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whisperdawg

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What's next after a secured credit card?
I finally decided to take control of my life and make a concerted effort to restore my credit. At the beginning of November-2016, I was sadly hovering at around 508-TU & 510-EQ. After immersing myself in countless reviews from Credit Karma users and watching YouTube videos, I started off by checking my credit report for errors. I have a couple of medical bills that had been paid and were still showing as owed. Minimal amounts, but errors nonetheless. I spoke directly with the collection agency and they made the corrections, and promptly reported it to the credit bureaus. It still showed up on my report under the collections accounts, but at least it was marked as a $0 balance. My score went up a few points the following week! The next step was to apply for a secured credit card, which I did at my bank (Wells Fargo). I was approved and received my card within a couple of weeks. I only used about $27 out of a possible $500, thus keeping my credit utilization ratio between 5% and 6%. They reported to credit bureau the following week, and my score jumped up nearly 60-points. Here I am only 1-month later and my score has gone from 508-TU & 510-EQ up to 573-TU & 574-EQ. My question is, where do I go from here? I only have the one secured credit card with Wells Fargo. Nothing else. I have no other currently open accounts. I only have past negative charge-offs, derogatory comments, repossession, etc…that caused my credit score to dip so low. I have been advised to leave them alone, as paying such old debt off would only “reactivate” the timeline for it staying on my report. It’s best to just leave a sleeping dog lie and wait for it to fall off the report. However, I want to start building new and positive credit accounts. Should I open a 2nd secured credit card with another company (Capital One for example)? Or should I try and expand the type of credit and apply for a JC Penny’s card or maybe even a Chevron gas card? I know I have only just begun and it won’t be fixed overnight, so I really appreciate any help or suggestions.

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You can ask you rbank for a secured personal loan.  For me that meant taking a 1 year loan for 1k.  My bank put the money into a CD, once I paid the loan in full then the CD was mine.  So I spent a little money on interest for the loan, but it diversified my types of credit, and gave another item in good standing.  Once you get over the 600-650 mark, maybe about a year. Then ask your bank for an unsecured CC.  They will be more likely to give one with your direct history with them, than some other CC company would.

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whisperdawg

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I actually looked into that with Wells Fargo, but they lowest personal secured loan they do is for $3,000.  The $500 deposit for the secured credit card wasn't too bad, but coming up with $3,000 out of pocket might be a taller order.  Great advice though, especially if someone banks with a local credit union that does smaller loans.  

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Nomadre

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You do not need to come up with it out of pocket.  You take a loan for the 3k, they give you 3k, it is then put into the CD with yours and the banks name on the CD.  When you fullfill the payments they then give you rights to the CD and you can cash out. It is different than most secured loans, where they want a car title or other forms of collateral, the money they are lending is the collateral.

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The main thing, assuming you don't have any more debt to pay off, is just to allow time away from what is affecting your score.  Since you didn't really elaborate on what is making your score low, it is hard to give specific advice.  Also, one of the biggest misconceptions our there is that when your score is right around the 600 mark, there are wholesale things that can be done to improve your score another big number.  Big jumps are usually for those with score in the 350-520 range.  Just give it time and do the right things(pay on time, credit utilization low and don't have your credit pulled)

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One other thing I forgot to mention, if you have someone you really trust (that has smashing credit), you could ask to be added as an 'authorized user' to their credit card account.  My mother did that for me.  She always paid her bills on time and had large limit cards with less than 10% utilization, so I asked to be added to one of her 25,000 dollar cards.  Because I'm wasn't the primary account holder I'm not sure that it had the same effect on my score as if I was, but I can tell you it really helped.  Nothing happened for the first month or two but after that I had some big score jumps.  But, you have to trust that person not to miss payments and not to go on a massive shopping spree.  

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Good job, Whisperdawg, on trying to get your finances in order.  As has been said, the cliche that time heals all wounds is particularly true in the credit world.  If I were you I'd forgo the personal loan in favor of additional credit cards.  I believe that in general, 3 cards is a good number (along with other types of credit -- car loans, mortages, personal loans, etc.).  You didn't say how long you've had your secured card but I'd do a single round of hard pulls (group them together in a single day) and try and get a gas or store card. If that fails, I'd take out 2 more secured cards with whatever limit you can afford.  Don't worry about what the new credit and hard pulls will do to your score -- it doesn't matter in the grand scheme of things.  What you really care about is the big picture.  While you're waiting for the deragatory credit to fall off you need to build a history of perfect repayment and (as you mentioned in your op) and less than 10% utilization.  The age of your history effects your score so get going on those new cards now, don't wait.  That way, when the bad stuff is gone you'll have a couple of years under your belt of good stuff. If you wait until your score is good enough to get an unsecured card, it will shorten your 'average age of credit history'.  I made that mistake once.  At the time I only had 2 cards (a store card and a Visa card) -- one was 15 years old and the other 3 years.  So when I went to get another card it killed my 'average age'.  I wish I had gotten them all as close together as possible.  

One you've got your 3 cards then it's just a waiting game.  In a couple of years (depending on how long the deragatory credit is slated to remain on your record), you could always try for a personal loan or a car loan.  

Good luck!

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