Credit Cards for People w/ Bad Credit Score?

[DigitalAR]

I had 3 accounts in collections for the past 7 years that finally dropped off. The problem is that my low credit score of 550 remains.

I’m wanting to raise the credit score now by getting credit card(s) but this time having learned my lesson will only use them with money I actually have.

I’m wondering what are some of the best ways to get my credit score up, in the current low credit score situation I’m in.

Although this thread is intended to focus on credit cards, in open to other helpful suggestions.

I heard that for individuals with low credit scores that there are credit cards that can be opened but usually require either a yearly fee, or a minimum deposit, or both.

Please recommend whatever you think would be helpful.

Also, long time MacRumors lurker and so glad am finally a member and can use the forums!

 

[Banglazed]

The best way to boost your credit score is to be added as an additional authorized user on someone’s account. Another way is to get those secured credit cards where you will need to do a deposit that will help you to rebuild your credit. Then develop habits to manage it by reducing large purchase amount before the closing statement date where you make an additional payment to clear the remaining smaller amount on the due date that is reported to the bureaus as a way to minimize credit utilization at least the balance is below 30% of total credit line, on time payment (autopay) and dispute any discrepancy in your credit report (this could be the fastest way and often overlooked).

 

[wilberforce]

Use a single card, charge a lot on it (everything you possibly can), and pay it off 100% every month.
This is what I have done for many years and my credit score is around 800.
CC bureaus do not like seeing multiple CC balances, or revolving credit

 

[Juicy Box]

I’m wondering what are some of the best ways to get my credit score up, in the current low credit score situation I’m in.

IMO, the best way to increase your credit rating is with secured personal loan.

I did this several times after my credit rating took a huge hit after a divorce in the 2009.

It sounds complex, but it is really simple and easy. Pretty much risk free for everyone involved, too.

I used a credit union, but I think you can pretty much go to any bank and ask them about a secured personal loan.


It loan works like this:

1. You ask for a secure personal loan, my bank did it at a wide range of amounts, such as $100 up to a few thousand dollars.

2. You give the bank the amount you want to borrow. If you want the loan for $200, then you give the bank $200.

3. They give you back $200 in a loan.

4. Depending on the terms you agree, 6 month, 12 month, 24 month, etc., you pay back the loan in payments. The payment size depends on the amount borrowed and the terms.

5. You pay back the loan every month, and the bank reports to the credit bureaus that you are making payments on a loan.

6. The bank benefits by collecting a small amount of interest from you. For my bank, it was like 0.5%, so hardly anything. Banks also do this because it is really no risk to them, since you put up money as collateral.

7. When the term is up, and you paid off your loan, your credit score would have improved a lot. You can open another secured personal loan if needed.


I did this shortly after my credit took a hit, and it would have been beneficial to do this earlier, and not after the 7 years, but never too late to start. I also got some high interest credit cards and payed them off monthly.

The problem with credit cards is that unless you are actively using them and paying them, they do not get reported monthly to the credit bureaus. But, doing a mix of things would be good as well.

Creditors want to see that you can make payments on time, that is why I think secured personal loans are better than just credit cards alone.

My credit rating improved pretty quickly, and I now hover in the high 700's. I am hoping to hit 800 sometime next year.

 

[Juicy Box]

You pay back the loan every month

I forgot to mention that for my bank, it was really easy for payments, and as soon as I made a payment on the secured personal loan, the money went right back into my bank account.

Since it was a loan secured with my cash, as I made payments, the amount of money I put towards my loan instantly went back into my account for me to spend if I wanted.

Example for a $20 payment.

My bank would automatically take $20 out of my account to pay the cash secured loan. Since it was secured with my own money, the $20 would instantly be available in my account.

In reality, I could just leave $20 in my account, and never touch it or add anything, and eventually the loan would be payed off.

Building credit with every payment.

The bank benefits by collecting a small amount of interest from you.

To elaborate on this, I actually didn't pay any interest on the load. Well, I kind of did, basically the bank collected the interest that I would have made if I left it in my saving account.

Normally I would get that interest, but my bank took it, and that is how they benefitted from giving me the loan.

 

[DigitalAR]

Use a single card, charge a lot on it (everything you possibly can), and pay it off 100% every month.
This is what I have done for many years and my credit score is around 800.
CC bureaus do not like seeing multiple CC balances, or revolving credit

Would you recommend opening and having just one new credit card at a time? I’ve heard of some finance YouTubers opening up many as a way to boost their score quickly. Obviously they pay off all the credit cards monthly fully, but will have like half a dozen credits cards and charge only a little bit on each.

I forgot to mention that for my bank, it was really easy for payments, and as soon as I made a payment on the secured personal loan, the money went right back into my bank account.

Since it was a loan secured with my cash, as I made payments, the amount of money I put towards my loan instantly went back into my account for me to spend if I wanted.

Example for a $20 payment.

My bank would automatically take $20 out of my account to pay the cash secured loan. Since it was secured with my own money, the $20 would instantly be available in my account.

In reality, I could just leave $20 in my account, and never touch it or add anything, and eventually the loan would be payed off.

Building credit with every payment.


To elaborate on this, I actually didn't pay any interest on the load. Well, I kind of did, basically the bank collected the interest that I would have made if I left it in my saving account.

Normally I would get that interest, but my bank took it, and that is how they benefitted from giving me the loan.

Thank you for the long detailed response.

To make sure I understand you fully, I’ll see if I understand. So, I belong to a credit union at the moment and looked up on their website just now that they do offers secured loans at a 2.75% interest rate. Maximum allowed loan is $5,000 and longest loan period is 36 months.

Let’s say for example I wanted a secured loan of $1,000; am I correct in understand that in order for this $1,000 secured loan I first need to pay the bank $1,000?

Then I have 12 months with $1,000 that the bank kinda gives me and during those 12 months I also make payments of say $84 and by the time day 365 hits the bank then gives me my original $1,000 back?

Am I correct in that that is one way to see this and pay the secured loan? And/or I could just take out a $1,000 secured loan and for a whole year not pay $84 a month and by the time 365 days hit the bank just keeps the original $1,000 i deposited for the secured loan and it still shows off as paid?


___________________________

Another question regarding these secured loans:

Do you think it would be best to take out a $3,000 secured loan for 36 months, or three $1,000 secured loans one at a time for 12 months each for the next 3 years?

 

[wilberforce]

Would you recommend opening and having just one new credit card at a time? I’ve heard of some finance YouTubers opening up many as a way to boost their score quickly. Obviously they pay off all the credit cards monthly fully, but will have like half a dozen credits cards and charge only a little bit on each.

I don't know, all I know is what has worked for me. But this is what my report says explaining why my score would not be even higher (I currently have AppleCard and Visa card with balances):

 

[compwiz1202]

IMO, the best way to increase your credit rating is with secured personal loan.

I did this several times after my credit rating took a huge hit after a divorce in the 2009.

It sounds complex, but it is really simple and easy. Pretty much risk free for everyone involved, too.

I used a credit union, but I think you can pretty much go to any bank and ask them about a secured personal loan.


It loan works like this:

1. You ask for a secure personal loan, my bank did it at a wide range of amounts, such as $100 up to a few thousand dollars.

2. You give the bank the amount you want to borrow. If you want the loan for $200, then you give the bank $200.

3. They give you back $200 in a loan.

4. Depending on the terms you agree, 6 month, 12 month, 24 month, etc., you pay back the loan in payments. The payment size depends on the amount borrowed and the terms.

5. You pay back the loan every month, and the bank reports to the credit bureaus that you are making payments on a loan.

6. The bank benefits by collecting a small amount of interest from you. For my bank, it was like 0.5%, so hardly anything. Banks also do this because it is really no risk to them, since you put up money as collateral.

7. When the term is up, and you paid off your loan, your credit score would have improved a lot. You can open another secured personal loan if needed.


I did this shortly after my credit took a hit, and it would have been beneficial to do this earlier, and not after the 7 years, but never too late to start. I also got some high interest credit cards and payed them off monthly.

The problem with credit cards is that unless you are actively using them and paying them, they do not get reported monthly to the credit bureaus. But, doing a mix of things would be good as well.

Creditors want to see that you can make payments on time, that is why I think secured personal loans are better than just credit cards alone.

My credit rating improved pretty quickly, and I now hover in the high 700's. I am hoping to hit 800 sometime next year.

Yes even any installment loans are good. They like the see a variety of credit. I don't think it really hurts you to have multiple cards unless one balance or the total balance is a good percent of the limit. Or if you open a lot that tanks your credit age and adds inquiries

 

[TheIntruder]

I'll start by saying you'll be best served by doing research, and asking in places dedicated to personal finance.

This is really not the place for that kind of expertise, and personal experience as a borrower does not necessarily lend knowledgeable advice from the lender point of view.

But, having worked in the finance industry, and having ordered and evaluated credit reports, that lenders, specifically the underwriters, use to assess creditworthiness, I'll make a few simple points.

Firstly, what is your goal? Do you need to borrow money? Or just want to improve your credit score?

The latter is possible without engaging deeply in the former.

Secondly, simplicity and limiting liability are good things, especially for individuals who have encountered difficulty before.

At this point, the lenders want to see your ability to dig a hole and backfill it without you falling into it again.

To that end, you can dig one small hole and demonstrate that skill, multiple small holes, or even more, with some of them being as large and complex as you can get away with.

Which choice achieves that goal, with the least risk? To you, as well as them? That should be your guide. I know which way lenders will favor, and it's not the one where there is a greater chance you might fall in and can't get out again.

Unfortunately, credit scores have become a sort of "life score" and used for things well beyond their original intention, as well as being widely misunderstood.

In truth, they are simply a method to assign an objective, numerical figure to one's ability to responsibly obtain and use credit. No more, no less. They do not judge how much money you make, or the type of job you have, or any other such characteristic.

They are also fluid, and will naturally fluctuate based on the specific time that a sample is taken. Reaching 800 is not cause for celebration, because it can just as easily go down again, and as a practical matter of no use at all if that score is not needed by a lender to make a decision. Scoreboard watching is unnecessary most of the time.

Each of the major credit bureaus have their own specific formulas to arrive at those figures, which they treat as trade secrets, so it is impossible to specifically determine which factors are used, and how they are weighed. As for-profit businesses, they also offer multiple scoring products aimed at different industries.

While it is impossible to know the specific formula, it is however, quite easy to divine which factors are important, and are weighed the most.

The one that makes up the largest piece of the piece is a record of paying your bills, on time.

Do that, and the rest will take care of itself.

 

[DigitalAR]

I'll start by saying you'll be best served by doing research, and asking in places dedicated to personal finance.

This is really not the place for that kind of expertise, and personal experience as a borrower does not necessarily lend knowledgeable advice from the lender point of view.

But, having worked in the finance industry, and having ordered and evaluated credit reports, that lenders, specifically the underwriters, use to assess creditworthiness, I'll make a few simple points.

Firstly, what is your goal? Do you need to borrow money? Or just want to improve your credit score?

The latter is possible without engaging deeply in the former.

Secondly, simplicity and limiting liability are good things, especially for individuals who have encountered difficulty before.

At this point, the lenders want to see your ability to dig a hole and backfill it without you falling into it again.

To that end, you can dig one small hole and demonstrate that skill, multiple small holes, or even more, with some of them being as large and complex as you can get away with.

Which choice achieves that goal, with the least risk? To you, as well as them? That should be your guide. I know which way lenders will favor, and it's not the one where there is a greater chance you might fall in and can't get out again.

Unfortunately, credit scores have become a sort of "life score" and used for things well beyond their original intention, as well as being widely misunderstood.

In truth, they are simply a method to assign an objective, numerical figure to one's ability to responsibly obtain and use credit. No more, no less. They do not judge how much money you make, or the type of job you have, or any other such characteristic.

They are also fluid, and will naturally fluctuate based on the specific time that a sample is taken. Reaching 800 is not cause for celebration, because it can just as easily go down again, and as a practical matter of no use at all if that score is not needed by a lender to make a decision. Scoreboard watching is unnecessary most of the time.

Each of the major credit bureaus have their own specific formulas to arrive at those figures, which they treat as trade secrets, so it is impossible to specifically determine which factors are used, and how they are weighed. As for-profit businesses, they also offer multiple scoring products aimed at different industries.

While it is impossible to know the specific formula, it is however, quite easy to divine which factors are important, and are weighed the most.

The one that makes up the largest piece of the piece is a record of paying your bills, on time.

Do that, and the rest will take care of itself.

Very well said, thank you.

Am on it now and will surely report back soon with more questions.

 

[Juicy Box]

ould you recommend opening and having just one new credit card at a time?

I have heard people say that you shouldn't have too many credit cards as it would hurt your credit rating, but in my experience, it is the opposite. The more credit cards, the better.


I have many credit cards, way more than I did prior to my divorce back in the 2000's, and my credit score is great. I get store cards for deals such as financing specials and discounts, and I never pay cash for anything I don't have to.

I never pay interest anymore, and usually use a cash back card, or some type of card that gives me a bonus for paying things.

Most of my credit cards have a zero balance, but I used them usually at least once every 6 months to keep them current. If you do not use your credit card after about a year or two, the bank may end up closing the account, which can be a hit to your credit rating.

I ask for increases to my credit cards, which is a temporary hit to my credit rating, but it is a net positive because my total credit usage decreases without paying anything. Eventually the temporary hit to my credit rating will go away, and it improves even more.

For increases, I love it when the banks do it automatically. I have an old Barclay account that I initially got to buy my maxed out Late 2012 iMac. I forget the original limit, but over the years, Barclay would give me increases to the limit. It is now currently $22,000. The interest rate is really high, so hardly ever use it for purchases besides the occasional one to prevent Barclay from closing the account.

Let’s say for example I wanted a secured loan of $1,000; am I correct in understand that in order for this $1,000 secured loan I first need to pay the bank $1,000?

Yes. It doesn't need to be $1000, but that is how it works.

You give them $1000, and they give you $1000 back as a loan.

Then I have 12 months with $1,000 that the bank kinda gives me and during those 12 months I also make payments of say $84 and by the time day 365 hits the bank then gives me my original $1,000 back?

Yes, basically, that is how it works, but they give you back the $84 after you make each payment, not at the end of the loan. If you do not spend the $84 and just let it accumulate in your account, then you would have the $1000 in your account when it is all over with.

And/or I could just take out a $1,000 secured loan and for a whole year not pay $84 a month and by the time 365 days hit the bank just keeps the original $1,000 i deposited for the secured loan and it still shows off as paid?

I am not sure what you mean here. If you don't pay the $84 a month, you will default on your loan. This would be bad.

All you need is that $84 to make the payment, and it instantly frees up $84 to spend if you need to, so as long as you are not borrowing too much that you cannot make a payment, you really shouldn't be in that position.

My advice, don't do a secure personal loan for more money then you know you can come up with for a payment. Like I already said, the payment will instantly come back to you if you need that cash for something else.

If you know you can do $20 payments, just stick with that. The biggest benefit for the secured personal loan is that it shows you making regular payments on a loan. The loan amount isn't going to be that big of a factor, and having it too big could be a negative thing.

Do you think it would be best to take out a $3,000 secured loan for 36 months, or three $1,000 secured loans one at a time for 12 months each for the next 3 years?

Keep in mind that you will get a credit rating hit for each new loan that you open, although, this is a temporary hit.

I would keep it simple, just stick with something that it will be easy for you to make the payments. Even a few hundred dollars.

Talk to the bank about it, and see what they say about secure personal loans. Also, look into credit cards, you may have to get one with a monthly fee, or maybe even a secured credit card, but doing multiple things will help improve things quicker.

 

[Juicy Box]

I have heard people say that you shouldn't have too many credit cards as it would hurt your credit rating, but in my experience, it is the opposite.

I meant to add that I think maybe why people think that having multiple credit cards are bad is that your credit rating can take a hit by opening a new account. This is just temporary, and goes away after two years.

The benefits of having lower credit utilization my be a net positive in the short term anyways, and will definitely help out in the long term.

 

[DigitalAR]

I have heard people say that you shouldn't have too many credit cards as it would hurt your credit rating, but in my experience, it is the opposite. The more credit cards, the better.


I have many credit cards, way more than I did prior to my divorce back in the 2000's, and my credit score is great. I get store cards for deals such as financing specials and discounts, and I never pay cash for anything I don't have to.

I never pay interest anymore, and usually use a cash back card, or some type of card that gives me a bonus for paying things.

Most of my credit cards have a zero balance, but I used them usually at least once every 6 months to keep them current. If you do not use your credit card after about a year or two, the bank may end up closing the account, which can be a hit to your credit rating.

I ask for increases to my credit cards, which is a temporary hit to my credit rating, but it is a net positive because my total credit usage decreases without paying anything. Eventually the temporary hit to my credit rating will go away, and it improves even more.

For increases, I love it when the banks do it automatically. I have an old Barclay account that I initially got to buy my maxed out Late 2012 iMac. I forget the original limit, but over the years, Barclay would give me increases to the limit. It is now currently $22,000. The interest rate is really high, so hardly ever use it for purchases besides the occasional one to prevent Barclay from closing the account.




Yes. It doesn't need to be $1000, but that is how it works.

You give them $1000, and they give you $1000 back as a loan.



Yes, basically, that is how it works, but they give you back the $84 after you make each payment, not at the end of the loan. If you do not spend the $84 and just let it accumulate in your account, then you would have the $1000 in your account when it is all over with.



I am not sure what you mean here. If you don't pay the $84 a month, you will default on your loan. This would be bad.

All you need is that $84 to make the payment, and it instantly frees up $84 to spend if you need to, so as long as you are not borrowing too much that you cannot make a payment, you really shouldn't be in that position.

My advice, don't do a secure personal loan for more money then you know you can come up with for a payment. Like I already said, the payment will instantly come back to you if you need that cash for something else.

If you know you can do $20 payments, just stick with that. The biggest benefit for the secured personal loan is that it shows you making regular payments on a loan. The loan amount isn't going to be that big of a factor, and having it too big could be a negative thing.


Keep in mind that you will get a credit rating hit for each new loan that you open, although, this is a temporary hit.

I would keep it simple, just stick with something that it will be easy for you to make the payments. Even a few hundred dollars.

Talk to the bank about it, and see what they say about secure personal loans. Also, look into credit cards, you may have to get one with a monthly fee, or maybe even a secured credit card, but doing multiple things will help improve things quicker.

I suppose what I was asking overall in regards to the secured loan and I think I’m understanding this correctly is that in order to play the secured loan game as described, one would need a total of $2,000 in the aforementioned example.

$1,000 to give the back for the secured loan and another $1,000 throughout the year the secured loan exists so the bank will see you’re paying.

I guess perhaps maybe you’d really just need $84 a month and just keep it at the ready each month to pay the bank.

Am I understanding that correctly?

I agree that making multiple movies will allow all this to go quicker.

My goal is to get a mortgage in 2024 and figured I may as well start now.

I just had over $15,000 worth of credit card debt just completely disappear from my credit reports last month after being untouched for 7 years but my 550 credit score remains. Although admittedly it is weird no longer seeing those few debt collection items on my report at all anymore.

 

[Juicy Box]

I guess perhaps maybe you’d really just need $84 a month and just keep it at the ready each month to pay the bank.

Am I understanding that correctly?

Yes.

You only need the amount of your monthly payment in your account.

You pay the bank $1000, and they give you $1000 back at the same exact moment as a loan.

Assuming it is for 12 months, you pay $84 monthly on the loan, and that $84 instantly goes right back in your account (assuming you have it set up taking payments from the exact account that the paid off amount goes into).

You could use it as a way of saving money as well. Pay from a different account, and let the money that comes back to you build. At the end of the 12 months, you would have $1000 in the account, and you can do another secured personal loan if you wanted, or invest it, spend it, etc.

Talk to your bank about it. It worked great for me, but they could probably show you exactly how it works better than I can explain on here.

 

[compwiz1202]

I meant to add that I think maybe why people think that having multiple credit cards are bad is that your credit rating can take a hit by opening a new account. This is just temporary, and goes away after two years.

The benefits of having lower credit utilization my be a net positive in the short term anyways, and will definitely help out in the long term.

Yes, inquiry will temporarily bad, average age will be temporarily bad, ratio and number of accounts will be good as long as you don't go out and max it. And more with good ratios in good standing helps with age since there will be more higher ages which will make the average move less with a new one

 

[SnappleRumors]

CC bureaus do not like seeing multiple CC balances, or revolving credit

Incorrect. High credit utilization ratio lowers a credit score. A credit card is revolving credit.

 

[SnappleRumors]

I had 3 accounts in collections for the past 7 years that finally dropped off. The problem is that my low credit score of 550 remains.

I’m wanting to raise the credit score now by getting credit card(s) but this time having learned my lesson will only use them with money I actually have.

I’m wondering what are some of the best ways to get my credit score up, in the current low credit score situation I’m in.

Although this thread is intended to focus on credit cards, in open to other helpful suggestions.

I heard that for individuals with low credit scores that there are credit cards that can be opened but usually require either a yearly fee, or a minimum deposit, or both.

Please recommend whatever you think would be helpful.

Also, long time MacRumors lurker and so glad am finally a member and can use the forums!

There are a variety of ways to rebuild credit such as secured credit cards. It takes time and discipline.
You can join a bureau and use their website advice as well.

In the meanwhile, keep your credit utilization < 30% at all times and pay all bills on time. The rest is a matter of time as your credit score slowly rises over time.