Please excuse me if this has been covered, and simply point me to the appropriate thread. I searched on (credit card) and got way too many hits…
I want to apply for a credit card. I haven’t had any lately. I wouldn’t be bent out of shape if I didn’t get one, considering my financial history, but I don’t want a failed application to screw up my current credit rating. Is this a valid concern?
Backstory:
During the dot.com boom/bust, I got in a bit of financial hot water, so I arranged through CCC to pay off all my credit cards and cut them all up. I’ve been surviving on my checking account and other resources for at least three years. For the most part, this has worked fine.
Reasoning:
I still worry about unplanned expenses, so I’m thinking of signing up for one credit card. Here’s why:[ul]
[li]I want to fly home to visit my mom and brother at Thanksgiving. I can save up for this, but I’m worried about fares rising and so forth. A credit card would give me a certain amount of flexibility.[/li][li]Credit cards are easier to use when I make deposits on stuff or rent cars. With my debit card, a deposit ties up the money in my checking account.[/li][li]If my car suddenly dies or something else extreme happens, I’d have some sort of backup.[/li][li]I could get deals on stuff like Frequent Flyer miles by using the credit card instead of my debit card.[/li][/ul]
I know the risks of getting over-extended on credit, so I’m considering applying for a really low limit, like $700. Lead me not into temptation! I don’t want to do this if it will make my credit rating worse than it probably is; I honestly haven’t had the courage to look!
An application like that only reports as a “hard inquiry” which may temporarily affect your credit score. The idea behind that is they don’t want people opening ten accounts in one week so they you want your credit score to reflect the new credit in some way. It doesn’t matter as far as I know if you get the credit or not, it is still listed as a hard inquiry. The only difference is that an acceptance will make the account be listed your credit report soon. It shouldn’t make much of a difference. People get new credit all the time after all. However, it would be wise to apply for credit that you are fairly confident that you can get from the start. Finding a winner by trial and error may hurt you.
I urge you to order free copies of your credit reports from Experian, Equifax, and Trans-union. You get at least one a year. One of them might even tell you your credit score and that will tell you where you stand with credit card companies. They use it as their major criteria.
Are you sure that all your old credit accounts are actually closed? I know that some credit card companies will just let you pay things off, but keep the account open. If that’s the case, you may not need a new card; you can just call up an old creditor and have them reactivate the account and send you a card.
You can check by getting a free credit report from one of the three credit agencies.
It is mainly based on your credit score (that you need to get from the reports). You have to pay at least one agency (one agency might be free?) for the actual score but all three of them should be similar. I won’t give you any hard numbers but the 700 range starts the rather good range with 720 meaning that you have good enough credit for most purposes. The mid to high 600’s are the grey area so you will need to be careful and below that your credit is basically crap and you need to look into some king of secured card (you put up the amount of money of your credit line up for collateral but you will build credit by using it).
I wouldn’t worry about the tiny hit your FICO score might take after getting a few Inquiries. Yes, that tiny hit could make a 1/4% difference on a Home loan, which could be very expensive over a 30 year loan. But I assume you’re not going to apply for one of those real soon now. For just applying for a credit card, it is unlikely to make any significant difference.
First thing to do is to get your free credit report, from all of the “big 3”. Then, Dispute all the errors (and there will be quite a few). Don’t just Dispute every “DeRog”- if it’s legit and recent then call the creditor and see what you can work out. However, most normal debts can only stay on your credit report for 7 years, thus if you are a little unsure and the Derog is 5 years or more old, then go ahead and Dispute it- often Creditors don’t bother to verify debts that old.
There is an alternative method- find a Credit card that you like, with good rates and everything. Apply for it- if they turn you down, you can use that letter to get a copy of your Credit report free from that Credit reporting co. Dispute as above.
Based on the advice in this thread, I got free credit reports and FICO scores. My scores were in the mid-600s, as I expected, except for Experian which was in the low 700s. I was amused to see that TransUnions advice was to open up more credit. They apparently think that I dont have enough of a recent credit history. Hmmmm.
I will go through the reports for derogs today. At first glance, all of them were valid. After all, I did say I had financial problems. I am lucky to have these FICOs. CCC really does work.
If you got free reports, then you probably didn’t get your FICO score. What you got was some fanciful, sort of FICOish approximation, of which each agency has its own (which is why you got different numbers from the different agencies). The actual FICO formula is very closely guarded by Fair Isaac, and they don’t just give out scores to schlubs like us.
Yesbut- usually, when you order your free report, you can get the actual FICO score for around $10 more. However, in the OP’s case, the various Credit reporting agencies estimations of his FICO score is good enough. The *exact * score is only critical if you are going to apply for a mortgage loan.
I was just trying to correct the misconception (easy to have, because the agencies try to pass off their score as a real FICO) that those scores were the same thing. Thank you for pointing out that they are still useful numbers to work with.
That’s true, and if you were going for a Mortgage, make damn sure you get the real thing- in that case paying for a Pro to “improve” your score isn’t a bad idea.
You could always get a secured card if your application is rejected or if you don’t want to risk applying for a regular card. After about 6 months of regular purchases (even small amounts) and regular payments you’ll get offers for other cards.
