Trying to establish credit

[Siren]

I recently attained my credit report. I have 4 revolving accounts that I closed w/ zero balances about 5 years ago and 2 items in collections.

One I am disputing as the account isn't mine and it has been recently placed on my report from a company called PALASIDES for a very small amount of $43. The other is from the library (*shame*) that will be 7 years old March 2004.

I know now (didn't realize it then) that paying off my credit card accounts and closing them, as I was a student digging out of debt (no late payments on any of the accounts) are as bad as not having active credit. My credit file is pretty thin. I have not tried to secure any credit at all until now.

As a result I am trying to e-esablish credit. I only have 3 inquires on T, none on EX and 1 on EQ which were made in 2002.

My questions are as follows, because don't have an active credit history at all I am going to obtain secured credit cards. Would it be wiser to have only one card with a higher available credit amount or perhaps open up 2-3 cards with lower available credit?

Should I contact the library and pay off the balanced owed or just let the tradeline fall off next year? I am afraid that if I pay the small balance due that it will reactivate the 7 year reporting period.

Any help would be appreciated.

Thanks!

~Ren

[paw67]

Ren,

Paying the library off will NOT restart the 7 year reporting period so that is up to you if you want to pay it or let it fall off.

In terms of secured cc's, I personally would go for 2 or 3 instead of 1. I would think that 2 or 3 positive tl's would work better for your score than 1 even if the limits are lower.

Good luck!!

paw67

[Siren]

Thanks for the advice paw67 I do appreciate it. I think that I will go with 2 cards to start with and lower limits rather than putting the entire amount on one card.

I am trying to esablish a FICO score as I cannot get one because I have not had an account active within the last 6 months (according to myfico) so I'm starting from scratch.

If I would have known this years ago I would have never closed those accounts. It seems that so much works against you.

Because the library card is listed as a charge card (Imagine my surprise!!!) I was nervous that paying it would start the whole time period over again and I would have that collection stay on my report longer.

I'm learning, learning, learning...

Thanks for the info.

~Ren

[kb9tbq]

Siren

If you are working to get the best from your credit scores; then mix the type of credit which you have. Open at least one installment loan with local bank or credit union.

You can save yourself unnessasary inquiries here by pulling all 3 up to date credit reports and going to the lender directly. Show them reports with condition that they are no allowed to pull your credit report without first confirming if you can get approved for the loan!

If they do approve then they can pull their own report to seal the deal; if not, then you saved yourself an inquiry being added.

Another thing, on the number of accounts that you have, make sure that you establish enough for what you comfortably need, and still at the same time, can maintain only using a total of 30% of the credit limit per account.

Like if you have a $5,000 Credit Limit, then you want to maintain below $1,500 balance for the scores to be affected positively. By maxing out your credit limit - you drive up your utilization which hurts the scores.

So if you actually want available usage of say $3,000 then pick up 2 credit cards with $5,000 each. And keep both balances below the $1,500.

Also if you are lacking in history, you may consider finding a friend or relative, who can add you to their credit card as an authorized user. They must have an account that has long established history, high credit limit, low balance, and perfect payment history. Also make sure their creditor has policy to report to all 3 CRAs, and that they actually report AU accounts.

With these types of accounts, you are not responsible for the debt; but you get to benefit from the reporting. Just do the owner of the card a favor and don't actually use the account, that way should you need serious help letter, they will respect you for not abusing their assistance and be more likely to offer assistance when needed.

* Note about AU accounts, this is good for starting up, but once you have established decent credit of your own, and plan to apply for major loan like mortgage. Recommend that you shake these accounts loose by calling the creditor and asking them to terminate your relationship on the account & update the CRAs. This way the mortgage company when figuring up your debt to income ratios don't make the common mistake of counting this account against you on the loan approval.

That should get you started fairly well, best of luck on your credit journey.

[melisadawn]

If you are going for secured cc I heard union plus is a good card to go with. I personally do not have one. So if anyone here does give your opinion please.

[credithound]

Another good Secured card is American Pacific Bank. They charge only $35 per year annual fee and your fund your account through secured savings account. They report to all 3 CRA'S and it does not indicated a secured card. Minimum is I believe $300 and Credit Limit can be increased by you to $15,000. APR 17.5 % Not bad for a secured card.

You can even have a second AU at no charge.

Go to American Pacific Bank.

I have this card and they have been great. You can even open your account quickly by wiring funds into a secured account that will post immediately. I had my card in 2 days. You pay for the rush, but its worth it. They even give you a form to print out and send to them.

Good Luck

[credithound]

here is American Pacific Bank's website for all interested parties

http://www.apbank.com

secured visa card

FYI

Credithound

[Siren]

Whoa. Thanks for all of the very good advice.

kb9tbq, that's a lot of good information. This really is an uphill struggle to get things back in order. It seems as if it's going to be so time consuming but worth it in the end. I read somewhere (perhaps at the myfico site?) that it is a good idea to have a credit mix of different types so I will definitely look into that when I secure my cards.

The tip about bringing in your own credit reports was a good one. I passed it along to a friend that is looking to finance a car and has been slammed with so many inquires on her report. She only wished she knew it sooner. I guess so many of us could utter the same words.

The 30% ratio was exactly what I was going to ask in another question. Thanks for reading my mind.

melisadawn Thanks for the UP card info. It seems that you must be a member of a union so I need to go back and look it up to be certain. It was so late that I could barely keep my eyes open. Thanks for the post.

credithound, you wrote something that I had completely forgotten about! That I need to get cards that report to the CRA as not being secured. I thought I found the perfect card with Washington Mutual Bank http://www.wamu.com Their secured cards have a 15.55% APR and a min deposit of $300 to $5000 max. No app fee. $35 annual fee... BUT upon reading your post, I called and they said that they report as being secured.

No luck there. I know that I need to get cards that do not list to the CRA that they are secured. Thanks for the advice on APbank. I printed out the application ASAP but I don't see on the site that it lists the cards to the CRA's as being unsecured. Did you call them directly to find out?

Another card was HSBC bank. I was going to go with them but yet again, it reports as being secured when I called this morning.

I know this can impact your score but it's lousy trying to find secured cards not listed as being such.