Non-Reporting Credit Cards

[Anonymous]

Without getting into the specifics of any particular card that may or may not be on the market today, I would be interested in know what others would think of a hypothetical credit that did not report to CRAs. I'm thinking of a revolving card with a traditional credit line, not a pre-paid card, secured card, or debit card.

Some thoughts that come to mind:

1. Would this be a sustainable situation for the underwriter? What would the underwriter do when people start to default on the card to mitigate risk?

2. If such a card existed, would it attract a higher portion of riskier borrowers and would that require a higher APR to create a sustainable return?

3. Would consumers like the idea? Would they see it as freedom to spend without prying eyes? Or would they see it as being deprived of the score rewards of responsible payment?

4. Would certain types of benefits, such as extended product warranties, be harder to offer with a non-reporting card?

5. Would non-reporting encourage bad credit behavior? Would people use a non-reporting credit card (NRCC) more irresponsibly if they thought they could 'get away it'?

I'm sure there are more issues, but this is what has popped into my head in a Sunday morning, pre-coffee state.

[Anonymous]

I'd like to think I am a responsible person, but something like this *could* cause me to want to carry a balance. I think I will stay away from accounts such as this, as I am trying to re-establish credit. I need all the help I can get.

[Anonymous]

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@Anonymous wrote:

I'd like to think I am a responsible person, but something like this *could* cause me to want to carry a balance. I think I will stay away from accounts such as this, as I am trying to re-establish credit. I need all the help I can get.

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Interesting. So you see the lack of policing as potentially increasing the danger of self harm?

[Anonymous]

I do. I guess I like having someone looking over my shoulder to keep me in line.

[Anonymous]

I have one that doesn't report, but I treat it like any other card. PIF monthly.

[Anonymous]

watchnerd wrote:

5. Would non-reporting encourage bad credit behavior? Would people use a non-reporting credit card (NRCC) more irresponsibly if they thought they could 'get away it'?

Speaking for myself, I wouldn't use it any differently than any other card that I can't truly utilize because of credit scoring.  However, for life's many unexpected events, it would come in really handy if I HAD to use it.  I would feel much better knowing that my score wouldn't spiral out of control with a necessary charge and increase my utilization.  Only in America can one receive a hundred credit applications a year for cards they can't even use for fear it will tank their credit score.

Seriously...If I truly needed to use a credit card, it would be for a large and necessary purchase - furniture, electronics (can't live w/o a computer), car problems, large hospital bills, emergencies, etc.  Instead, I save for the things I truly want because that's what I was forced to do for 10 years waiting for negatives to drop off of my CR.  The only time a large charge is made is if it is a necessity and I don't have the cash readily available.  Even though I really, really, really want an HDTV, I realize it's not a necessity so I have exercised great restraint in not charging one on a card.  If I really wanted it bad enough, I would  have saved for it already.

After being credit poor for such a long time, I value my credit whether it is reported or not because even if it's not reported all along and I mess up, you better believe they will report it then and all of my hard work would be for naught.

[scramblingin2007]

I wouldn't do it. Reason #1: You get dinged for a hard Inq. Ouch!

                         Reason #2: There would be no account showing on CR for that hard. Double Ouch!

[Anonymous]

I'm not sure if this was where you were going but these cards DO exist. For example, my Amex Biz card does not show up on any CRs. I hot a hard inq on EX when I applied.

No tradeline shows up at all unless I default on the card. Then it would because even though it's a "small business" card I'm the personal guarantor of the account.

They still offer all the good Amex benefits including extended warranties. I just know there is no real reason to pay before the statement drops, etc, so I get the full "float" by scheduling my payment right on the due date.

[shawnette]

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watchnerd wrote:
Without getting into the specifics of any particular card that may or may not be on the market today, I would be interested in know what others would think of a hypothetical credit that did not report to CRAs. I'm thinking of a revolving card with a traditional credit line, not a pre-paid card, secured card, or debit card.

Some thoughts that come to mind:

1. Would this be a sustainable situation for the underwriter? Why wouldn't it be?  These types of cards have existed for decades.  What would the underwriter do when people start to default on the card to mitigate risk? Report the defaulted credit lines and pursue collections, as they have done for decades.

2. If such a card existed, would it attract a higher portion of riskier borrowers and would that require a higher APR to create a sustainable return?  Not necessarily.  Just because a card doesn't report to the bureaus doesn't mean they hand them out like candy.  They still have standards that have to be met, hence the hard inquiry.

3. Would consumers like the idea? Absolutely.  Would they see it as freedom to spend without prying eyes?   Or would they see it as being deprived of the score rewards of responsible payment?  Some would.  Some would just treat it like any other card.

4. Would certain types of benefits, such as extended product warranties, be harder to offer with a non-reporting card?  Why would they be?  Amex offers extended warranties and they don't always report (my corporate card never reported).

5. Would non-reporting encourage bad credit behavior? Nope.  Would people use a non-reporting credit card (NRCC) more irresponsibly if they thought they could 'get away it'?  Not if they have any common sense.  I'm pretty sure that if you default on any card that pulls credit before issuing, they will definitely report defaulted accounts.  Why else would they pull your credit to begin with?

I'm sure there are more issues, but this is what has popped into my head in a Sunday morning, pre-coffee state.

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[Anonymous]

Let me get this straight. This "hypothetical" card doesn't report monthly activity but the CRA's would still allow them to report on defaults?