Secured Credit Cards & Secured Loans Can Help Build Your Credit History

Secured credit cards and secured loans are an alternative to signing up for a regular credit card in order to build your credit history.  I recently received the email below from a reader who is a recent college graduate and is looking to build up her credit history so she can buy a home in the future.

I’ve recently graduated from college with two degrees, no loans, no debt, but no credit. I didn’t take out a credit card in college. You posted about cards for college kids and I saw an old post about cards for grads and young professionals (who’ve already established credit in college).

I’m single with no dependents. I’m working full time and bringing in a steady income. I’m used to living simply and paying with cash-so I’m not swipe-happy. I realize that this helped me to learn how to budget, live with less, and stay debt free, but I want to buy a home someday.

Are there any cards out there for people who are just trying to establish credit as young professionals? I’ve been looking on bank rate, but I’m overwhelmed. What kind of card should I be looking for? I think that I fall in the gap between your two posts. I have an income, but no credit history.

The point of establishing a credit history is to prove that when you borrow money you’ll pay it back.  One popular way to borrow money is to sign up for a credit card where you’re pre-approved to spend a certain amount of money.  You agree to pay that money back within a certain amount of time or the credit card company will charge you interest on the balance you owe.

Managing Risk
The credit card company is taking on risk by lending to you using a typical credit card and will require some form of proof that you’re likely to pay back the money you borrow.  If you don’t have a prior credit history, a credit card company probably won’t want to give you a typical card but there are ways you can reduce the risk to the lender to the point where they’re willing to lend you money.

Secured Credit Cards
When you signup for a secured credit card you place a deposit with the credit card company and they give you a card with a spending limit based on the amount of your deposit.  You’re reducing the risk of lending to you by providing collateral for the money you borrow.

The credit card company will report the card details to the credit reporting agencies so make sure you pay your bills in full and on time to build up your credit profile.  Here are some of the secured credit cards you can sign up for to help build your credit history:

The Orchard Bank MasterCard Secured (issued by HSBC Bank) has a $35 annual fee, which is lower than most secured cards, and it’s waived for the first 12 months. Unlike some of the other secured cards the Orchard Bank MasterCard Secured one has no application fee.  The online bill pay feature can help you make sure your payments are made on time.

The Bank of America Secured Visa Card has a little lower annual fee than the Orchard Bank Mastercard Secured, $29, but a higher APR. This card doesn’t have an application  fee and also offers online banking.  The Secured Visa Card requires a minimum deposit of $300 into a Bank of America security deposit account.

Secured Card Tips
Some things to consider when looking for a secured card are the annual fee, the minimum deposit, the APR, and whether the company you’re working with reports your payment history to Equifax, Experian, or TransUnion.  If they don’t let the credit bureaus know you’ve been paying on time then the secured card payments won’t do anything to help your credit rating. 

One other thing to think about is whether the credit card company offers other non-secured cards you can convert to once your credit rating improves.  Orchard Bank offers the Classic MasterCard and Bank of America has a whole range of cards to choose from.

Secured Loans
The second method I’ll cover has nothing to do with credit cards, it involves a trip to your local bank.  My wife actually used this approach after we got married since she had never opened a credit card or taken out a loan and so had no credit history.

What we did was to put $1000 in a certificate of deposit (CD) at our local bank.  My wife then turned around and used that CD as collateral on a 12 month secured loan. The bank was willing to lend her $1000 since it was backed by a $1000 CD.  The loan went on her credit history so as long as she made her payments on time, it created a posititive track record for borrowing.

This method worked out pretty well for us. We wanted to make sure each loan payment was timely to help build her credit so we setup the loan payments to come right out of our checking account.  At the end of the year we cashed out the CD and put that money back into our checking account; the interest she earned on the CD ended up covered over half of the interest cost of the loan. 

Obviously the biggest obstacle to this method is how much cash you have on hand.  Although it didn’t cost us much in interest, we tied up $2000 in cash flow over the course of a year, $1000 in the CD and another $1000 in loan payments.

Establishing Your Credit History
The first step in establishing your credit history is to get a free credit report and see where you currently stand.  If you have bad credit or no credit then getting a secured credit card or secured loan and making your payments on time can help you get where you need to be.  It’s best to start with one line of credit and monitor your credit rating over time. 

If you’re building up your credit so you can apply for a loan, don’t apply too early.  Make sure you’ve raised your rating up high enough so that you feel confident you’ll be approved.  A loan application will create a hard pull on your credit report, something you want to minimize when you’re just starting to build or repair your credit history.

Equifax ID Patrol Review - A Good Choice to Monitor Your Credit Reports and Protect Your Identity?

Equifax’s ID Patrol, a new identity theft protection and credit monitoring service, launched recently and I used a promotion code to sign up for a free trial. I’m a big fan of credit monitoring services, as you could probably tell from my True Credit review, especially if they offer identity theft protection as part of the package deal. So, lets review how ID Patrol stacks up against the competition.

Let’s start with a quick walkthrough. To sign up for the service I went to Equifax.com.

It was pretty simple to locate their ID Patrol product since they have a huge banner on the front page.

Then I logged into my account with Equifax. (You can create one for free if you don’t already have one, you don’t have to sign up for anything.) Once I signed up for ID Patrol I was taken directly to a page that showed me my current credit reports at all three bureaus.

Aside from having all three of my credit reports on the same page, my debt-to-credit ratio at all three bureaus was clearly spelled out. The entire thing was easy to read and pretty comprehensive. They get points for that in my book – I’m busy, and if I have to take 30 minutes just to figure out how to use a service I’m paying for, then I’m not a happy camper.

I was pleasantly surprised that all of the main ID Patrol features were visible on the front page and it took me very little time to figure out how to use them.

At first glance this service has a ton of features. You can:

• View your current credit reports at all three credit bureaus.
• Freeze your Equifax credit report with the click of a button.
• Get email alerts any time something changes on your credit reports.
• They monitor suspected internet trading sites (The ones that buy and sell people’s information and credit card numbers.) and they will alert you if your information shows up on a “for sale” list.
• You get up to $20,000 of identity theft insurance as part of the ID Patrol package.
• They have “Identity Theft Resolution Specialists” on call 24/7 in case your identity does get stolen.

Now, since most credit monitoring services offer you three-in-one credit reports, account freezing, and email alerts, I wanted to take a closer look at the other main features to see if the service was really worth the $14.95 a month.

Equifax WebDetect™ - Suspected Internet Trading Site Monitoring:

It took me about three seconds to add my social security number to the list of numbers that ID Patrol actively searches for over the internet.

The cynic in me was hoping that they didn’t just Google my Social Security number. There is no official list of sites that they monitor since they are supposedly “underground, illicit information trading sites.”

I was not 100 percent sold on this particular feature. I mean, to my way of thinking, the identity thieves who are selling information are probably selling large lists at a time – and I doubt seriously that they are letting prospective buyers “Get a peek” at said lists before they pay for them.

So…if that’s the case, how could Equifax monitor those lists for my information, unless they are buying the lists themselves? It just does not make sense to me.

Giving them the benefit of the doubt though, if they did find my information on an “illicit list” then the email alert might give me time to freeze my credit reports and call my bank before any charges were made.

$20,000 of Identity Theft Insurance:

Now the truth is, when your identity is stolen and fraudulent charges are made on your credit cards you are not liable for more than $50 per card. Here’s a quote from the FTC:

• Your maximum liability under federal law for unauthorized use of your credit card is $50.
• If you report the loss before your credit cards are used, the FCBA says the card issuer cannot hold you responsible for any unauthorized charges.
• If a thief uses your cards before you report them missing, the most you will owe for unauthorized charges is $50 per card.
• Also, if the loss involves your credit card number, but not the card itself, you have no liability for unauthorized use.”

However, if your bank account information is stolen you could end up being liable for all the charges that were drawn on your account between the time that your information was stolen, and the time that you reported the theft to your bank.

I was surprised to find that the $20,000 of Identity theft coverage also pays for:

• The cost of getting notarized fraud affidavits.
• The cost of sending certified letters to your creditors and the police.
• If you have to take time off of work to straighten the mess out they could reimburse you up to $500 per week, for as many as four weeks.
• “Reasonable” attorney fees, long distance phone calls to your creditors, and, if you had to close out your previous accounts, they even pay for new loan application fees.

24/7 Identity Theft Resolution Specialists:

A search of Experian’s website did not reveal a special number for ID Patrol users to call in case of fraud. They do list an automated 24 hour phone number – so I called it. Disappointingly all it did was give me instructions on how to place a fraud alert online.

Two things here:

1. You don’t have to use Equifax’s ID Patrol Service in order to call their number and get automated instructions. That service is available to everyone, so no real reason to pay extra for it.
2. If you really think your identity has been stolen, then you need to freeze all three of your credit reports completely – not just place a fraud alert. Most lenders will refuse to issue you credit if you have a fraud alert on your account – but not all of them. When you freeze your credit report it means that lenders literally cannot pull your credit score to give you a loan, so it’s far more effective than just an “alert”.

In Review:

I am actually going to ditch my first love (True Credit) for this service. Why? Because I am currently paying $15 a month to monitor all three of my credit reports with True Credit, and it has no identity theft insurance. With ID Patrol, I get all three reports, plus the identity theft insurance for $14.95.

Even given the dubious nature of some of the features, it comes down to price vs. functionality, for me. ID Patrol has the extra features that I want, it’s basically the same price, and it’s easier to use.

Another priceless bonus is this: The only ads I ran across while using ID patrol were for an Orange Checking Account at ING Direct, and a Home Depot Account. True Credit’s pages are swimming in targeted advertisements, and that gets old fast.

So, what do you think? Is Equifax’s ID Patrol Service worth $15 a month? Would you use it?

True Credit Review - How I Use the Credit Score & Credit Report Monitoring Service

What is True Credit?

True Credit is a credit monitoring service that allows you to check your reports and scores from all three credit bureaus each month.

Do you really need to monitor your credit reports?

Well, depending on who you ask this service is either a valuable lifeline or a total and complete waste of money.

Let me be frank: If you are able to walk into any bank or auto dealership in America and have them roll out the red carpet for you, then you do not need this service! You can simply check your free credit reports once a year, look for inaccurate information, and give yourself a well deserved pat on the back for expertly managing your credit.

However, if you are like the rest of us, and your credit score needs a little work, then yes, this service should be invaluable to you.

Personally, I monitor my credit each month through a service called True Credit. Using this service has allowed me to raise my credit score over one hundred points (yes you read that correctly) and it has prevented me from accidentally lowering my score by applying for things I might not get approved for. Forewarned was forearmed in my case.

The Lowdown:

For $15 a month True Credit bought me access to all three of my credit reports and scores in an easy to read format. The sad fact is, not all of my creditors were reporting to all three bureaus, and I was shocked to find that my score varied wildly from place to place.

How True Credit Helped Me:

1. As soon as I signed up I was able to look at my reports from all three credit bureaus. It turns out, I had incorrect information on all three credit reports. I was able to immediately challenge an incorrect past address, and several old collection accounts that had already been paid off but were still reporting as open accounts. That is what raised my score.

   Now, it is important to note that you do not have to pay for a credit monitoring service to challenge items on your credit report – that is free. However, having everything in one place, printable, and easy to compare side- by- side made the process much easier for me. In my opinion that alone was well worth the $15 because it saved me time and stress.

2. I had a former friend who stole my personal information and used it to open an account in my name. I had previously resolved that issue, but keeping tabs on my report each month lets me be very, very sure that they do not do it again. Once your personal information has been stolen, you can never really be sure that the thief won’t use it again, or give it to someone else.

   Using True Credit gives me enormous peace of mind. No more identity theft here – I’m going to know it as soon as it happens and be able to take action on it. They also give me the ability to freeze and un-freeze my credit report with the click of a button. If I ever do notice suspicious activity, I can stop it right then and there.




3. Knowing my credit scores has save me from making several bad decisions. Once I knew what my score was I stopped applying for credit card offers that I probably could not get approved for, like platinum cash back rewards cards. Before, when I did not know my credit score, I always figured,

   “What the heck? Maybe I will get approved and that is a good offer!”

   Now, let me tell you that was the wrong way to go about it. Applying for any new loan can lower your credit score so while I was happily applying (and getting rejected) for several cards a year, my score was plummeting.

4. True Credit allowed me to time the purchase of our last car. I was able to wait until my score had gone up some (and because I monitored them, I knew exactly what all three of my scores were). Because of that, we were able to finance at a better interest rate than we would have gotten several months earlier, and we came out on top of the deal.




5. I noticed an interesting psychological effect - Once I started paying to monitor my credit, I started taking my score more seriously. I felt more in charge, and more comfortable with the credit side of my finances. It would be interesting to know if any of you have had that same effect come from monitoring your credit? Did you notice any change in the way you handled things while you were monitoring vs. when you were not?

Now, again, paying for a service like this may not be your cup of tea. I can only tell you that I have found it to be an essential part of rebuilding my score. If you are facing some similar challenges, then it will probably benefit you to take a look at it.

Free Trial: True Credit is offering a 30 day free trial that will let you try out the service and see your TransUnion credit report and score for no charge. Click here to get the free trial.

I also found an excellent walkthrough on YouTube. It’s about eight minutes, so if you’re at work, you may want to wait until you get home to watch it. It gives you screenshots, guides you through the process of looking at your reports, and even covers some additional features that I didn’t mention here.

How about you? Have you ever used a credit monitoring service?
Do you think it’s worth the money?

Leave us a comment below and give us your opinion!

Photo from Dreamstime.com

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Identity Theft Protection - What You Don’t Know Can Hurt You

Identity theft in the form of stolen account information is often paid for with the time you spend contacting banks and merchants to cancel fraudulent transactions.  Unfortunately there are higher financial implications for a more sinister type of identity theft that involves not just a few transactions but entire fraudulent accounts opened in your name.

Fraudulent Account Identity Theft
This type of crime can be much more damaging because identity thieves try to use a false address when they setup a fake account.  Of course this means you don’t receive any bills or other correspondence tied to the account even though it’s open in your name.

Identity Theft Costs
What you don’t know can definitely hurt you.  Bills and debt can mount up in the fraudulent account and when collection agencies finally come after their money, the thief at the fake address will be long gone.  The collection agencies will track you down since the account was opened with your personal information and give you the bill.

Ruined Credit
It’s not just the big bill you have to worry about.  The identity thief may severely damage your credit as they run up the bill, never making payments and raising red flags on your credit report.  These credit problems can have far reaching effects on your ability to take out a mortgage, personal loan, or even get auto insurance.

Lost Time
Obviously since you didn’t open the account or spend the money you’ll have to begin the process of clearing your name and handling the debts.  This process is a very time consuming and frustrating job that can take years to clear up in some cases.

Personal Information Sources
The credit card companies take a pretty big hit from identity theft costs so they provide resources to educate consumers on how to avoid it.  A cheat sheet on protecting yourself against identity theft from Visa lists the following ways that criminals get access to the personal information needed to open accounts in your name.

• Stealing unopened mail (pre-approved credit offers, bank statements, tax forms, bills)
• Access to your home (service person or “friend/family”
• Using inside sources (white collar crime)
• Social Engineering
• Lost wallet or purse
• Dumpster diving
• Online data theft

The thieves can use this information to:

• Open new bank accounts, and write bad checks.
• Establish new credit card accounts and not pay the bills.
• Set up cellular phones or utility services and run up bills.
• Obtain personal or car loans.
• Get cash advances.

Preventing Identity Theft
You can avoid some of the ways identity thieves access your information by getting a secure mailbox, shredding your documents, not giving out personal information over the phone, and keeping the minimum amount of personal information possible in your wallet or purse.

Of course you can’t protect yourself against some of sources such as white collar crime and online theft of your information from a third party. Although you can’t prevent those from happening you can make it more difficult to apply for credit with your social security number by putting a fraud alert on your credit report.

I did this after having my credit card account number stolen, anytime you apply for credit with your social security number, the merchant or financial institution is supposed to see the flag and contact you.  The one downside is that you’re unable to receive your free annual credit report online.  Instead you have to mail in a request for your report.

Monitoring your credit report is definitely a step you should take to protect yourself from identity theft.  Keeping an eye on all the lines of credit and accounts in your name can help you from getting a nasty surprise months down the road. 

Next time I’ll take a look at the form of identity theft where a person actually assumes your identity: name, driver’s license, and all. 

Best Credit Cards for New College Graduates & Young Professionals

The best credit card for you will likely change along with your financial circumstances.  As you graduate from college and get a job, you’ll want to do a review of your finances and your current credit cards to make sure you’re taking advantage of the benefits your new salary might bring. 

Many people unfortunately rely heavily on credit in school because they don’t have much money coming in. However, once you graduate and find a job you’ll finally have a regular income. Not only will this allow you to start paying off the debt you might have accumulated during your college years, it may also mean you’re eligible for cards with better features. Here are some tips to follow as you search for the best credit card for a new college graduate.

Tip 1:  Upgrade your Credit Card

If you have a student credit card, chances are the interest charged on unpaid balances is higher than it needs to be. In order to offset the higher risk of students defaulting on credit card debt, student cards tend to have higher rates and lower credit lines.

If you were able to establish good credit while in school here are some of the best credit cards for you:

Blue from American Express

Blue from American Express has an introductory period of 15 months at 0% interest for purchases.  You can’t get a rate any lower than zero and after the introductory period is over the rate is still one of the lowest around for credit cards. 

The Blue card does offer a rewards option through the Membership Rewards Express program. You could instead opt for the Blue Cash card if you have an excellent credit history.  Blue Cash does pay up to 5% cash back but is better for people spending many thousands of dollars a year on their card.  A new graduate is probably better off sticking with the Blue card instead of the Blue Cash.

Discover More Card

The Discover More card is similar to the Blue card in that it only requires “Good credit”. It doesn’t have the introductory 0% interest on purchases but it does have a better rewards program than the Blue card.  The More card can earn you up to 5% cash back in certain categories of spending.

Although student lines of credit are excellent to have during school to help to establish a credit history, now that you have a salary coming in, you’re likely eligible for a new card that offers more benefits.  Things to look for are a lower interest rate and a rewards program.  Of course the quality of card you’re eligible for will depend on your credit score.

Tip 2: Don’t Close Your Student Line of Credit

Many people make the mistake of closing their student line of credit because they have a better line of credit opened.  Ironically, this is a move that could actually cause your credit score to drop.  The problem is that lenders look for long term credit history on your credit report since a credit history helps establish your ability to repay on time and makes companies more willing to extend you credit. 

You can check your current report for free once a year with AnnualCreditReport.com.  You can also check out your FICO score in addition to your credit report at myFICO.com.  There is a fee for the service but they do offer a free trial.

Tip 3: Watch Out For Balance Transfers

With your lower interest rate on a new credit card, you may be tempted to move your existing student credit card balance to a new line.  This may not be a bad idea but watch out for the high balance transfer fees often in place.  You also want to look for a card that offers a low APR on balance transfers (even a 0 percent APR) so you save money.

One of the cards discussed earlier, the Discover More card, will give you 0% interest for 12 months on balance transfers as an introductory rate.  They do have a balance transfer fee, 3% for each balance transfer made under this offer, with a minimum of $10 and a maximum of $75. 

How you could take advantage of this is to move your balance on an existing student card over to the Discover More card when you signup.  You’d have 12 months of no interest payments so the money you paid each month would go toward paying down the balance instead of towards interest.

Tip 4: Use Credit Responsibly

Now that you have a better credit card in your hand use it wisely.  Don’t create more debt for yourself with irresponsible spending.  As a new college graduate, you are likely looking for a home, furnishings, a car, or even to start your own business.  You’ll have plenty of opportunity to spend money, if you charge things on your card make sure you have the cash to cover them.  Pay off your credit card each month to continue to build a credit history and to avoid interest charges.

If you haven’t had a chance to build your credit history yet or have bad credit there are a few options for you. The downside is that you’ll have to pay an annual fee due to your bad credit.  The upside is you may still qualify for a credit card and if use it wisely you can rebuild your credit.

For the worst credit, apply for the Orchard Bank Classic Mastercard. The annual fee will vary depending on how bad your credit is but at least you may be able to qualify for a card.  They also offer the Orchard Bank Platinum MasterCard which is a step up from the Classic.  The Platinum has a lower interest rate and can also have a lower annual fee depending on your credit history.  Remember, if you do qualify for one of these cards, be thankful for the second chance and use it to repair your bad credit by paying your bills on time and not carrying a balance.

Tip 5:  Research Your Credit Card Options

There are many different cards available with a wide array of different card features.  Make sure you research your options before applying for a new card. You can call up your current card provider, explain your situation, and ask what cards you’re eligible for now that you have a regular income.

There are many sites online that you can use to review and compare different credit cards.  Some of the things to look for are:

• Low APR on purchases
• Low APR on balance transfers
• Low Balance transfer fees
• No Annual fees
• Cash Back options
• Travel rewards
• Gas rewards
• High Rewards earning limits
• 0% APR deals on card purchases and balance transfers

College Graduate Finance Guide
This article wraps up the personal finance tips for college graduate series.  Here is a summary of all the financial topics we covered:

• Investing for College Graduates
• Health Insurance for College Graduates
• Student Loan Tips
• Spending & Budgeting for College Graduates

How to Get a Free Credit Report

If you are interested in purchasing a home, buying a car, or getting a loan for any reason, your lender is going to ask you for the information necessary to get a credit report. Depending on the results of the report, you will be able to obtain a loan or be rejected. So, if you want to know before asking, you can get a free credit report.

Well, since I watch television, I am also subject to the ever-so-frequent commercials. I remember the advertisement for freecreditreport.com AnnualCreditReport.com. So, before writing this post, I decided to try it out for myself.

The entire process takes 5-10 minutes. You fill out a couple of questions to verify who you are, type in your social security number, and wait approximately one minute. Although it is very easy, and the reports are concise and simple to understand, I must admit it is disconcerting all the same.

In a matter of a minute, I had a record of where I have lived over the past 10 years. The computer knows things about me I couldn’t even remember. For example, when we lived overseas, my ex gave them his dad’s address as a permanent state-side address for legal purposes. Also, I was informed that I have purchased a car last October and the name of the Bank was one of my ID questions. No wonder ID theft is more prevalent today.

Anyway, the screen gave me information account by account. I know whether I am current on all of my loans or credit payments. I also know the exact total amount of my debt and the reason for the lender.

Then, I am told my ranking, compared to the general population in the United States. I am not sure if this is supposed to make me feel worse or better.

Finally, the report tells me my overall credit score. Below the score, it also states how they calculate the score so if its good you understand why and if not you know what’s necessary to improve your number.

Since it is free, I only got a score from one of the three credit sources. According to the results, the other two credit calculating agencies might have slightly different numbers. If I want to see their calculations, I need to pony up some cash. No thanks! I seriously doubt that it will be a significant enough discrepancy to matter.

Do you have other ideas on how to get a free credit report?

Tina