applied for this OpenSky (this card + one other that I don't recall the name of were the only two I could find that reported to the bureaus and only required a soft inquiry).
Approval was essentially instantaneous (does anyone get denied for this card?) -- the only thing is that it takes a while for them to credit your deposit and get your card out to you. Don't see how this is such a huge issue, honestly. We're talking about a couple of weeks, not months. You only need to deposit $250 (I opted for $300). If you're applying for credit, $250 being 'tied up' for a few weeks shouldn't cause you some severe financial hardship... right?
In any case, the very first month I had this card, my Equifax score reported here on Credit Karma went from 549 to 638. This should enable me to get an unsecured card that doesn't come with any fees (or at the very least, a secured card w/o any fees, that will later convert to an unsecured card after x period of time of good payment history -- I'll have to check again if this is possible with this card, but I from my recollection, the annual fee was there 'forever' & was not possible to ever get waived).
I don't plan on keeping this card for more than 3-6 months, as my 'new' credit history length will be tied to my first card w/o any tacked on fees.
I'd say this card is serving it's purpose brilliantly.
.... to the 'MObettacredit' person that stated paying off entire balance is a mistake & how you should leave a small 'balance'... that is incorrect info. The utilization that is reported to the credit agencies, is the amount that you are invoiced for. Always pay off the full balance. The only time it'd make sense not to is if you had some introductory or balance transfer APR that was less than the rate of inflation.
zevus's response was:
Laws vary by state, so it's hard to say.
If something is in collections, it has most likely been deliquent for something like 6-9 months or longer. In most cases, it's better to not pay it at all, rather than reset the 7-year dropoff period by making a payment (or paying it off). Both will extend how long this derogatory information appears on your credit report.
As to your question: it may raise your score some minimal amount, but it will never be very good as long as the derogatory marks stay on your credit report. If these accounts have been in collections for over 2-3 years, then you'd be making a serious mistake in paying them at all. The only exception to this would be if a lawsuit is pending or you feel that you may be sued for the outstanding debt. Check the statute of limitations in your state.
OK, I did find something better, with no annual fee. Applied and accepted already. I started application process on this card a few days ago.
It's not listed on Credit Karma. It's the SDFCU Savings Secured Visa Platinum card. Like the OpenSky card, it doesn't do a hard inquiry on your credit report. It also doesn't have an annual fee.
Here's how to get this:
First, qualify for the State Department Federal Credit Union by becoming a member of the American Consumer Council, at www.americanconsumercouncil.org ... use promo code "consumer" to get a free lifetime membership.
Go to www.sdfcu.org and open a savings account (I didn't open a checking account or anything else). You can transfer money there directly via a checking account, it processed in one day for me. I sent $300, giving me $301 total (they give you a free $1). Minimum for the card is $250.
Go to products -> credit cards -> apply now, for the savings secured visa platinum card. It has a 7.24% APR, no annual fee, NO FOREIGN TRANSACTION FEES (!), 25-day grace period on purchases, and a even a reward point system in the form of "Flex Points" that you can redeem for gift cards and such. It reports to the three major bureaus.
It can also be converted to an unsecured card later (try after a year or so of good payment history?). The one downside I see is the $3 ATM fee.
Anyway, fill out the application, put in the amount that you deposited to your savings account (I didn't include the free dollar), wait a day or two, & it should be listed as approved. Payments to the card will credit within one business day, as you're simply depositing money back into the savings account that you removed via use of the secured credit card.
Honestly, I wish I had put something like $500 in there, as the no foreign transaction fee & flex point system is better than my Paypal debit card a lot of times (the paypal debit card gives 1% cash back, but has a 2 or 3% foreign transaction fee).
Anyway, there you go. OpenSky, but better.
zevus's reply was:
Long term - yes, multiple lines of credit benefit your credit score, assuming that usage of credit doesn't increase. Why? Because total credit line has increased. If you spend $2,000 a month on credit cards and have a 10k total limit, you're utilizing 20% of your credit (it uses the amount that is shown on your statement, not the amount that is left over after you pay for that month). If you spend $2,000 a month on credit cards and have a 20k total limit, you're utilizing 10% of your credit. You don't want to be over 40-50% for more than a few months or random reviews by the credit card companies could result in them increasing your APR or lowering limit. Use each card at least once a year, or the issuing bank *may* cancel it (usually only if your score plummets, but...).
Short term - It *could* lower your score slightly because of the hard inquiry, those stay on your report for 12 months (but don't have as much of an impact for the last 6 months).
I've actually paid in full twice, w/o even receiving a statement & my scores have still gone up. I think that is probably just tied to getting a new card, though.
I do know for a fact that when they generate an invoice, the amount on the invoice is the amount that is reported to the credit bureaus. So whenever you get invoiced, it's always better to just pay it in full.
I had a similar issue, w/ my car insurance rates going up about 50% after a credit check. These occur every 2 or 3 years for existing policies & they'll also explicitly state in their renewal letter if the rate was increased due to this credit check. There's no reason to settle for that increase, though.
I also have a pristine driving record & no insurance lapses over the time period they're permitted to use (5 years for major accidents or DUI related offenses & 3 years for general traffic/moving violations, I believe?).
Rather than settling for that 50% increase, I got on the phone and called my insurance agent and said I wasn't going to continue the policy w/ the new rate. I ended up getting a new policy that was even cheaper than the original "pre-bad-credit" adjusted policy. It *did* require me to pay a full year in advance, though (obviously may not be possible for some folks).
As some people may be interested & located around the same area -- my new policy is with Worth Casualty Company (they're based in Fort Worth, Texas).
The total for one year was $242 (that's with car being paid off & the minimum liability coverages). Progressive was planning on raising my rate to ~$600 a year. Quite a savings, there ...
Note to people reading this: it's not a good idea to pay off your 'open collections account', if it's something that's been open for, say, over 3 years (w/o you declaring bankruptcy). It's likely at that point you're past the statute of limitations on wage garnishment, any lawsuits, etc., and by making a payment on something like that, you just ensure that it stays on your credit report for another 7 years, instead of falling off in 4 years like it would have previously. The fact that you did pay it off, will barely have any impact on your score (due to the years of defaults) for the first 4 years, but will have a huge negative impact for the next 3 years.
If you don't declare bankruptcy, and aren't subject to wage garnishment, etc., then once something has been in collections for year+, generally it is not a good idea to pay it off.
Oh, to add.... yes, if you pay off a loan after 6 years, your credit rating will be much, much lower for year 2, 3, 4, 5, 6, 7.
It may be slightly higher (or it could just be the same) for the first year, before it was due to fall off.
*Any* payment you make to a collection agency extends the date on that debt.
I can't agree with that statement. What you'd be looking at is your credit utilization as a whole, not the utilization of one card.
In fact, hitting near that max of that card and then being able to pay it off (preferably at the very next due date, so you don't get interest rate jacked) shows them that you're "good" for that amount & on a review inevitably leads to an increased credit line.
My MBNA card has a credit limit of over 50K, despite my initial application giving an income of 25K/yr.
I'm giving this 4 star rating, with the assumption that people realize what this card is useful for. It's obviously not going to have some flashy reward system or great APRs.
Some history: I had an SDFCU secured card as my initial new line of credit, about five years after defaulting on around $75k of revolving debt (did not file bankruptcy). I'd recommend people to check this if they aren't aware of it. You can become a member of SDFCU by joining the ACC. $15 for lifetime membership, or free if you use promo code "consumer" (or it worked 2 years ago anyway). I did a ton of research and never found a better card than this that reports to the credit bureaus. Reward program on that isn't so hot, but, well, it's 7.99% APR and no fees.
The Capital One Secured Mastercard was my 2nd line of credit, approx. a year after receiving the SDFCU card. Application was simple, minimum security deposit of $49 is not bad at all -- considering the shenanigans employed by other banks, what with these nonstop credit offers for 30% APR, $150 annual fees, and they'll even get your credit score for you for an additional $15/mo, and it's automatically included for convenience, you can opt out at any time! Ah, I digress. Best plan for the Capital One Secured Mastercard is to send the minimum $49, use a couple times a year and treat it more as history + active line of credit & paid as promised. The down side with this card is that they will never convert this card to unsecured (hence 4 stars). This deposit is "gone forever", until card is cancelled. If the card is used to build credit history, cancelling it would make me cry, and should involve plenty of time pondering under the Tree of Woe before making such a decision. I fail to grok any circumstance where you'd WANT to cancel this card. It would inevitably have a negative impact on your score. The $49 isn't worth it, trust me.
No annual fees, so no problems keeping it indefinitely. Just use it enough to not get dumped for inactivity after you get better credit.
Short form: it builds credit like it says it will, & it's partially secured for as little as $49 with no fees. It's about the best you'll get outside of credit unions.