What to know before rebuilding your credit with secured credit cards

Question

The higher your original CL, the higher they can be raised to new higher CLs. I remember using Open Sky secured card and the $200 CL never went up in a 6 months. I got a CreditOne card with a $300 CL and was increased to $500 within 3 months. Not surprisingly, when I applied for Capital One nonsecured cards, I started at $500 (the highest CL of my two secured cards). Your available credit is a factor in your score so the more money you can put into these cards, the better - bc your score will be higher and will give you a better foundation of starting CL in the future.
Keep in mind, there are of many fees associated with SCCs and make sure to take that into account from the get go. This can range to annual fees to monthly charges to even transactiom costs when you swipe. Read the fine print and find a reasonable card without outrageous fees. I beleive I used CreditOne bc they didn't cost as much as others.
When starting out, an upfront fee may kill your utilization the first month. For instance, if you have a $49 CL and upfront annual fee is $27, you're already at 54% utilization. And if you pay that immediately, it won't matter bc your remaining available credit will still be $22 and your first month reported to the bureaus will show high utilization (or in any lenders eye's - high risk). So find out what upfront fees will hit the first month and depsit enough money to stay under 30% UTIL. Build a healthy habit of not crossing 30% utilization and pay your cards off 10 days before they're due the first time around bc some companies take up to a week post your payment and you never want to be late. This way you know how to time your payments.
The amount of credit accounts also is a factor in your score so if you can afford to, get two or more. The best way to do this is apply for one, make your first payment that will typically include your upfront annual fee. Wait for that payment to clear, then apply for another card. Lenders see payments will often grant you cards with signs you pay your balances. This healthy process of applying for CCs can be used with the regular CCs you will be eligible for, usually in 6 months time.
Keep in mind that your reporting date is usually 3 days after your statement date and timing is key. Let's say you have a $300 card. You've used $75 to stay under 30% and you know your due date is the 20th of the month. You make a payment on the 16th for $75 and it posts on the 19th returning your balance to $0. The next day, your due date, the day closes in good standing. Within a 3-10 days the balance will reflect your credit report. Try to use 1-9% (or 29% max) of your CL in this window bc having 1-9% UTIL reporting is better $0 reporting and you don't have to carry a balance and pay interest. These rebuilder cards prey on those who cannot manage their cards. But that's not you bc you know the game and are here to beat the system.
You want move to $0 annual fee CCs asap so feel free to apply for unsecured CCs within 6 months. Capital One is known grant cards and forgive for past mistakes so apply there after 6 months if you're not aware of bettet options.
It also ould be a good idea to take $500 and deposit as a CD with your bank and use that as collateral for a secured credit card. Its the same concept as a secured card but you get interest back with your original deposit.
Hope this helps someone.
Much love,.
Romulus

Answer 1

Personally, I would keep your utilization down to 10% or less for a few months and lie low, just showing responsible card usage. Keep checking the Capital One prequalification page after that, and once you become prequalified for the unsecured Platinum, take the chance, as the prequals are usually pretty solid.
When you get your unsecured Platinum, use it a whole lot and either pay in full every month, or, like with your secured, keep it at 10%-below. Meanwhile, definitely pay your secured in full every month. At about 5 months, if you displayed heavy (but responsible) usage, they should give you a pretty good CLI--I often see people go from $300 to $1500.
By then you should probably have your charge-off paid for, so, while it won't remove it off of your report, it will help. You'll also have a decent unsecured card, and by then I would feel comfortable applying for another card and maybe closing your secured card after that, since it unfortunately won't graduate.
BoA has a secured card that will graduate, but their prequalification page is utter garbage, so you'll be taking a huge chance by applying, and there will be a chance at denial even with recon. However, if you do get it, it will be great to have an evolving credit card in your hand, as you won't have to close the line (as I'm sure you'll eventually need to do with the Capital One).
I dunno, I'm a pretty conservative person when it comes to this credit game, so my offered plan might be a bit lukewarm, but I think it might be pretty solid for you. Good luck, you can do this!