To unsecured we're going to talk about that, previously we talked about the length of time that it generally takes certain credit cards to graduate from secured status to unsecured status, meaning that when you got the secured card you put a security deposit down.
And after a certain period of time of making on-time payments, the bank looked at your account again and decided to either return your money to you and let you continue to use the card nor without a security deposit in an unsecured fashion or maybe upgrade you to a different credit card, but essentially moving you from secured to unsecured.
No bank move you from secure to unsecured
Now no bank guarantees that they are going to move you from secure to unsecured, but most of them over a certain period of time if you make your payments on time and you don't have any bad stuff going on with other credit accounts or loans that you have they will generally move you up from that secured card, some of them in as little as six to nine months, some of them are going to take longer.
Now one card that has been fairly popular in the secured card space is the Capital One secured card, but I've been getting a number of comments over the last few days and even over the last couple weeks saying that the Capital One secured card no longer will graduate people from secured to unsecured, and in fact one person even commented that she talked to someone from Capital One on the phone and they said they don't do that anymore. So I have no reason to doubt that, this is true.
Capital One is friendly
But I'm surprised because Capital One is generally a credit card issuer that is fairly friendly to people that are trying to build credit for the first time or trying to rebuild credit much more than most of the other banks out there. I'm surprised that they would do this because of course getting a secured card customer even though they may be building or rebuilding credit does mean you've already got a customer sort of in your hands versus the time and expense that it takes to find new customers.
So it seems like it would be in Capital One's best interest to graduate people from their secured card to their other cards, so I'm not quite sure what the reasoning would be, that they would change their policy or change their thought process on how to handle people that have those cards, anyway, assuming this is true and assuming that you have the Capital One secured card you know what should you do going forward, how should you think about this, what should you actually do as you're trying to continue building my advice would be these.
Keep the secured card or apply one
Number one is keeping the secured card if you already have it until you have had it for at least a year, and if you have made all your payments on time and you haven't done anything wrong with any other accounts in terms of late payments on any other credit cards or you know bank loans auto loans anything of that nature at that year mark.
I would tell you that it's probably time for you to try to get a new unsecured card whether that is from Capital One or maybe from discovering, the two banks that I think of as being the most likely to work with people that are building their credit score up.
It may be time to just do an application with one of them and see how it goes, now you might use the pre-approval tools that they have online to see what they are telling you about your likelihood of being approved or you might just want to sort of do a cold application for a credit card that you are interested in knowing what the limitations of your own credit history might be now.
Get a hard pull on credit report
I know some people this makes them feel a little afraid, because they know that they are going to get a hard pull on their credit report, meaning that Capital One or Discover or anybody else that they might go after a card from is going to look at their credit report, and that is going to put a small ding on their credit score, usually of you two or three points for the most part.
When you are going after new credit, however, in my mind while this is true, that ding to your credit score is really not very big, and it is, those are points that you can easily get back over a not very long period of time by continuing to make your payments on time.
If you are approved for the new card then obviously you are going to have another credit account, which over time is going to help, your credit score are going to take a short-term hit, in order to do better over the long term in terms of building credit and building up your credit score.
The time needs depends on what your situation is
So if you go ahead and you are approved for that other credit card, great, if you're not approved for that credit card basically that is information, and at least you know where you stand. I think I'm going to take another six months probably at a minimum.
And sort of garden as they say on some of the forums not apply for anything new, continue to try and build things up, and that'll try again in six months or longer depending on what your situation is.
Now let's say that you are approved for the new credit card you still have that Capital One secured card that you're sitting with, so it might seem like I've gone off on a tangent here, but I have not, because basically what I'm saying is it may be time to go after a new credit.
Because you're not going to get upgraded from that card. If you are approved for new credit elsewhere then you could either keep that card if you don't mind them having your security deposit for longer or you could cancel that card.
Close accounts still keep the good things
I know again a lot of people feel like when they are new and they're building credit or rebuilding credit, I should say that they don't want to close accounts that they have opened, because they're worried about the average age of their accounts and all that sort of thing, and so they want that older account on the books. But you should know that those accounts do stay on your credit report for a period of time as long as seven years in many cases.
So even if you close a credit card that doesn't mean that you've wiped out all the good things that you have done with that credit card, as long as you go off go out on good terms with that credit card company, and you've made your payments and everything is not really going to hurt you in any major way.
The fact that if you got a new unsecured credit card
Now you know the way the credit scoring works, it may ding you a few points, but you have to think about the fact that if you have gotten a new unsecured credit card.
1. You have a new credit line which is going to allow you to continue to build your credit, so you essentially have the unsecured card and making that secured card go away is not that big of a deal.
2. Now that you have the unsecured card, you're sort of in with an unsecured card, so the time is really to build your credit and not go after any credit so much in the short term.
Cancel that card if you are approved for a new one
That's kind of why I think it is okay to cancel that card if you have been approved for a new one, and then obviously if you are not approved you still have that secured card and you could continue to try and build your credit that way until you are approved for another card.
But really once you are approved for that first unsecured card I think for most people it is a time to be patient, and I know it is very difficult to be patient especially if you're getting very small credit lines, but you want to build in some time there.
Because when you start applying for more credit cards at some point you've got credit card companies looking at you and seeing that you're applying very often, and that is especially detrimental to you if you are someone that has a lower credit score or doesn't have as much of a history there.
Be careful about how often you are going after credit
So you need to be careful on how often you are going after credit especially when you are new or to credit, it's no fun to be patient, but unfortunately, that is the best way to go about things when you are trying to build your score. I've got a little off on a tangent here and talking about scoring in general, but I think that is kind of the path that I would take.
If I were someone that had the Capital One secured card and knew that it was not going to be graduated now, I don't know for sure that, this is true, this is what I've been told by multiple people though, and so I have no reason to believe that it is not true.
Other web page resource
Capital one graduated me from a secured to unsecured card: https://www.creditkarma.com
Capital One Secured MasterCard: https://www.askmrcreditcard.com/secured/capital-one/