Even though financing through a Credit Union doesn’t benefit your credit as much as financing with a national lender, they can help put you over the top and complete your re-establishment process. Your employer may be affiliated with a credit union that you can join for free. If not, many credit unions are “open enrollment”, or open to anyone that lives in a certain city or state. Sometimes these credit unions will charge a fee for new members — just don’t pay more than about $25 to join.
Credit unions are different than banks. Often times a credit union has more flexibility when choosing who to lend money to, as well as a greater variety of options. Credit Unions are a great place to secure a personal loan, home equity loan, or, in our case, an un-secured credit card. Credit unions are also a great place to refinance the car you just purchased too.
By this point in time you’ve had a secured credit card for about 6 months and a car loan for a month or two. Now it’s time to start getting unsecured credit cards. Remember that the most important thing when applying for a credit card is to get one without an annual fee. With a secured credit card, annual fees are usually required. However, unsecured cards (or cards not requiring a cash deposit) shouldn’t require you to pay them a fee each year.
Be especially careful when applying for rewards cards — while you might get a mile or two for every dollar you spend, you’ll also have a $50-$75 annual fee to pay. Unless you’re putting thousands of dollars a month on your credit card you’re probably not going to earn back the fee you’re paying. Also, if your local credit union offers a credit card of its own make sure to apply for it.
When you apply for a credit card, ask for a small balance ($1000) — that will increase your chances of becoming accepted. When applying for the credit union’s credit card make sure you have at least $500 in your credit union savings account. It’s a good way to increase your chances of being accepted by the credit union.
Most importantly, if your credit union or national bank credit card application is denied, it’s very important that you call the credit department and find out why you were denied. Often times applications are denied by a computer. The computer may not know about your good payment history, recent car loan, or even that your bankruptcy has been discharged.
If you’ve completed the steps before this one chances are the person on the other end of the phone will approve your application. Also, people at the credit union can be more understanding than those at national banks — make sure you call or even stop by the credit union to find out what you can do to get your denial changed to an approval. The process is very easy just like hiring a san diego bankruptcy lawyer.
With your new unsecured credit card in hand, go spend some money. Get anything you want…as long as it’s $50 or less. Just like before, we’re going to use the credit system to our advantage. By buying a small item and paying the balance off the first month you have the card, you can get the credit bureau to show that you’re making payments every month even when you actually aren’t. Also, by paying off the card you’re increasing your available credit line. Remember, banks are like sheep. If they see other banks extending you credit they will follow.
As far as destroying unsecured credit cards, I’m not a big fan. While destroying the secured credit card your got a few months ago made a lot of sense because of the high interest rate and fees, this new secured card should be kept for emergencies. I keep my credit cards in a drawer at home and don’t even think about them. That way, they’re out of site (and out of mind) but I have them if I need them. Some people put their credit cards in a pale of water and freeze them in the freezer. That way, they can’t be used to make impulse credit purchases. Whatever you do, make sure that this new credit card is used for emergencies only. You can’t afford to load it up with debt.
Dont’ stop with one unsecured credit card — make sure you apply to large, national credit card companies. Ideally, you want to have three credit cards with a combined credit limit of at least $10k, but the higher the total limit the better. The way the credit system works, having less than $10k in available credit can cause your credit score to drop anytime you buy a big ticket item. For instance, if you have a $10k credit limit and you spend $4k on your card to take the family on vacation, 40% of your available credit is gone until the debt is paid off.
The credit bureaus lower your score as your percentage of available credit drops — like in the above example, where it dropped from 100% to only 60%. In fact, if you want to have a perfect credit score no more than 10% of your available credit can be in use. Whatever you do, make sure that you never use more than 50% of your available limit or your score will drop substantially.