topic Re: "Major Bank Card" in Rebuilding Your Credit

"Major Bank Card"

Booner72 — Wed, 07 Sep 2011 01:43:07 GMT

I've been noticing people telling people to get a "Major Bank Card" to get their revolving credit going - what defines "Major Bank Card?" Does FICO score a credit union Visa or an AMEX differently than a First Premier Bank Mastercard or a store card?

Thanks in advance.

Re: "Major Bank Card"

NikJ4 — Wed, 07 Sep 2011 01:49:20 GMT

My guess would be a VISA or MC or Discover or Amex instead of Macy's or Dillards. Store cards will limit you to that store and the other will give you a broader range of usage. Thats my guess.

I am sure someone will correct me if I am wrong.

Re: "Major Bank Card"

Anonymous — Wed, 07 Sep 2011 01:53:04 GMT

I disagree. I don't think a major bank card or a store card hold more weight than the other. What it boils down to, and what we shan't forget because I think this is why we're all on these boards to begin with, is that all that matters, ultimately, is the FICO score that we want to reach. So whether you have high or low usageon a Cap One or BoA or a Macy's card. It will all affect your score accordingly. The key is to manage one's credit and to have different types of credit.

Re: "Major Bank Card"

llecs — Wed, 07 Sep 2011 01:54:40 GMT

Each TL is coded. In general you'll have revolving CCs and charge CCs, and even store-based charge CCs. In general, they are scored nearly the same. IME, I added my first three in rapid succession and one was a store charge (Macys). I noticed per FICO that I received more of a bump at #3 (Macys) vs. a bump at #2 (revolving CC), despite util staying at 0%. This gave me a clue that maybe having a store charge is important in your mix. The increase was due to a lack of credit...cards #4+ resulted in a loss.

Re: "Major Bank Card"

Anonymous — Wed, 07 Sep 2011 01:55:12 GMT

And NikJ4, I please don't think I was downing your response. I wasn't. I was just generally disagreeing with the idea of one card weighing more than the other. I responded quickly and didn't want to be taken out of context or to seem like I was countering what you were saying.

Re: "Major Bank Card"

NikJ4 — Wed, 07 Sep 2011 02:24:27 GMT

I claim to be no expert so my feeling were not hurt. I knew where you were going when I read your post but thanks for being considerate enough to respond back. I wish more people would be courteous.

Re: "Major Bank Card"

Booner72 — Wed, 07 Sep 2011 02:58:44 GMT

@llecs wrote:
Each TL is coded. In general you'll have revolving CCs and charge CCs, and even store-based charge CCs. In general, they are scored nearly the same. IME, I added my first three in rapid succession and one was a store charge (Macys). I noticed per FICO that I received more of a bump at #3 (Macys) vs. a bump at #2 (revolving CC), despite util staying at 0%. This gave me a clue that maybe having a store charge is important in your mix. The increase was due to a lack of credit...cards #4+ resulted in a loss.

llecs: Could it be that three accounts had more weight than two?

Re: "Major Bank Card"

Anonymous — Wed, 07 Sep 2011 03:47:25 GMT

Thanks for understanding!!!

Re: "Major Bank Card"

Anonymous — Wed, 07 Sep 2011 03:59:22 GMT

Regardless of which card(s) have more weight (Macy's vs AMEX, etc) you're most likely better off getting a "major" card because you can use it at more locations and reap the rewards benefits more so than a store card that you (hopefully) won't use as often as a card you can use for rewards on gas/groceries/other necessities.

Re: "Major Bank Card"

Anonymous — Wed, 07 Sep 2011 05:04:41 GMT

The exception is if you do not have at least one bank card.

FICO Reason Code #3 (Too few bank revolving accounts) does look at bank cards specifically. It only takes one card to satisfy this Reason Code, and a merchant (i.e. a store) card doesn't fit the criteria for this code.

Re: "Major Bank Card"

llecs — Wed, 07 Sep 2011 14:48:57 GMT

@Booner72 wrote:
llecs: Could it be that three accounts had more weight than two?

I'm making the assumption that the law of diminishing returns comes into play into the FICO score, just like we see by adding new inquiries (e.g. adding your 15th likely won't have any impact), or adding a new CA (minimal, if any, impact if you have 20 others), or changing util (reducing from 90% overall to 80% overall likely won't have any impact on FICO, but going from 90% to 1% would have a ginormous impact).

If I saw a gain on the first 3, and losses on 4+, then we have to assume that a mix of credit is important. We've all seen success stories in here of large gains when their first CC was added. Grant it, it's a YMMV based on what else is reporting. So, if there is a gain, then mix is helped. If there are losses on subsequent CCs, then we have to assume that the mix had been satisfied. A loss also means that you get dinged due to new credit reporting (on everyone's CR..."New Credit" category and certainly told uncounted times in here). You can also lose due to a drop in AAoA. I didn't know enough back then about AAoA, but if there was more of a gain on #3 over #2, then you can rule out AAoA since AAoA cannot be improved due to adding credit (well, maybe Amex is the exception if backdated).

So, if there are pre-built in losses due to new credit, then the improvement on the mix outweighed the new credit ding, resulting in a net gain. If #1 and #2 saw gains, then mix improved and helped my FICO over the new credit ding resulting in a net gain on both. #3 was the store charge card. The gain on that CC, when it reported, was greater (only in the single digits) over the gain from #2. Since all 3 reported $0, util can be ruled out. AAoA can be ruled out since adding the Macys wouldn't help AAoA. I'm assuming that the new credit ding isn't less for one credit type over the other. Any you can rule out any other changes ot my CRs since I was pulling all 3 FICOs (when we could pull EX back then) every few days or so. YOu can also rule out inquiries since I already had 20-30 reporting on each report by that point.

The only source of error I can think of is that the law of diminishing returns is accounted into that new account ding. On average I have lost 20-25 pts per each new account reporting. Except for the beginning where I went on app sprees for 5-10 CCs at a time, and except when I added some earlier this year when my mortgage reported, I've been reserved and only app'd every 6-12 months to replace some of the cards I got back then.

Re: "Major Bank Card"

Booner72 — Wed, 07 Sep 2011 19:01:01 GMT

Good Gosh Golly - 20 points for adding a new account? I must be in the "you should add accounts" category, because my FICO EQ score initially went down 11 points when Lowe's AU was added, but that was a maxed out card (now paid in full) -- but then adding CU Visa, CU Overdraft protection, and Walmart brought it back up to 632 (hopefully stays there) -- I did get a score alert this past Sunday for something else entirely, but at that time the new 3 accounts were added, so I can only assume my score will remain at 632 (barring any other kinds of changes).

Interestingly, I don't think FICO dropped at all for the 4th mortgage inquiry or even the 3 accounts added for Inquiry. I don't think AAoA affected either by much, surprisingly.

So interesting to try to understand how this all works.

Thanks for all your great info!