09-09-2009 06:53 AM
02-11-2010 04:33 PM
02-11-2010 05:46 PM
Credit accounts (whether they issue an accompanying card or not) vary significantly in their impact on your FICO scores. They can be:
1- Bank/National Credit Card Companies
2- Merchant Cards
3- Consumer Finance Companies
FICO sees Bank and National Credit Card Companies as the highest quality lenders. They want you to have at least one of these accounts. It can be with a bank or national credit card company (i.e. AmEx, Discover, CapOne) or with a bank; and it needs to be a revolving account (credit card, overdraft, LOC). You get dinged if you don’t have at least one of these accounts (FICO Code # 3 "Too Few Bank Revolving Accounts ), so when you add your first one, you will see a score increase.
Merchant cards are not held in the same high esteem as Bank and National Credit Card Companies. Although there’s no FICO advantage to having these cards in and of themselves, they have advantages that make them attractive (i.e. high credit limits which may help utilization, long-term usefulness which helps AAofA, consumer discount programs).
FICO will ding your credit for having Consumer Finance accounts (Fico Code # 6 "Too Many Consumer Finance Accounts" - one is too many). The damage will remain for as long as the account reports (that is up to ten years after you close the account). However, closing the account will result in a less significant ding; and aging will continue to lessen its impact. How much damage it will do depends on your “package.” Some see this code show up only when their scores are high and believe it has very little impact. Others, self included, see Consumer Finance as having a more significant ding. For me, it is the second most derogatory item for my FICO score. It comes in just behind my BK, and before 5 inquiries and new accounts. So, as usual, your mileage may will always vary. But when all is said and done, it’s a negative account.
For DH, GE Care Credit comes up as a “Consumer Finance Account” (here we go again…..) on his mortgage and his CCT inquiry page. This is a KOB (Kind of Business) code. We are in the process of closing this account. If we knew what it was, we would not have opened it. If we need to finance medical (and we will this year), we will do it on a card from a “quality” lender or through some other means (no, I’m not talking robbing banks).
I do worry about people not being aware of the KOB (Kind of Business) code which FICO attaches to this account.
We all get to open the accounts of our choice, but knowing what an account is before you open it is the very best defense against very unpleasant surprises. And I think many people open Consumer Finance accounts without being aware of it.
So, for me, if I needed a $5,000 account to cover medical, (well, I would probably go for a LOC first, but if I was looking at cards only) I would go for a #1 (Bank/National CC) card first; then a #2 merchant card 2nd; and I would opt out of app’ing for anything coded as a #3 Consumer Finance Account.
Beware the fine print and beware the very visible (but hard to find) KOB Code. Remember, FICO rewards you for having at least one bank/national cc account; and hits you for having any Consumer Finance accounts.
02-12-2010 09:46 AM
02-12-2010 02:06 PM
Peaches- apparently the PPs care credit acct has been coded incorrectly-- for the vast majority of card holders it shows it for what it is on cbr- a revolving/charge acct
if you want the acct don't let the PPs post about an atypical and inaccurate coding of a charge acct disuade you. Care Credit is not a Consumer Finance Account.
02-12-2010 04:08 PM
I did not receive any ding for CareCredit. And IMO credit is to be used in the best financial advantage....not solely for the purpose of having the absolute highest FICO score.
If you need $1200 in dental and can get an interest free promo for 12 months on CareCredit...that is pretty good use of money and credit. IMO, you will see the ding (should there be one) moreso from inquiry and new account.
Even when "what's hurting you" codes and explanations come up, they don't tell you how much this has affected you. I have had the "looking for credit" code, but later had that code disappear and not received any extra points. I also have at times had other reason codes that made virtually no real impact on the score itself. Sometimes (again IMO) the ding is that it isn't boosting your score, but not necessarily depressing it either.
I am very happy with my CareCredit and Chase. They provided me interest free money for 2 years on extensive dental that would have been a large amount to pay straight out of reserves rather than working into cash flow.
IMO IME only