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Credit Repair/Secured card closeout?

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QUESTION: Hi there,

I don't live in Texas, but this is a general question.

Trying to repair my credit for the past 4 years or so, so I got two secured credit cards per recommendations from a bit of research.  In the past 3 years, I've used both cards consistently and haven't missed a single payment on either.    Because I've struggled with financial discipline, I sought out and applied for a Chevron gas card that can ONLY be used for gas (no visa/mc logo) for the purpose of reviewing my expenses and paying it each month.  I was able to easily get one with a $500 limit.  There's no way I would've been issued this card 4 years ago; I know my credit score is rising.  

Now that I'm on the road to recovery and just got a VERY good paying job, what should I do (if anything)?  I was thinking of closing out my secured cards altogether and applying for unsecured cards.  Is this a good idea?  Not necessary?  Just looking for some guidance to continue to build credit in a way that raises my credit score and allows me to get close to my goal of applying for a home loan.  

Thanks,

~J

ANSWER: Jeff,

Congrats on the new job! I think closing out the two accounts could be harmful to your credit at this point.

I would suggest the following course of action:
1) Call the secured card company and see if they would unsecure the cards you already have. They will give back the security deposit at that point and it becomes like any other card.

2) Keep the two cards open and apply for two replacement unsecured cards. If you get the two unsecured cards, then keep them open for 2 years. Then shut down the secured cards. You want to have a minimum credit history of 2 years for better scores.

---------- FOLLOW-UP ----------

QUESTION: Chris---Thanks for the quick response!

So I had already contacted one of the two cards about unsecuring the card and they said that wasn't an option.  (I'll have to check on the other).  

My followup questions are these:

1) Since I'm keeping my secured cards open (at least one), is it good enough to pay it off, not use it and just keep it open?  I always hear about how you should USE it and not let it sit there, but I'm not sure.)

2) Same question for the new unsecured cards---do they need to be used to be helpful to raising credit?  Or can you just have them and "sit on them
"?  

3) If yes to the above questions, how much usage is good?  Or does it matter?  Is there a certain balance/percentage of available credit that should be kept?

Thanks again for responding.  

~J

Answer
One nice thing I have noticed about secured cards is they do not tend to close out due to inactivity. I would say you can certainly not use it and leave it open.

Unsecured need to be used every 2-3 months so they do not shut them down. You do not need to make large purchases to show activity. Maybe a tank of gas?

If you are going in for a loan process, do not have more than 7-8% ratio of balance to credit limit.  Example, $1000 limit, balance from $70-80.

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Chris Ebert

Expertise

I can answer questions for Texas residents concerning issues that involve creditor and debtor rights. Specifically, I can answer questions concerning: FDCPA, FACTA, FCRA, and Texas state collections violations. Further I can guide consumers as how to repair their own credit with out the need for hiring a credit repair company.

Experience

For the last 10 years I have worked as a Sr. Paralegal in a law firm (https://txclf.com) that defends debtors against their creditors. I have reviewed thousands of credit reports and under the supervision of our attorney helped thousands of clients resolve their credit issues.

Organizations
The Ramos Law Firm

Education/Credentials
University of Texas at Austin

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