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


txjohn wrote:

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.

 


Thanks.:smileywink:

 

I think sometimes it helps to also remind people to app for credit that is useful to *their own sitation. What I see a lot of on the boards is that someone who is building credit or just new to the forums getting into a frenzy with apps for the wrong reasons.

 

For me a store card keeps my majors free for other things if I ever need to use them. I'm not sure if I agree or disagree with you on the fact that a store card doesn't have an effect on the FICO score. I've seen evidence to the contrary but until I crack the FICO code I'll never be sure.

 

 

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


Ulan wrote:

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.


 

For the person who shops a particular store on a regular basis, without a store card, and obtaining the store card presented various values (similar to rewards right - discounts, rebates, etc.) then I think this is a good financial decision.  This is not for mix, this is for bottom line value.   For my needs, I usually find that shopping the competition on most products usually provides a vendor with good enough day to day prices to not require special discounts or sales, and then I use a major card.....but then again, I'm not much of a big time shopper, I hate doing it :smileyhappy:

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

[ Edited ]

txjohn wrote:

Okay, they have a little value, but I want to discuss what their limited value in general is.  I do this, because I see many credit newbies and rebuilders make a mistake thinking they have values that they really do not.  So, this is intended to educate on their real and true values as opposed to the mistaken ideas of value.

 

1.  Store and gas cards do NOT add to your "mix" of credit.

 

2.  Store cards DO help establish and build credit when it is harder to get a major card.  But, this is only because they add to your TL and CL in general, but they do NOT provide any FICO or credit benefits for have them as a specific type of credit (aka "mix" ) .

 

3.  If you could have the equivalent CL / TL in a major card (Visa, MC, Discover) vs. a store or gas card, the major would be better in practical use and credit terms.

 

4.  Credit scoring and review looks more to "premium" and "bankcards" for any extra consideraion. 

 

5.  "Mix" of credit means types of credit, ie:  Revolving, Installement, Mortgage & Real Estate.  It does not mean 17 different types of revolving.

 

6.  The main benefit of store and gas cards it they tend to be easier to get and give CL's that could not be obtained in major cards when you are building credit.  Example, my oldest card is a Macy's 21 years old.  It is my only store card and its age is the only reason I keep it.

 

7. A major card allows you to shop any gas station or store where you find the best price, product or convenience of location.

 

8.  A store card encourages purchases that you may not purchase if you did not have it (though the same can be said of major cards in many ways too).

 

9.  A store or gas card means you shop a certain label and their limited locations.  Those cannot be the best price, most convenienct location or best product 100% of the time.  They may at times, but not at all times.  A major cards allows you to shop the best price, product, location.

 

My attempt here is to educate on what appears to be a misunderstanding by many credit newbies or credit builders.  Many seem to believe there is a value in the "mix" of credit by getting store and gas cards.  There is a value in that it helps establish credit in general, provides useful CR TL's and CL's for utilization percentages.  But, there is no, none, nada extra value for having them for "mix."  They help build credit, but they don't do a thing for the mix.  In fact, many store cards can have a detrimental view by lenders when reviewing your mix, sometimes.

 

Now, for those who want to argue my points, I'm not arguing, I'm providing an FYI from my experience.  And that experience has shown that these cards have no special benefits except the general "establish and build" revolving credit effect and that they are easier to get than majors, and CLI's are often more frequent and larger than the majors.  This helps utilization and the appearance of CL's in general....but for the "mix" they add nothing.

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

I have to agree with txjohn here.....they have little value. Yes they offer a mix, ok but so does just having a few majors, and installment loans, and mortgage that's a powerful mix right there. And one i have been using for along time now. I have a few store cards Neiman Marcus and Sax fifth Aveue. But Neimans is an Exclusive store only takes their store card or Amex. Cards like Target, Walmart, Best buy & Gasoline cards I've learned to pass them by. DON'T NEED them. And my FICO scores are fairly high. I would like them to be higher, like in the 800's but you know what they say "Best things come to those who wait":smileywink:

Message Edited by 74king on 05-18-2009 08:56 AM
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Re: Debate: Store Cards & Gas Cards have no value

[ Edited ]

MsKiwi wrote:

 

For me a store card keeps my majors free for other things if I ever need to use them. I'm not sure if I agree or disagree with you on the fact that a store card doesn't have an effect on the FICO score. I've seen evidence to the contrary but until I crack the FICO code I'll never be sure.

 

 


But, MsKiwi, if you had another major card with an equal CL to your store card, in lieu of the store card, then it is not actually freeing you up any other CL.  Otherwise said, if you had all majors with the same TOTAL CL available, then nothing is lost and nothing is needed to "save."

 

And this goes back to my original point.  All things being equal (account age, CL, history) a major card has more benefits, general usefulness, ability to shop any location, price or product AND optionally have a reward element on top, while acting as a revolving TL reference.

 

Here is the math I am talking about:

 

Let's state for this example that I have a FICO of 692, and I only have 1 revolving TL (Visa) and 1 installement (auto).

 

I need to app for another revolving TL.  Let's say I app for Macys and get an $800 CL.  And my FICO improves 8 points!  Yeah, retail accounts help!

 

But wait, what if instead, I had app'ed for and received a BoA Mastercard for $800.  Would my FICO improve less than 8 points, exactly the same effect of 8 points,  or would it have possibly improved maybe 10-12 points?

 

Here is the theory.  Retail accounts do factor into FICO.  But do they count more so than a major?  I highly doubt that a retail card will ever give you a bigger boost, than what you would have recieved by instead of app'ing the retail app'ed and got a major.

Message Edited by txjohn on 05-18-2009 09:03 AM

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


haulingthescoreup wrote:
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.

 

Hmmm, hauling you have presented one possible data point that may be a factor.  The effect of "prime" vs. non prime lender (like CU's).

 

Is it possible that certain retail accounts have some type of "national" and "prime" lender standing that possibly would give them some extra FICO boost?

 

If so, it would not be the "retail account" that were the factor, but the "prime lender" and "national account" standing.  This is worthy of consideration.  :smileyhappy:

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


txjohn wrote:

Ulan wrote:

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.


 

For the person who shops a particular store on a regular basis, without a store card, and obtaining the store card presented various values (similar to rewards right - discounts, rebates, etc.) then I think this is a good financial decision.  This is not for mix, this is for bottom line value.   For my needs, I usually find that shopping the competition on most products usually provides a vendor with good enough day to day prices to not require special discounts or sales, and then I use a major card.....but then again, I'm not much of a big time shopper, I hate doing it :smileyhappy:


I agree. These are calculations everyone can make for himself. For instance, I agree with your stance that there is not a single branded gas card that is actually worth it, except for people who cannot get a major rewards card with gas rewards. A store card that is probably worth it for me is Kohl's, as I shop there anyway, and the card discounts stack with instore discounts. Macy's is borderline. You probably need their store card to bring their pices into a reasonable area. Otherwise, I draw blank. I won't buy my electronics at Best Buy, even with coupons, if I can get them much cheaper at Newegg or amazon.

 

This means, for me, this whole debate is mostly moot. I will get one store card because it make financial sense to me. If it boost my score, I'll be happy. If not, I'll be still happy :smileywink:

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


txjohn wrote:

haulingthescoreup wrote:
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.

 

Hmmm, hauling you have presented one possible data point that may be a factor.  The effect of "prime" vs. non prime lender (like CU's).

 

Is it possible that certain retail accounts have some type of "national" and "prime" lender standing that possibly would give them some extra FICO boost?

 

If so, it would not be the "retail account" that were the factor, but the "prime lender" and "national account" standing.  This is worthy of consideration.  :smileyhappy:


 

KUDOS debate honors go to Hauling.  She alone has given me a new piece of info that makes me think that "possibly" a retail account may have a certain benefit, if that retail account somehow has a "prime lender" and "nationa account" FICO factor.

 

Of course, if that is the case, again a BoA or Chase major accomplishes the same thing, but these cards are probably going to be harder to obtain than the store card....so the combination of an easier approval, prime/national account and potentially higher CL and CLI's may provide a benefit.  But I still see this benefit limited to those who need to establish or build credit.  Once you can qualify for the prime bankcards, why not just say "THIS $10K BoA VISA is my DEDICATED STORE CARD."  :smileyhappy:

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

[ Edited ]

txjohn wrote: 

Hmmm, hauling you have presented one possible data point that may be a factor.  The effect of "prime" vs. non prime lender (like CU's).

 

Is it possible that certain retail accounts have some type of "national" and "prime" lender standing that possibly would give them some extra FICO boost?

 

If so, it would not be the "retail account" that were the factor, but the "prime lender" and "national account" standing.  This is worthy of consideration.  :smileyhappy:


I read this somewhere else that a full financial report contains the categories like this:

 

"Upscale Retail Card - - indicating whether the consumer has an upscale retail card, based upon the National Retail Federation’s listing of “prestigious” stores, and the open date of he most recent upscale retail card."

 

There are also categories for "Mail Order", etc.. This seems not to be part of your normal FiCO score, though.

Message Edited by Ulan on 05-18-2009 09:26 AM
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Re: Debate: Store Cards & Gas Cards have no value

Thank you to all who have replied and contributed to this thread.  I hope that none felt I was just arguing to argue.  I was not, I was actually attempting to draw out new information.

 

Too often we hear "we don't know why" and I really hate that.  I wanted to know, what true values existed in a store or gas card, and to date, this is what has been brought out:

 

1.  Retail store/gas cards tend to be easier to get (than major cards), and thus are good builder/establishment revolving TL's.

 

2.  Retail accounts may provide higher initial CL's and more frequent CLI's during the builder/establishment credit years.

 

3.  Some retail accounts may have a "prime lender" and "national account" standing that may provide all of the same FICO (and some LO) benefits as that of a major prime card.

 

4.  Retail accounts are considered as a part of your mix (as revolving accounts) for your CR.

 

 

What I still believe is that a retail card will NEVER have more value, in any circumstance, than that of a "prime" "national" bankcard.  But with that said, prime-nation-bankcards don't come in the beginning, thus the true value of retail are similar to other builder cards, like Orchard, that they are steps in credit ladder.  :smileyhappy:

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


Here is the theory.  Retail accounts do factor into FICO.  But do they count more so than a major?  I highly doubt that a retail card will ever give you a bigger boost, than what you would have recieved by instead of app'ing the retail app'ed and got a major.

I'd say they are treated equal, 

 

I can tell you my DW FICO scores are all 800+,  right now the open accounts on her CRB's are 'only' five CC's, a QVC,  JC Penny (her oldest account at 26yrs and counting) , BAC (used to be MBNA) CITI (2nd oldest at 20yrs), a CrapOne card, and our mortgage, she has no installment loans, She was on the auto loan from Chrysler opened in 2002 but that note was paid off three years back,  Her  AAoA is something like 15yrs,

 

The only credit inq's on her file are from the two mortgage refi's we did last year,  I'll admit, Her  high credit scores have been achieved by ME doing most of the heavy lifing in our financial relationship,

 

One thing I have noticed is, as you said, FICO's scores are based on an algorithm that appears to be based on FM,

 

 I quit trying to figure it out,  I can tell you my FICO's are up over 100-pts since last summer,  I had too many CC accounts with balances and high utilization,  Even with 5-new accounts from last fall, As soon as I only had two CC reporting a balance and UTL under 10% my scores went to 750+,

 

 

 FICO hates revolving debt, it needs to be avioded at all costs,

 

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