This secured credit card does absolutely nothing for your credit score
Sometimes the only way to get your credit history kick-started is to put up a security deposit with a card issuer, and then begin to use their card. It’s like a rental security deposit – you get your money back at the end. But at the end of what? A few recent client experiences shed some light on this.
Shelley declared bankruptcy in 2003, and in 2007 approached TD Bank about a new Visa. She already had a Capital One master card for two years with a $1,500 limit, but I had advised her she needed more things happening in her credit bureau to build up her rating.
TD was more than willing to help, providing Shelley put up a security deposit for a new visa. She invested $5,000 in a GIC. She operates a business account at TD and was advised at the branch to make the new secured card a business visa – that way she could efficiently separate her personal and business spending.
She came to see me late last year and was dismayed to see her personal credit report only displayed her old Capital One Mastercard. There was no mention of her three-year-old TD business visa.
Even though she had allowed a personal credit enquiry to open the TD Visa, they explained that this particular business visa card would NEVER show on her personal credit report – in fact, it doesn’t show up on a business credit report either!
So for three years, she thought she was accumulating Equifax brownie points, but in fact, nothing had changed. I argued strenuously with TD Bank and Equifax on her behalf, but no one would budge.
We asked if we switched the card to a personal visa if they would carry forward the usage history to her personal credit history. The answer was a firm no.
We asked if they would release the GIC funds after three years of stellar, impeccable usage. No, and yes. She would have to submit a full application again, and if she qualified (which she clearly would now) they would release the funds and they would start her all over.
This credit card requires an inquiry on your credit score, but no increase in score for responsible usage
But I hate gratuitous inquiries on the personal credit report, and this offends me.
So she cancelled the business visa card with TD, got back her security deposit, and walked across the road to RBC and opened a personal savings account. Banks will do a credit inquiry if you open a new checking account, but not if it is simply a savings account. RBC was delighted to have her as a new customer, and immediately offered her a new $3,000 visa with no credit report inquiry required.
This was truly unfortunate. Most major banks offer business Visa cards, and a personal credit inquiry is necessary to qualify. And these cards do show up on your personal credit report. (Two easy examples are CIBC Aerogold for business and also the CIBC Bizline Visa card.) Shelley had unwittingly selected one of the very few business Visa cards for which this is not true.