Thursday, June 3, 2010

I had past issues, but am now debt free. I got 1 of those Bank of America prescreened credit card offers and applied. I was turned down, but they offered me a secured card & want me to send them at least $300. They say it will help my credit scores and I

Looks like your question got cut off but I'm assuming you wanted to ask whether the Bank of America card was a good idea. I can't give you a yes or no answer but I can give you some common sense advice on how to think about whether or not you need that card.

First, how severely did your "past issues" damage your FICO score? If it pushed your score into the 500s or lower, a secured credit card might be a good way for you to rebuild your credit. Your payment history is among the top factors in determining your credit score, which in turn helps determine whether or not you qualify for loans and on what terms. If your score is so bad that most lenders won't touch you (and being in the 500s is pretty close to that), one way to rebuild credit history is with a secured card, which is basically a credit card that is "secured" with collateral -- in this case, a $300 deposit, in many others, a linked checking or savings account.

That said, you may not need that secured card at all. If you've already got a credit card or cards in your name, you don't need to get a new one and in fact applying for additional credit after you've already had issues could further hurt your score. If you already have a credit card in your name, one way to rebuild your credit is to use that card for small purchases and to pay the balance in full monthly. For example, if you've budgeted $200 for groceries every month, you could use your existing card to pay for them, then immediately pay off that bill out of the cash you would've used normally. That will show up on your credit report as you paying your card balances in full every month and help your score. Just remember that this strategy relies on you paying the full balance every month and never carry a balance of more than 30 percent of your available limit.

One last thought: Personally, I've never been a fan of prescreened credit offers. As a consumer, I know when I have a need for new credit or to change lenders. I don't need credit card marketers to tell me that. Credit card issuers send those letters out for their benefit, not yours, and in my house they always end up in the shredder. Besides, the offer you got feels a lot like a bait and switch: if you were "prescreened", then the company should already know that you don't qualify for anything but a secured card, so why send you an application for something different?

Think about it.

Ask me anything

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