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HiLine
Posts: 2,944
Registered: ‎10-19-2012
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Are sub-prime cards underrated?

Does having a card from a sub-prime lender on your credit profile have any negative impact? If not, I don't see why people throw rocks at them, especially if they don't carry a maintenance fee.

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Revelate
Posts: 9,161
Registered: ‎12-30-2011
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Re: Are sub-prime cards underrated?


HiLine wrote:

Does having a card from a sub-prime lender on your credit profile have any negative impact? If not, I don't see why people throw rocks at them, especially if they don't carry a maintenance fee.


There's been anecdotal evidence that some lenders will dismiss applications with a FP tradeline as an example (though they carry a heavy AF anyway), but really the fact is everyone's credit file is different, and subprime cards are the only things that are available to some... and to build or even fix one's credit, one does have to start somewhere.

 

I suspect the vast majority of users on this forum have gone through a subprime credit period (rarely does everything being peachy in one's credit life lead one to this forum) and some percentage of those have had a credit card or other loan product through a lender that typically plays in the subprime strata.

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
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cashnocredit
Posts: 1,024
Registered: ‎07-18-2009
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Re: Are sub-prime cards underrated?

There have been reports Amex has declined folks for having LOCs from a bank associated with higher risk. Not sure how credible these reports are but they aren't common.

I have reestablished credit over the last couple years
so my moniker is, well, rather out of date.

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trumpet-205
Posts: 2,482
Registered: ‎11-11-2010
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Re: Are sub-prime cards underrated?

[ Edited ]

Is not about subprime lender, but lender that deals with bad credit. Limited credit can be subprime, but not the same as bad credit.

 

Bad credit lender - First Premier, Applied Bank, First Progressive, Credit One, etc.

Subprime lender - Some of Capital One's cards, any reputable bank that issues secured card or high APR (24.99%), some store cards.

 

Many people look down on bad credit lender, not subprime. AMEX for example, hates to see First Premier.

 

Reason behind this is because you have to be pretty desperate to go for a bad credit lender. Desperate as in you don't even have the money to put down for a good secured credit card. Bad credit has default rate as high as 50%, very risky business.

 

It is the same reasoning why people look down on those with a Payday loan history.

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MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
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Re: Are sub-prime cards underrated?

That is crazy! 50% default rate? Wow! That is crazy...I've been through hell and back in credit land, I can't see why people would be so stupid after climbing out the ditch to fall back in again.

I started with Orchard 5 years ago to rebuild. I like that it now shows the line as Cap1 because I have that subprime card and another prime card with them. No one knows the difference. But I truly believe Orchard wasn't frowned upon as much as First Premier is. I remember when I was trying decide, I looked at First Premier's terms, and said, I'll wait. I couldn't get down with those fees. The terms with Orchard were much more pleasant.
Cards: Orchard Bank ($1100) | Cap1 Cash Rewards ($2500) | Chase Freedom ($1000) | Best Buy ($2500) | Discover It ($1000) | Barclay Rewards ($2500) | Current scores: EX FAKO: 684, CK TU: 649, FICO EQ: 680, FICO TU: 698, FICO EX: 658 Happy Homeowner Since 2/6/13! :smileyhappy: Last App: 4/5/13 Gardening until July 2014
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Wolf3
Posts: 3,198
Registered: ‎01-24-2010
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Re: Are sub-prime cards underrated?


MovingForward_2012 wrote:
That is crazy! 50% default rate? Wow! That is crazy...I've been through hell and back in credit land, I can't see why people would be so stupid after climbing out the ditch to fall back in again.

I started with Orchard 5 years ago to rebuild. I like that it now shows the line as Cap1 because I have that subprime card and another prime card with them. No one knows the difference. But I truly believe Orchard wasn't frowned upon as much as First Premier is. I remember when I was trying decide, I looked at First Premier's terms, and said, I'll wait. I couldn't get down with those fees. The terms with Orchard were much more pleasant.

There is a huge difference between cards like First Premiere and cards like Orchard. Even though both are sub prime, you can't lump them together and make any reasonable assertion about them.

 

 

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MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
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Re: Are sub-prime cards underrated?

Agree. All I remember was the FP initial fees took up most of the credit line and I said that is ridiculous. I guess there are people out there that continue to play the game of how much money can they get that is not theirs and blow it. I did the payday loans 10+ years ago. Those are NASTY! You end up in a spiral of borrowing half your paycheck back every week as most people who do payday loans don't have another source of income that isn't applied towards debts to counter the spiral.
Cards: Orchard Bank ($1100) | Cap1 Cash Rewards ($2500) | Chase Freedom ($1000) | Best Buy ($2500) | Discover It ($1000) | Barclay Rewards ($2500) | Current scores: EX FAKO: 684, CK TU: 649, FICO EQ: 680, FICO TU: 698, FICO EX: 658 Happy Homeowner Since 2/6/13! :smileyhappy: Last App: 4/5/13 Gardening until July 2014
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navigatethis12
Posts: 1,936
Registered: ‎01-24-2012
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Re: Are sub-prime cards underrated?

In my opinion, any underwriter that looks at any kind of card in a bad way is silly. People who have no credit often resort to Credit One or First Premier because they usually can not get a card anywhere else. I know when I had no credit and kept getting denied I was extremely tempted to accept these company's offers. The only reason I did not is because I do not believe in annual fees, but other people do not feel the same.

 

Someone can just as easily default on a Chase card, the same as they can on Credit One. Obviously if the person was bad with credit they would have derogatory information on their reports, along with the cards. If someone has the cards and has perfect credit, I do not see a problem.

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Revelate
Posts: 9,161
Registered: ‎12-30-2011
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Re: Are sub-prime cards underrated?

[ Edited ]

navigatethis12 wrote:

In my opinion, any underwriter that looks at any kind of card in a bad way is silly. People who have no credit often resort to Credit One or First Premier because they usually can not get a card anywhere else. I know when I had no credit and kept getting denied I was extremely tempted to accept these company's offers. The only reason I did not is because I do not believe in annual fees, but other people do not feel the same.

 

Someone can just as easily default on a Chase card, the same as they can on Credit One. Obviously if the person was bad with credit they would have derogatory information on their reports, along with the cards. If someone has the cards and has perfect credit, I do not see a problem.


It's not looked at like someone has the same chance to default on FP as Chase, it's that FP is willing to accept people who are theoretically/statistically more likely to default than Chase is.  Also if you can get any credit card from Chase I'd say that FP et al. is utterly moot.  I on the other hand had to deal with the deep subprime strata, and took a deep subprime unsecured installment loan for a tradeline, but never went through FP or similar.  If that hurts me with lenders so-be-it.

 

The individual with perfect credit and cards isn't the same individual that needed Credit One or First Premier in the first place.   Even if you're a no-file, one has better options than either of those two, and there's some amount of fairness in the assumption that someone who makes reasonable decisions with regards to credit applications is less of a risk.  

 

FICO is ostensibly a risk analysis, as are the internal algorithms, and if customers with the two above-mentioned tradelines on their record lead to a higher default rate than what's satisfactory on the APR range they're offering, then it is a rational decision by a lender to deny those customers.

 

It's just business, not personal.

 

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 04 673, EQ 8 707, TU 720, EX 702* (09/02/14, EX older)
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