Discover Secured Card won't graduate despite strong credit score

[Anonymous]

Hi all, 

I've had my Discover secured card for 13 months now. Started out with $500 deposit, but I added an additional $500 deposit a few months in.  Received a letter around 7 months stating that the monthly review process would begin. I have 4 accounts: 17,000 LOC, 1% utilization, no missed/late payments, my Citi secured card graduated 5 months ago, 752 FICO.

I've called Discover numerous times and I get the same canned answer, "your card will be reviewed each month on your statement date." When I ask for more information on what parameters go into the automated system determining if a secured card can graduate, I don't get an answer. I asked if there was a glitch in the system as it seems strange to me that it hasn't graduated - they say, no the system is optimized.  I've spoken to supervisors and they informed me that they would file a request for higher-ups to look at it, but haven't gotten any feedback on that front. 

My average age of credit is 1 year 6 months, which is the only "negative" thing I can think of. I don't want to close my account, but having $1,000 tied up gaining no material interest is kind of a waste when I can put it towards a long-term growth fund. 

Any thoughts? I've looked through the forums here and I've seen some people wait as long as 24 months to get their security deposit returned. I've seen others with a credit score 100 points lower than mine, graduate at 7 months? 

Thanks everyone! 

[Anonymous]

Your data points are strong but maybe you're missing some others that might help.  My Discover Secured graduated after 7 months at a 650 FICO (TU), so 100 points lower.

A few questions:

• Did you ever pay your account late (not 30D late, just past the due date)?
• Did you ever have a returned payment?
• Did you ever chargeoff or IIB Discover in the past?

Any other data points that might tell us why Discover isn't showing you any love?

I bet if you go to Discover.com's prequalification page, you'd see a strong approval there and get a higher limit, plus you can get double cashback on the first year for whatever card you deal with.  Then just close the secured card and get your money back.

[Anonymous]

Thanks for the quick response! 

Nope have never paid past the due date, always on time. Going back, I realized there may be only 1 other thing that is holding me back. In Jan. 2017, I paid part of my balance (a week before statement cut), but I was in the process of switching checking accounts from one bank to another and there was a returned payment - though I didn't think that would have an impact since I just paid it the next day with the new checking account. 

I did take a look at Discover's prequalification page and you're right, strong approval ratings there. I saw on their site that if you close a secured card, it would take 2 billing cycles + an additional 10 or so business days to get the check in the mail. On the other hand, if they convert it for you, it would take 5-7 business days to get the check. Wondering if I should wait until Jan. '18 if that "returned payment" falls off?  

[Anonymous]

That returned payment will do it.  I can't prove this for sure, but I have heard this problem with many secured cards -- that a returned payment is flagged internally and a LOT of folks don't graduate because of it.  Maybe a year will make a difference.

If that is your oldest account by a long shot, closing it might hurt you in 10 years minimally. Very minimally.  I wouldn't worry.  I'd open a new Discover card for sure, bet you get a hefty new starting limit, and just close the secured card after.  Get your money back and move on.  That $1000 will be a nice new year's bonus.

If you do choose to keep it open 3 more months, please update the thread so we have a data point on this.  I am keeping a personal website of data points like this so I can easily refer to them when helping others, and the "my Discover card will never graduate" question is common so getting more data points is super helpful.  In my opinion, the returned payment is the issue.

Also note: going forward, I suggest considering "pushing" payments from your bank rather than "pulling" payments from the credit card website.  Pushed payments clear pretty quickly (1 business day in Chase's case!) and there's so much less risk of a returned payment.

[Anonymous]

Absolutely will keep you all updated should I decide to keep it open 3 or more months. Seems strange to me that they would, in theory, hold it against me when I repaid it from the new checking account the following day, which was before the due date anyway. Thanks for the push vs. pull tip though - good to be aware of for sure. 

Maybe I can send a message to Discover (their front line secured card team, unfortunately, can't provide much insight apart from "account gets reviewed on the statement date each month") seeing if I can have that removed from my account given the circumstance. 

Thanks again!

EDIT: I just called and spoke to an account manager explaining the situation and how it was simply an oversight as I was switching from Chase to Citi checking accounts and I paid the next day (after that returned payment charge) from the correct account. Looking back at the transaction date on my statement, it was actually over 20 days before the next due date. Luckily, the account manager went ahead and is getting that waved for me, should have an email confirmation within 72 hours. I believe this should have a material impact on the secured status - will let you know! 

[Anonymous]

Wow, they have account managers working Saturday?  Amazing!

Yeah, it sounds weird that a company would penalize you for a returned payment even if you still paid it on time, but that's part of their internal risk scoring.  And the fact is, people who bounce checks or payments are actually higher risk than people who run high utilization -- even if the reason you bounced a payment has nothing to do with your financial worth.

I've heard it from numerous people in underwriting: a bounced payment is one of the worst things a person can do because banks rely on automated risk analysis.  A human doesn't look at graduating you, a computer does.  The computer sees a bounced payment and says "This person probably doesn't manage their bank balance" even though we know it was a mistake based on changing banks.

Learn to push payments.  This is important because you may change banks again and you really want to be assured you'll never bounce a payment in the future.  Even prime lenders with prime credit cards can ding your internal score over it!

[Anonymous]

Hi, just wanted to update this thread - I had my 14th statement cut this past weekend and no changes... I called today to ensure that the automated review still occurred despite falling on a weekend. I was told yes, the review ran and no, my account did not un-secure.  

I spoke, again, to a supervisor who told me there isn't a single person in the entire company who could tell me exactly why I haven't been unsecured. I asked, who manages this automated review system? The supervisor said our tech team does. So I said, I want to speak to the tech team to understand what goes into the algorithms of the automated review. Obviously, it's rule-based, looking at certain factors to determine if someone is eligible to unsecure. I was told that that information is encrypted and the team wouldn't be able to tell me specifically why I haven't graduated to an unsecured account. 

I asked the supervisor what my options are and she told me that I can wait (not specifying how many months), or I can try to see if I am eligible to open a new card and then close this card (I'm pre-approved for the Discover Cash Credit card), but I do NOT want to close out an account and lower my average account age (which is 1 yr 6 months at this point). 

Pretty disappointed. 

[Anonymous]

Closing a card does not drop average age until it falls off your reports in 10 more years.

The only time you don't want to close a card is if you have 5 or fewer cards.

[Anonymous]

I have 4 accounts (Citi, Chase, Discover, and CapitalOne). 

[Anonymous]

After looking at some other sites, I saw people recently complaining about not having their account unsecured for up to (and sometimes above 24 months)... I said screw it and applied for the Discover IT cash back card. Was approved immediately, 5k credit line. I will cancel my secured card in a few days once my last pending purchase / my corresponding payment posts.