What does a credit approval today say about my formerly-bad credit?
July 26, 2007 7:32 AM   Subscribe

What does it indicate about my formerly-bad credit that I could be accepted today for a regular contract by a cell phone company? How can I tell when it's the right time to apply for a credit card again?

I've been repairing my credit for a while now, so this is the first time I've applied for a credit-check-based account in a couple of years. I was approved and I'm excited about that, but I'm wondering what it indicates about how my credit is now. Could cell phone companies be called less picky, more picky or about as picky as other places that check credit, like a credit card company or a landlord? Or is that so much of a generalization that I really can't predict anything?

If it matters, my new phone is with T-Mobile and they said my credit indicates I could have up to three phone lines with them (don't know if that's average, low, or high number for them).

I have a few months before I can request any of my free annual credit reports again, so other than those, what other ways could I check up on my credit?

I know it would be useful to hold a credit card, charging only things I can repay immediately, to further establish good credit. (Last credit card I had was 9 years ago, in college, and I flunked on that one; its balance turned into a chargeoff.) If I should apply now for a credit card, can I pick any kind? I was thinking about one with a points system that rewards something I naturally do (one example is the Amazon card which rewards Amazon buying most).
posted by anonymous to Work & Money (14 answers total) 2 users marked this as a favorite
I would check out your fico score at myfico.com. That will give you the best idea of how your credit looks. They have different plans but the cheap one (~$13 if I remember right) would be good enough for what you need.
posted by GlowWyrm at 7:42 AM on July 26, 2007

One thing I like about having a Providian CC is that I get to see my FICO score, updated every month, when I log into my account.
posted by ThePinkSuperhero at 7:44 AM on July 26, 2007 [1 favorite]

I can't speak to its accuracy since I've never actually gotten my real credit score, but here's a site that will estimate your FICO score.
posted by jessbrandi at 8:59 AM on July 26, 2007

Cell phone carriers, in my experience, are just about the pickiest creditors on the face of the planet. Sprint made me put down a whopping deposit when I signed up with them (then stole most of it from me when I left them, the bastards), and T-Mobile made me put down a large deposit and then made me take their $40 a month billed-in-advance plan for a year before they'd let me switch over to a cheaper plan. I have no idea why they're so picky when you're paying your bill on a credit card anyway, making collection the credit card issuer's problem rather than theirs, but that's how they are. A friend who's gone through a Chapter 7 told me that after a bankruptcy, you can still get a car loan (albeit at an outrageous interest rate), you can even get a mortgage if you put enough down, but nobody will let you have a cell phone.

So I'd say it's probably worth applying, even if you don't want to pay for your current score first. The worst they can do is turn you down, which will ding your score but not that badly and not for very long. I'd definitely go for a Providian (or WaMu, same company) card because the free FICO score every month is a nice perk. You may not be able to get the rewards cards yet, as those typically require a higher score than your garden-variety card.

For example, WaMu does have a nice platinum rewards MasterCard that offers up to 10% cash back on gas purchases for the first six months and up to 5% cash back on everyday purchases (including gas) after that, 1% on everything else, and 0% APR for the first nine months. They may not give you that one, but they will probably be willing to give you one of their cards.

If you can't get one from WaMu, try a Capital One secured card. You send them a small deposit and they send you a card with a limit some multiple of that (say, $50 deposit gets you a $200 limit). It's not much, but it does report to the credit agencies the same as any other card, and in a few months you will have a credit history you can use to help you get a better card.
posted by kindall at 9:00 AM on July 26, 2007 [1 favorite]

If you sign up for the 30-day trial of the score monitoring service at MyFICO, and then make sure to cancel before 30 days, you can see one FICO score for free. That's probably all you need unless there's some reason your reports would be different at the different agencies.

From what you said it sounds like it would be a good time to apply for a credit card. They are not really that difficult to get, especially if you're willing to take one that is designed for people with bad credit or doesn't have quite as good terms. If you don't have anything negative on your report for a couple years, I think you'll be fairly OK.

The only reason I would say not to apply for one is if you're not going to be able to handle making the payments. But it sounds like you're already at the point where you're being responsible with this kind of thing.

Also, the only downside to applying is that you get an inquiry on your credit report. That lowers your score, but only by a very slight amount (and you already have one from the cell phone). The benefit of having a paid-off credit card (the age of your accounts is a big factor in your score) will quickly outweigh that.
posted by mcguirk at 9:06 AM on July 26, 2007

You have a very specific question about right now, but I'm going to "teach a man to fish" so to speak and give you info on how to continue to evaluate this for the future.

To build off what kindall said, secured credit cards are an excellent way to build credit, whether or not your score allows for a regular credit card approval right now. She's describing a partially secured card, but fully secured ones are also offered. Capital One is not the only one to offer them, either -- most of the Big Guns do.

There are a few different ways to get your credit score, and most have been enumerated here. But if you're American and you haven't done so already, you're entitled by law to one free credit score every year, at annualcreditreport.com. (From what I understand, getting one of these doesn't count as a credit inquiry.)

If for some reason you would like more access to your credit score than that, most credit card companies, and some third parties, offer yearly subscription services to credit report monitoring. I've even heard of one being able to get text messages to one's phone when one's credit file changes, under this sort of plan. But certainly not everyone needs that. What they offer at MyFico is a little more bare-bones, but also may still be unnecessary for you. I'd go with the free one you're entitled to first, and evaluate at that point if you need more.
posted by RobotHeart at 9:19 AM on July 26, 2007

Annualcreditreport.com does not include a score, last time I got mine -- just the report. (And this may be the first time I've ever been mistaken for a woman....)
posted by kindall at 10:09 AM on July 26, 2007

I was in your position only two years ago, and I've already built my credit up well. Check your credit score. If it's poor, well, the little dings it gets from too may credit requests are just a necessary evil if you want to get credit to improve the score. They'll be counterbalanced by your prompt paying history yet to be.

Some tips aside from applying for secured cards:

-Lie about your income on applications.
-Three credit accounts is optimal for building credit.
-You might not qualify for rewards programs, just take whatever you can get. Use it every month, pay it off or at least to less than 2/3 of the limit.
-You might have the best luck at small retail stores that offer 0% financing, like a bike shop or a furniture store. They might help you fudge the application to get your business.
posted by Ambrosia Voyeur at 10:16 AM on July 26, 2007

That should be less than 1/3 the limit. Durf.
posted by Ambrosia Voyeur at 10:17 AM on July 26, 2007

Avoid applying for Capital One cards (secured or otherwise) at all costs, unless every other provider turns you down.

They are ok for establishing a credit history if you cant get any other card, but be aware that not only do they suck in terms of credit limit increases (the CrapOne card I got in 2001 has been stuck at a measly $500 limit since then), but they do NOT report to the CRAs "same as any other card". CapOne does not report your credit limits to the CRAs, so the card is basically useless for helping your overall utilization, if youre looking to improve your FICO scores.
posted by melorama at 10:41 AM on July 26, 2007

One thing I like about having a Providian CC is that I get to see my FICO score

I am pretty sure you are getting the FAKO score. FICO only comes through myfico.

may I suggest you consult creditboards? lots of tools there. read the forums, write a couple dispute letters after you know the items on the report.
posted by krautland at 11:00 AM on July 26, 2007

Providian/WaMu provides a true FICO score (they use the term FICO® and I doubt they would be allowed to do so if it weren't really a FICO score), but it's usually from your TransUnion report. As it happens, my TransUnion report has the least bad stuff on it, so it is a wee bit optimistic in my case. This probably isn't a factor for most people.
posted by kindall at 12:45 PM on July 26, 2007

It's really, really easy.

Legally speaking, any time someone runs a credit report on you, you have a right to see that report. Now the cell phone place doesn't see it--it's automated, the computer tell them what to give you.

I'm assuming you didn't have to pay a deposit.

BUT anyway, here's what you do. Go to a local bank, like a real bank or a Wells Fargo, and tell them you're interested in getting a car loan. You haven't picked out the car yet, and you'd like to know what your rate will be with them.

They'll run your credit. Ask to see the report. Done and done.

Or, go test drive a car and let the guy run your credit, but don't buy the car.

No reason to *pay* for anything. As to what's actually ON your credit report---annualcreditreport.com will give you your once-a-year free credit report for all 3 versions.
posted by TomMelee at 5:01 PM on July 26, 2007

CapOne does not report your credit limits to the CRAs, so the card is basically useless for helping your overall utilization, if youre looking to improve your FICO scores.

With the small credit lines CapitalOne cards offers, it doesn't really matter much that they don't report your limit. In this case, the agency will use your highest reported balance as your limit, so if this is a concern, simply run the card up to its max and pay it off the next month. Timely payments matter more anyway. Six months of those, and you'll start getting offers for unsecured cards from other lenders.

I suggested CapitalOne mainly because they do offer low limits, thus it is difficult to get in too much trouble. This can be especially important for someone who has had trouble managing their finances in the past.
posted by kindall at 5:43 PM on July 26, 2007

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