Getting a credit card while doing your CP

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mike72

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Getting a credit card while doing your CP
« on: March 20, 2013, 08:08:37 PM »
I have been doing my CP for almost 3yrs. Got 1 year left. I was thinking of getting one of those secured credit cards to help start building my credit. I decided to apply at capital One, because i heard they are easy, no hassles. Instead of getting secured card they approved me for a real credit card with 2500 limit. Has this ever happened to anyone? i always thought there would be no way to get real credit for at least a few yrs after the CP.
I'm happy, but thinking could it be because i have never missed a CP payment?

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JEC

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Re: Getting a credit card while doing your CP
« Reply #1 on: March 20, 2013, 09:21:35 PM »
It hasn't happened to me, but I haven't applied for a non-secured credit card. I did apply for a secured card through People's Trust MC.  I have a $500 limit, which I am increasing this month to  $1000.  I also have a pre-paid MC through Bank of Montreal. I actually like the pre-paid card because there's no worry of missing a payment or going over a limit, LOL  The only negative is that I have to phone in any transaction that I want to do that occurs outside of Ontario or at least if it occurs outside of Canada.  That is a real hassle.  I can order on-line etc, but can't phone for a purchase without telling BMO first. I guess it's their security system.

Good for you for getting a credit card.  It will be a chance for you to use your new financial skills to keep debt under control!!!

JEC

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mike72

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Re: Getting a credit card while doing your CP
« Reply #2 on: March 21, 2013, 05:25:47 PM »
Funny thing is thats all i wanted was a secured card to build my credit. I also use a prepaid card, both MC and Visa. Its not the greatest, to many hassles like you said. And i always have to go to place where i got the cards to loaded it up.. So thats why i wanted a secured card. The comfort of having a real card to build my credit.
When i called Capital one, i told them i wanted a secured card, they asked me why not go for a regular card. I told them my credit isn't really good. I didn't mention the CP. I gave them my info and the lady told me i'm a approved for a regular card. I was surprised, but accepted. I got a letter in the mail about 7 days after that telling me i was approved for 2500.
Its not the best kind of card, it has a $60 annual fee, and 19.5% interest rate. But i will take anything now, LOl.
For me i'm just surprised that i could get a card while on the CP.

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JEC

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Re: Getting a credit card while doing your CP
« Reply #3 on: March 21, 2013, 07:24:34 PM »
Was Capital One part of your CP? 

But good for you for getting a card. It's a chance to rebuild your credit and feel like you're part of the 'normal' world !!!

JEC

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mike72

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Re: Getting a credit card while doing your CP
« Reply #4 on: March 21, 2013, 07:56:30 PM »
No, Capital one was not part of my CP.  I actually had no credit cards in my CP.
« Last Edit: March 21, 2013, 07:59:48 PM by mike72 »

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AMCC

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Re: Getting a credit card while doing your CP
« Reply #5 on: March 22, 2013, 03:50:11 PM »
Mike;

There's absolutely no reason to prefer a secured card over a regular, unsecured card. They do not report differently on your credit file and the limits on the secured cards tend to be smaller (due to the fact most people don't have $2500 lying around that they can loan to the credit card company indefinitely).

Even if you had a $10,000 limit, remember that you control how much you use. You can rebuild your credit by using it for day to day expenses and paying it off (down to $0) every pay cheque. That's what I do with my credit cards and my score is in the 800s. Remember - you do not have to carry (revolve) a balance and you don't have to pay interest on a card to build a good credit rating.

Further, when you do get your CP paid off and you want to delve into larger loans such as cars or mortgages, it will bode a lot better and look a lot better to the lender seeing that you have a multi thousand dollar card in good standing rather than a $500 card.

Take the good fortune that's been bestowed upon you and use it wisely. This is a real good head start towards a solid credit rating in the future.

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mike72

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Re: Getting a credit card while doing your CP
« Reply #6 on: March 23, 2013, 05:25:18 PM »
Thanks for the advice guys/gals.  ;D
But I'm still puzzled on why they would approve me for a unsecured CC.  I'm not complaining, im very happy.  I just thought that after my CP, which ends next year it would be at least 7 years before i could get any unsecured credit-loans.
But like AMCC said, i should take the good fortune thats been bestowed on me and use it wisely.

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AMCC

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Re: Getting a credit card while doing your CP
« Reply #7 on: March 23, 2013, 05:32:44 PM »
Mike;

7 years - you're thinking bankruptcy. A CP comes off your file in 3 years, however with some re-establishment you can apply for credit shortly after discharge and get it. In fact, if you have at least one established credit product for one year or more when you get your certificate of completion you can get a very favourable rate on things like car loans and even mortgages won't be too difficult to obtain/renew.

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mike72

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Re: Getting a credit card while doing your CP
« Reply #8 on: March 24, 2013, 07:36:19 PM »
Thank you for the info AMCC  ;D

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freshstarter

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Re: Getting a credit card while doing your CP
« Reply #9 on: March 25, 2013, 10:21:50 AM »
I was able to get a short term loan and a regular (not secured) MasterCard from Affirm Financial. They really helped me out. check them out at affirmfinancial online

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Mac

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Re: Getting a credit card while doing your CP
« Reply #10 on: March 25, 2013, 04:45:19 PM »
I was able to get a short term loan and a regular (not secured) MasterCard from Affirm Financial. They really helped me out. check them out at affirmfinancial online

   the interest rate for the short term loans are 29.99 to 39% plus admin fees. wow

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mike72

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Re: Getting a credit card while doing your CP
« Reply #11 on: March 25, 2013, 06:11:17 PM »
The card i got from Capital one has a yearly fee of 59$ and 19.5% interest rate.

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JEC

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Re: Getting a credit card while doing your CP
« Reply #12 on: March 25, 2013, 09:12:06 PM »
I was able to get a short term loan and a regular (not secured) MasterCard from Affirm Financial. They really helped me out. check them out at affirmfinancial online

   the interest rate for the short term loans are 29.99 to 39% plus admin fees. wow

Remember...they are taking a chance on someone who went wrong, and corrected themselves. The interest rate is very high, but it's the price we pay for messing up. If paying that interest rate can bring our credit score up to a 'healthy' level, then it's worth it.  After proving ourselves to be credit worthy, the interest rates will come down and we'll pay the usual market percentages.

The best thing of all is that we've learned from our mistakes and hopefully will never be in 'that' position ever again!

JEC

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AMCC

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Re: Getting a credit card while doing your CP
« Reply #13 on: March 26, 2013, 11:17:59 AM »
The difference between interest rates on a credit card and interest rates on a loan are enormous. When you have a high(er) interest rate on a credit card, you can avoid paying interest by paying off your balance in full each and every month (I recommend all my clients pay their cards every pay period, eg bi-weekly).

A high interest rate on a "term loan" guarantees that you'll pay a lot of money in interest - especially considering the first few monthly payments at such a high rate of interest will be almost entirely interest with very little principal.

Remember that at 29.9% interest (Affirm Financial's "starting from" rate) on a 60-month term you'll pay back as much interest as you do principal. At 61 months or more the interest will actually be greater.

How bad could your other debts be that a 30-40% loan will be the better solution?

You're better to take a stair-step approach to your debts;

1) Make more than the minimum payments on all your debs each and every month.
2) Take your smallest loan/debt and pay as much money as you can as quickly as you can.
3) When you eliminate that debt, add that payment to the payment you're already making on your next smallest loan and eliminate that as quickly as possible.
4) Repeat this until all your debts are eliminated in due time.
5) Remember not to incur any additional debt while doing this. Ensure you're only ever spending a MAXIMUM of 90% of your net (after tax) income - the other 10% goes into a savings account.

Once you get the hang of this, you'll actually start to see a planned time frame where you know when each and every debt is eliminated from your profile and every time another one bites the dust you'll sleep that much better at night.

If you want/need to re-establish your credit after a CP or BK your best bet is to start with a secured credit card (or, in mike72's case, a regular credit card) and pay it off religiously every month for at least 6-12 months. Now that you've got that positive track record, talk to your OWN BANK about a secure GIC or RRSP loan. They should be more willing to be lenient with regards to credit score and rating because the loan will be secured against the investment and the interest accumulated on it.

Finally, or alternately to the GIC/RRSP loan at your bank - a small car loan also works well as an installment loan to rebuild your credit. Make sure the loan is at least $5000 to have a real positive impact on your score.

After you've gone through the CP/BK process and have a track record with a credit card you should be able to get an installment loan with interest in the 'teens', opposed to in the 20's.

Finally, remember that it took a long time to damage your credit rating, it's going to take a long time to repair it. Don't go for the first option that comes your way. Make the right decision for yourself.

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Dumdum

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Re: Getting a credit card while doing your CP
« Reply #14 on: March 26, 2013, 05:36:09 PM »
Question for AMCC: If you are still currently paying a car loan during a CP, does this help your credit rating?

 

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