This is another question in the Ask Ross series where you can ask me anything about personal finances. If you have a question for me ask here. This question comes from William who is paying down his consumer proposal and trying to rebuild his credit at the same time.
I am currently paying off a consumer proposal. My situation is, after filing for a proposal I got a secured BMO MasterCard. I used that card for about one year into the the CP. I was then asked one day to apply for a credit card at Canadian Tire. After a couple weeks, to my surprise, I received the Canadian Tire MasterCard in the mail.
Ever since then I have stopped using the secured BMO Visa card and have been using only my Canadian Tire MasterCard, which has been for the past two years. I started with a $1,000 limit and have grown it to a $5,000 limit.
My question is, is it a waste trying to build my credit with the Canadian Tire MasterCard because it is not a major bank, and should I have been using the secured BMO MasterCard this whole time also? Should I start using the BMO MasterCard again?
Very good question Billy. No harm done with your Canadian Tire MasterCard – and the $5,000 limit is very respectable.
You have not hurt yourself at all with what you have done so far. I would encourage you now to nurture your BMO card as much as possible – if the limit is less than $2,000 I would ask to increase the limit if you have the funds for a larger deposit.
But even if you cannot increase the limit at this time – start using it but always to no more than 90% of the limit. And try to have the balance fully paid a few business days BEFORE each statement day.
Normally, after one to two years of active usage and a perfect (super perfect) repayment history, a major bank will return your deposit to you without closing your card. Unfortunately some card issuers’ policy is not to return your security deposit until you close the account. This is unfortunate as it encourages people to close the account which has the longest history on their credit report.
Some people apply for a secured credit card then put it away for safekeeping, thinking time will be their friend. It may not hurt your credit score, but that will bring you no closer to the issuer returning your security deposit. They want to see healthy, responsible usage and repayments – not a dormant account.
You can and should use your CT MasterCard each month too – just to keep it current in your credit report – and also try to have the balance fully paid a few business days BEFORE each statement day.
If you would like to have your own secured credit card, you can apply for one here Secured Visa No Fee Application.
One other thing Billy. Please ask at the bank to be sure the BMO card you have is in fact a secured credit card. BMO have an excellent prepaid MasterCard which is not the same thing. That card is terrific for its convenience and low cost, but will not help rebuild your credit history.