topic Re: How to best make a "financing" credit card disappear in General Credit Topics

How to best make a "financing" credit card disappear

Anonymous — Thu, 21 Jul 2011 12:18:24 GMT

Hey all. I am 23 years old with a good/clean but somewhat brief credit history. I opened a Citi Forward card with a $4k limit about a year and a half ago, and have never missed a payment. I also used it as much as possible and always maintained a low balance. Last time I checked (about 2 months ago) my FICO was 703. I graduated from college in June and have since financed a car through BMW without a cosigner and started a new job where I make a little over $60k salary. These are the only two LOCs I had. A few days after my move, I decided to go bed shopping. I ended up finding a bed set at Sleepy's and they offered me 18 months of 0% financing. I didn't necessarily NEED the financing, but I figured it would make things a little more comfortable for me considering I knew it would take me about a month to start receiving paychecks and I had a lot of upfront costs. I also figured the financing couldn't hurt since making the monthly payments will certainly not be a problem. What I didn't know was that what the called "financing" was in reality opening up a credit card for me through GE Financing with a $5k limit and 18 month 0% APR and adding the balance to the card.

Is this common practice? The credit line is nearly 5x the amount I needed to finance. I plan on not using the card and making payments every month until I have a zero balance, but what is my best course of action once the balance does hit $0? Should I leave it open and ask for a credit line reduction, do I close it, or do I leave it open with no balance? I would have NEVER chosen this card to waste $5k of my credit line, and in fact, I probably could have opened a much better card with a 0% intro APR if this is the way I wanted to "finance" my purchase. I guess I learned a valuable lesson about reading carefully and asking a LOT of questions in the future, and never to assume that a salesperson is being straightforward with you.

I find this practice and lack of transparency disgusting. Being a 23 year old first time buyer, they probably spotted me walking through the door and knew they could hook me on the financing plan if they vaguely went over the terms and used the word financing instead of credit card. Some time this week, I plan on going back to Sleepy's to talk to the manager. I am not expecting to gain anything from the visit, and I know everything they do is likely 100% legal. But I find it extremely deceptive and careless on their part, and I want to make sure they know it. Being a 23 year old already able to afford a $1k+ bed set, I want to make sure they understand that they lost a valuable young customer and will receive many years of bad word of mouth from me for their lack of transparency.

Re: How to best make a "financing" credit card disappear

Anonymous — Thu, 21 Jul 2011 14:08:22 GMT

Sometimes those accounts report as a financing something or another that might hurt your score a few points. Can't recall the exact details. Not sure how your going to get rid of a tradeline... On the grand scale, I'm sure it doesn't matter as much as you may think it does. Can't dispute it as not yours because it is.

Re: How to best make a "financing" credit card disappear

TravellingNomad — Thu, 21 Jul 2011 14:15:56 GMT

did you inquire how their financing works? is there an AF on the card? they're actually not the only company to do that. Apple's financing is through a Barclays Apple Visa card. if there's no AF on the card, just sockdrawer it. maybe use it a couple of times a month to buy something and PIF to keep activity on the card. the CLI on the card helps your available balance on your CRs which will help when factoring your overall util.

btw...welcome to the forum!

Re: How to best make a "financing" credit card disappear

GregB — Thu, 21 Jul 2011 16:18:27 GMT

I don't think you have any reason to be upset.

The way they did this is the norm for a no interest account on a purchase. Sometimes there is an account setup that will allow future purchases and sometimes it is a one time use account. Sometimes there is a CC provided for regular use at the store.

I think you need to look over some of the posts here. Your questions about "waste $5K of my credit line" and "ask for a credit line reduction" make me think you have some misconceptions about credit.

This account HELPS your credit. I suggest you slow down before you do something that damages it.

Re: How to best make a "financing" credit card disappear

haulingthescoreup — Thu, 21 Jul 2011 18:53:55 GMT

@Anonymous wrote:
Sometimes those accounts report as a financing something or another that might hurt your score a few points. Can't recall the exact details. Not sure how your going to get rid of a tradeline... On the grand scale, I'm sure it doesn't matter as much as you may think it does. Can't dispute it as not yours because it is.

"Consumer finance accounts" appear as installment tradelines on your reports, and yes, they do carry a small ding.

I don't know if the industry was aware of this and changed, or if it was some unrelated issue, but many of these furniture etc financing accounts are now revolving, as in OP's case. They don't carry any ding, and they're regarded as revolving credit, pure and simple.

The one way that they might be troublesome is at the beginning of the financing, when presumably the balance is the highest. Depending on the CL that they report, this might result in high reported util. But if the lender reports a CL significantly higher than the balance, it probably isn't a problem, and once the balance begins to drop, it will be less and less of a problem, with no long-term consequences when it's paid off.

OP, leave the CL where it is. You're about to cause yourself problems. Having a CL nearly 5X higher than the loan amount is wonderful. That means that your reported util on the account is ~20-25%.

You haven't been tricked or manipulated at all. Many of us with ancient, paid-off consumer finance accounts on our reports would love to have had them report as yours does.

(edited in an attempt to improve clarity)

Re: How to best make a "financing" credit card disappear

Anonymous — Thu, 21 Jul 2011 20:49:09 GMT

Thanks for all the helpful replies. I understand that having a greater total CL and a lower debt/CL ratio will help my score, sorry I worded that poorly. Where I was going with reducing the CL on this card is that other creditors may be hesitant to continue to increase my CL when it was just recently increased by more than 100%, correct? I wanted to apply for a card I'd actually use to compliment my Citi Forward for rewards purposes. Given my brief credit history I'd assume that applying for another card in the near future would not be good for my credit or I may be denied for a card that I could have been accepted for a month ago, and that's the part that bothers me.

Assuming no AF, how long should I leave this card open? Indefinitely?

And to clarify I am really not trying to place the blame anyone else for this, if I would have read more closely I would have better understood how thier financing works up front. It's just disappointing that the salespeople at Sleepy's seem to deliberately portray the financing as something other than it is. As a 23 year old admitted first time buyer I am a huge mark, and that's exactly how they treated me. But I have learned a valuable lesson with seemingly minimal damages and some benefits, so I guess I can at least take that away from this.

Re: How to best make a "financing" credit card disappear

haulingthescoreup — Thu, 21 Jul 2011 22:21:29 GMT

Oddly, many people find that when it comes to CL's, the more you have, the more you get. It appears that many lenders are, well, chicken, and they wait for other lenders to be first to extend higher CL's. Once they see that you don't go bat-crazy and max out all your cards, they tend to believe that you're a good risk. In other words, I don't think that having a high CL will hurt you, except in very rare cases. For instance, Barclays once gave me a Barnes and Noble MC with a $500 CL, and at the time, I had nearly $100K in available credit. From what I saw on other posts at the time, they seemed to prefer giving large lines to people who didn't already have them. Of course, I had negatives too. Anyway, that was pretty much of an exception. Navy just gave me a $25K CC, and that's with something insane like $140K total CL's and $67K in income. If I ever did try to use up all the credit, I'd probably collapse before I got a quarter of the way through.

It's a good idea to cool your jets for a while, and this is true for anyone new to credit. It's better for your scores, and it makes you look like a more stable credit consumer. But it's also expected for those with "thin" files (not many accounts) and short history that they are going to acquire additional credit, in the you-gotta-start-somewhere department.

Just keep building up clean history, month after month, and research any credit product before you app, and I really do think that you'll be fine. And I hope that your mattress is nice and comfy!

As for how long to keep the card open, if all your credit has been opened within a few years, you could close it eventually one day if it was starting to bug you. As long as it is listed on your credit reports (generally 10 years after closing), it's factored into your AAoA. By the time it falls off, you'll probably have a solid enough history that it won't really affect you then. Otherwise, you could hang onto it as long as you like, assuming that they don't close it one day for non-usage.