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haulingthescoreup
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Re: Debate: Store Cards & Gas Cards have no value

txjohn, this is an interesting theory, and maybe you posted the statement as a debate topic; in other words, agree or disagree? and state your reasons. It looks a bit jarring to read, though, as if you had the inside word on this, and you were stating it as fact.

We've had reports of members' scores increasing more with the addition of the first retail card. I agree that it's anecdotal, but in fact, that's pretty much what we've had to use over the last two years in an attempt to crack some of the FICO score mysteries.

I will say (and I've said it often here before) that it doesn't make sense to me for a retail card to improve credit mix for those who already have bank cards. To me, I would think that credit mix would improve for those who started out with only retail cards and finally added a bank card.

But there are all sorts of wacko things in FICO scoring, supposedly supported by historical statistics, so this is one of those things that I just shake my head at, mention what we know of it, and move on.
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
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txjohn
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Re: Debate: Store Cards & Gas Cards have no value


haulingthescoreup wrote:
txjohn, this is an interesting theory, and maybe you posted the statement as a debate topic; in other words, agree or disagree? and state your reasons. It looks a bit jarring to read, though, as if you had the inside word on this, and you were stating it as fact.

We've had reports of members' scores increasing more with the addition of the first retail card. I agree that it's anecdotal, but in fact, that's pretty much what we've had to use over the last two years in an attempt to crack some of the FICO score mysteries.

I will say (and I've said it often here before) that it doesn't make sense to me for a retail card to improve credit mix for those who already have bank cards. To me, I would think that credit mix would improve for those who started out with only retail cards and finally added a bank card.

But there are all sorts of wacko things in FICO scoring, supposedly supported by historical statistics, so this is one of those things that I just shake my head at, mention what we know of it, and move on.

 

Hi Hauling :smileyhappy:

 

Yes, the intro is a bit jarring, and I do state it strongly in order to "extract" the potential posts with relevant info.

 

The statement I highlighted red is one of importance in your statement.  It represents the "establishment" or "building" of credit.  My question, would that score jump have been non-existent or less had the new account been a prime bank major card?

 

Maybe some of my post actually obscures my point and question.  I do believe that retail accounts are great ways to build credit, just like an Orchard card.  But I don't think that if all things were equal, and you extracted an existing retail TL and replaced it with an equal CL and age from a major, that it would negatively impact the score.

 

From what I have read, those individuals reporting score gains from the addition of a retail account, were people who needed additional TL's and references and revolving credit in general.  Thus my point:  adding revolving is adding revolving.

 

And the FICO education does not imply the benefits of Retail, only that they are considered in the scoring algorithm.  And since you are more likely to get retail accounts, higher CL's in the beginning, CLI's etc, this is the real benefit of them, not that their "retail type" actually is what is the benefit.

 

I will submit, that I am not representing an absolute knowledge.  I am presenting what I believe to be compelling evidence and logic.

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09/03/2009 TU: 777, EQ: 776 ($8 balance on an account dropped me out of 780's)
03/28/2009 TU: 814, EQ: 810, EX: 781 (02/12/2009)
05/18/2005 TU: 563, EQ: 580, EX: 549
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haulingthescoreup
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Re: Debate: Store Cards & Gas Cards have no value

One of the reasons that I have always grudgingly assumed that there is some value in one (just one!) retail card is because the previous version of the Credit Education screens stated flat-out that this was so. Every now and again someone in FICO-land goes back and rewrites stuff, and the last time that they re-did Credit Education, this statement went away.

Maybe it went away because it was incorrect; maybe it went away because the editor didn't realize how we love to dissect every little thing into molecules, I don't know.

The members who have reported larger-than-expected score gains were moderators, and I don't want to reveal all their details, but essentially they said that they had added one or two accounts previously and their scores had improved by X number of points, and then they added that first retail card, and their scores increased by X plus n amount (flashing back to 7th-grade algebra here!). In other words, the score increase was bigger than expected.

Now we all know that score change is often a result from multiple activities, not just the one we're focusing on, but I've seen this enough to think that there might be something in it.

As I said above, I agree; it appears illogical. But there are several other instances of illogical scoring: My USAA card carries less weight than a $500 secured Bank of America card, because it is regarded as a credit union card (USAA is not a CU), and cards from credit unions and local banks are scored less highly than those from national banks. This despite the fact that most CU's now are sounder than many national banks. Another example: a loan from a consumer finance company can potentially hurt your scores, especially if you have several, but a credit card from First Premier and the other bottom-feeder banks doesn't. Excuse me???

My take on the whole retail card thing is that it doesn't make sense, really, if you already have bank cards, but we don't have the data available that the scoring formula folks do, and there are enough vague hints to indicate that yes they do (including the material that used to be up there), I've read reports indicating that they do, and hell, one retail card isn't gonna hurt anyone. :smileyvery-happy:

But I don't see any reason to have a fistful of retail cards, unless someone is a shopaholic left over from the sixties.
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
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mjbfan79
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Re: Debate: Store Cards & Gas Cards have no value


txjohn wrote:

 

REWARDS:  Why not obtain some type of reward for the money spent anyway?  One of the arguements made for store cards is they provide discounts, coupons or other incentives.  Rewards are no different and they apply everywhere not just the limited purchases of a single establishment.  If you are going to spend $100 and have the option of getting 2-5% rebate back to your statement, why not go for the cashback if all other things are equal?

 

Message Edited by txjohn on 05-18-2009 06:15 AM

 

Again i don't care about rewards i don't shop that much anyway I'm a 29 year old single male lol.All care about is paying my bills on time. Some of u get to caught in these credit cards. I would rather have cash then a credit card any day but they do help in emergency's

 


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txjohn
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Re: Debate: Store Cards & Gas Cards have no value

[ Edited ]

mjbfan79 wrote:

txjohn wrote:

 

REWARDS:  Why not obtain some type of reward for the money spent anyway?  One of the arguements made for store cards is they provide discounts, coupons or other incentives.  Rewards are no different and they apply everywhere not just the limited purchases of a single establishment.  If you are going to spend $100 and have the option of getting 2-5% rebate back to your statement, why not go for the cashback if all other things are equal?

 

Message Edited by txjohn on 05-18-2009 06:15 AM

 

Again i don't care about rewards i don't shop that much anyway I'm a 29 year old single male lol.All care about is paying my bills on time. Some of u get to caught in these credit cards. I would rather have cash then a credit card any day but they do help in emergency's

 


MJ - here is some perspective for you.  By changing my CC's over to the best reward cards I could find, and merely using these for the amounts I all ready spend personally (creates no inconvenience) as well as using them for business related reimbursable expenses, I have earned approximately $1700 in rewards in the past 60 days.

 

My question to you, what could you do with an extra $1700?  By leveraging the benefits of rewards, I have at times reduced my costs by 22% on certain purchases.

 

In my business and work, I have the option of using my credit to expense certain things that I previously used a company card for.  Some of these expenses have allowed me to gain 5% cash on the purchases of my company's spending on these.

 

I used to go for the no perks, no frills, no reward cards cause I didn't care either.  Then I had a friend that did a spreadsheet and showed me how over the past 10 years I have walked away from thousands upon thousands of dollars.  When I saw that, I changed my mind :smileyhappy:

 

But to each their own. I am not on a mission of conversion, just education and information :smileyhappy:  

Message Edited by txjohn on 05-18-2009 07:44 AM

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09/03/2009 TU: 777, EQ: 776 ($8 balance on an account dropped me out of 780's)
03/28/2009 TU: 814, EQ: 810, EX: 781 (02/12/2009)
05/18/2005 TU: 563, EQ: 580, EX: 549
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cartercorp
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Re: Debate: Store Cards & Gas Cards have no value

txjohn,

I really enjoy reading all your posts And thanks again for responding to a few of my questions. But early on in my credit repair I had scores in the low 500s and I remember TU/EQ/EX stating that I needed a better mix of gas/retail cards for a optimum score.I have since then added 16 cc, a mortgage,and a car loan, my scores now are in the mid 700 range.

Maybe im still to new to understand this but doesn't any positive trade line help with scoring over time?

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txjohn
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Re: Debate: Store Cards & Gas Cards have no value


cartercorp wrote:

txjohn,

I really enjoy reading all your posts And thanks again for responding to a few of my questions. But early on in my credit repair I had scores in the low 500s and I remember TU/EQ/EX stating that I needed a better mix of gas/retail cards for a optimum score.I have since then added 16 cc, a mortgage,and a car loan, my scores now are in the mid 700 range.

Maybe im still to new to understand this but doesn't any positive trade line help with scoring over time?


 

Hi Carter!  :smileyhappy:

 

Yes, positive TL's definitely help.  And this is the true value of retail accounts (store/gas).  Retail accounts are great "builder" accounts.  But I do not believe that they actually give you a benefit for "mix."  I believe their value comes from an established revolving TL, CL, age/AAoA, count toward utilization. 

 

My question always comes back to this:  If you could have had your pick of ANY card on the market, in lieu of your store cards (they keep the same age, CL and all other factors), would you rather keep the store card or have the major card of your choice?

 

My point in the OP is not actually that retail cards have "no value" as a builder account.  My point is that they are pretty much like Orchard and the rest, easier to get, establish credit to get started on.  And this is only because the retail accounts are easier to get than majors.  The "RETAIL"  account type is not the value, it is the TL, CL, age, history....which ANY CC can accomplish.

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09/03/2009 TU: 777, EQ: 776 ($8 balance on an account dropped me out of 780's)
03/28/2009 TU: 814, EQ: 810, EX: 781 (02/12/2009)
05/18/2005 TU: 563, EQ: 580, EX: 549
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MsKiwi
Posts: 832
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Re: Debate: Store Cards & Gas Cards have no value


txjohn wrote:

mjbfan79 wrote:

txjohn wrote:

 

REWARDS:  Why not obtain some type of reward for the money spent anyway?  One of the arguements made for store cards is they provide discounts, coupons or other incentives.  Rewards are no different and they apply everywhere not just the limited purchases of a single establishment.  If you are going to spend $100 and have the option of getting 2-5% rebate back to your statement, why not go for the cashback if all other things are equal?

 

Message Edited by txjohn on 05-18-2009 06:15 AM

 

Again i don't care about rewards i don't shop that much anyway I'm a 29 year old single male lol.All care about is paying my bills on time. Some of u get to caught in these credit cards. I would rather have cash then a credit card any day but they do help in emergency's

 


MJ - here is some perspective for you.  By changing my CC's over to the best reward cards I could find, and merely using these for the amounts I all ready spend personally (creates no inconvenience) as well as using them for business related reimbursable expenses, I have earned approximately $1700 in rewards in the past 60 days.

 

My question to you, what could you do with an extra $1700?  By leveraging the benefits of rewards, I have at times reduced my costs by 22% on certain purchases.

 

In my business and work, I have the option of using my credit to expense certain things that I previously used a company card for.  Some of these expenses have allowed me to gain 5% cash on the purchases of my company's spending on these.

 

I used to go for the no perks, no frills, no reward cards cause I didn't care either.  Then I had a friend that did a spreadsheet and showed me how over the past 10 years I have walked away from thousands upon thousands of dollars.  When I saw that, I changed my mind :smileyhappy:

 

But to each their own. I am not on a mission of conversion, just education and information :smileyhappy:  

Message Edited by txjohn on 05-18-2009 07:44 AM

 

I think what Mjbfan is saying is that if you don't push enough through a reward card, there is really no benefit. For example, I put maybe $20-$40 a month on my cc's I don't see where I use it enough to earn any rewards. Even if I put all my monthly bills on a cc, it wouldn't be much.

 

The big difference for me is that I have a very small income compared to most people here ( I gather just from posts made) Since I have a much smaller income my spending is reflective of that. So for me a reward card wouldn't make any sense or difference.

 

I guess the good thing is that FICO is not based on income, it evens out the playing field for people like me.

 

 

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txjohn
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Re: Debate: Store Cards & Gas Cards have no value


MsKiwi wrote:

 

I think what Mjbfan is saying is that if you don't push enough through a reward card, there is really no benefit. For example, I put maybe $20-$40 a month on my cc's I don't see where I use it enough to earn any rewards. Even if I put all my monthly bills on a cc, it wouldn't be much.

 

The big difference for me is that I have a very small income compared to most people here ( I gather just from posts made) Since I have a much smaller income my spending is reflective of that. So for me a reward card wouldn't make any sense or difference.

 

I guess the good thing is that FICO is not based on income, it evens out the playing field for people like me.

 


EXACTLY!  You actually made my point very well.  Apply for credit that is useful, helpful and the least expensive.  At MJ's point, rewards are not an issue.  Give him 10 years and maybe they will be.

 

And if you want to build credit, have a strategy.  Establishing needed TL's is great.  I just wanted people to consider that if you are going on a limited app spree (1 to 3 apps) and can qualify for retail (store/gas) or majors, I highly suggest going for the majors, unless you can't get a high CL and the store presents that benefit.

 

Major cards have more general useability, options and benefits than store cards.  So, if I need TL's, then I may use store cards to fill the need.  But I don't think that adding them in strictly for a better "mix" will gain you anything that any other card would fail to.

Credit Scoring 101 - Tuscani   *  Guide to Common Abbreviations
Frequently Requested Threads * FICO High Achievers  *  FICO Score Estimator


09/03/2009 TU: 777, EQ: 776 ($8 balance on an account dropped me out of 780's)
03/28/2009 TU: 814, EQ: 810, EX: 781 (02/12/2009)
05/18/2005 TU: 563, EQ: 580, EX: 549
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Ulan
Posts: 790
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Re: Debate: Store Cards & Gas Cards have no value

My take on this is that, if there is a mix benefit from a retail card, it's probably small. It's a piece of information that is often repeated. An acquaintance just got a new mortgage, and the broker told him that, for best scores, he should have two credit cards from major banks plus one retail or gas card. I don't think that mortgage broker had any special insights, but it shows that the notion that retail cards help is common.

 

Anyway, I personally see that, in my specific situation (I have no house), there are only two retail cards that are actually worth it from a purely financial point of view. I don't have any rewards card that gets me 30% off something, so that's kind of a no-brainer. If these cards also help my score, that's a nice additional benefit.


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