@Anonymous wrote:
In most states it is legal for companies that sell insurance (Geico, State Farm, etc. etc.) to pull your credit reports. This is construed broadly to include the reports you are familar with (from TU, EX, EQ) but also CRAs like Lexis Nexis. L-N makes a score that is a lot like the FICO score, in that it takes all the data on reports and turns it into a single number that measures a potential customer's risk to a particular kind of industry and product (e.g. auto insurance).
The LN score considers some of the same features that the FICO score does. But the LN model is different too. One of the things that it looks at is how many "store" accounts you have (which includes a Macy's card but also a credit account with Pep Boys). Every store card you have is considered a bad mark against you by the LN model. FICO doesn't care whether a revolving account is a store card or a major credit card.
Another way that the LN model is different from FICO is that LN looks at your average credit limit. For example, if you had three cards with a 1k limit and three more cards with a 2, 3, and 4k limit, then you would have an average credit limit of (1 + 1 + 1 + 2 + 3 + 4) / 6 = 2k. FICO doesn't look at this (at least it didn't look at it in the models up through FICO 8). But in the LN model, if your average credit limit is lower than $10,500 (the cutoff is around here but I don't remember its exact value) then you get a ding. And as your ACL gets smaller and smaller, you get more and more of a ding.
Having a lower LN score eventually translates into higher premiums.
Simply cancelling a store card doesn't necessarily remove it from the LN calculation (since it is still on your reports as a closed account) but it would be the first step toward getting it off your reports.
I don't personally regard store cards and ACL as something to panic about. But it's just one small thing to consider when you are looking at your overall credit profile. In general, unless there's some really compelling reason to have a store card on your profile, I think it makes sense to gradually ease many of them off your reports. If a person's oldest card is a store card, that strikes me as a very compelling reason to keep it. But maybe the store account gives some sensational benefit to a person -- e.g. someone who buys 10k worth of stuff from Target every year -- the 5% cash back card is a no brainer then.
If you want to know more about this, feel free to create a new post about it and in your post ask Thom Thumb to comment. There are other people here who know all about it (besides TT) but he is certainly one. I don't have store cards and my ACL is well over 11k, so it's not something I have bothered to look into very closely.
The LN scores have lots of oddities - things that are neutral (or commonly considered helpful) on FICO are negatives on LN. Thankfully, the reason codes are far more detailed for LN than FICO, and basically show a paint-by-numbers guide to optimization.
The optimal LN average CL target is $10,533
Optimal average util is 6.22% (in general, but 10.34% on bank lines)
Actual dollar amounts of balances matter, too, in addition to the % util.
Optimal AAoA is weird - 16 years 2 months... but there's also reason codes for least 7 years 8 months AAOA, but only with an oldest account of 14 years 7 months or less.
(Optimal oldest account target is 118 to 175 months... younger is bad, but so is older. Yes, does mean the optimal AAoA is higher than the optimal oldest account. Shrug.)
And if your oldest account is not a bank revolving card... that's also negative.
Not only can certain store cards count against you on LN Attract Auto... but the longer they have been open, the more it counts against you!
Examples from the LN Reason Code List:
Numbers 3024 - 3029:
Ratio of Oldest Bank Revolving Account to Oldest Account is xx.xx% or Less
A Ratio of 99.78% or Higher is Better
1. What information is this message derived from? The score considers how long you have had a credit history with a bank revolving account. This may be done by figuring how long it has been since you opened your oldest listed bank revolving account. If the account has been closed, it still may be considered. A bank revolving account is one such as a Visa, MasterCard, etc.
2. How does this affect my insurance risk score? Insurance industry research shows that consumers with longer experience managing their bank revolving accounts have fewer insurance losses.
3. What can I do to improve this aspect of my score? As your credit history ages on your bank revolving accounts, the score may improve based on this factor. To avoid lowering this aspect of your score, consider keeping your oldest bank revolving account active and only open new accounts when needed.
Numbers 3060 - 3069:
Time Since Oldest Account Opening on File is XX to XX Months
118 to 175 Months Since Oldest Account Opening is Better
1. What information is this message derived from? The score considers how long your oldest account has been on your credit report, as well as how long all of your accounts have been established on average.
2. How does this affect my insurance risk score? Insurance industry research shows that consumers whose oldest account was established between 9 years 10 months and 14 years 7 months prior to the date the score was generated experience fewer insurance losses.
3. What can I do to improve this aspect of my score? Be cautious about opening new accounts. Over time, as your average account age increases, your score will improve.
Numbers 3070 - 3081:
Total Length of Time Department Store Accounts in File is XX Months or More
Having no Department Store Accounts is Better
1. What information is this message derived from? Using the date opened on accounts identified as department stores. These are primarily major department stores such as JCPenney, Bloomingdale’s, Macy's, etc. The score considers how long these accounts have been established. Any type of department store account (even those currently closed) is included.
2. How does this affect my insurance risk score? Insurance industry research shows that consumers who have a long established account history with department stores have more insurance losses.
3. What can I do to improve this aspect of my score? This component of your score may improve when the account is purged from your credit report.
Numbers 3082 - 3084:
# of Open Department Store Accounts is X
1 or 0 Open Department Store Accounts is Better
1. What information is this message derived from? The score considers the number of open/active department store accounts. Department store accounts refer to JCPenney, Bloomingdale’s, Macy’s, etc. A revolving type department store account is considered open if it has been reported (even with no activity) in the last 12 months and not reported as closed. Installment type accounts must have a balance greater than $0 to be considered open.
2. How does this affect my insurance risk score? Insurance industry research shows that consumers who utilize department store accounts to purchase merchandise have more insurance losses.
3. What can I do to improve this aspect of my score? Consider using fewer sources of credit to make purchases.
Numbers 3085 - 3087:
Total Amount of Balances on Open Sales Finance Accounts is $XXX - $X,XXX
Having a Total Balance Amount of $618 or Less is Better
1. What information is this message derived from? The score considers the total balances for all open/active sales finance accounts. A sales finance account is usually associated with high-ticket retail items such as furniture, stereo, piano, etc. A sales finance account is considered open if it has been reported in the last 12 months and has not been reported as closed. Installment type accounts must have a balance greater than $0 to be considered open.
2. How does this affect my insurance risk score? Insurance industry research shows that consumers with higher balance amounts owed on sales finance accounts experience more losses.
3. What can I do to improve this aspect of my score? Pay your balances down as much as possible. As the balances go down the score will improve.
Numbers 3088 - 3094:
# of Open Sales Finance Accounts is X
Zero Sales Finance Accounts is Better
1. What information is this message derived from? The score considers whether you have sales finance accounts that are considered open/active. A sales finance account is usually associated with high-ticket retail items such as furniture, stereo, piano, etc. A sales finance account is considered open if it has been reported in the last 12 months and has not been reported as closed. Installment type accounts must have a balance greater than $0 to be considered open.
2. How does this affect my insurance risk score? Insurance industry research shows that consumers with sales finance accounts that are considered active have more insurance losses.
3. What can I do to improve this aspect of my score? Consider using fewer sources of credit to make purchases. Once the account is no longer considered open/active this component of your score will improve.
Number 3121:
Number of Open Retail Accounts is 4 or More
3 or Less Open Retail Accounts is Better
1. What information is this message derived from? The score considers the number of open/active retail revolving or installment accounts. Retail accounts refer to accounts with clothing stores, jewelers, home furnishings, mail order and variety stores. A revolving retail account is considered open if it has been reported (even with no activity) in the last 12 months. An installment type retail account must have a balance to be considered open.
2. How does this affect my insurance score? Insurance industry research shows that consumers who utilize retail accounts to purchase merchandise have more insurance losses.
3. How can I improve this aspect of my score? Consider using fewer sources of credit to make purchases.
Numbers 3137 - 3142:
# of Accounts that are Open is X
5 or Less Open Accounts is Better
1. What information is this message derived from? The score considers the number of accounts that are open/active. An account is considered open if it has been reported in the past 12 months and has not been reported as closed. Revolving accounts need not have a balance to be considered open/active. Installment accounts must have a balance and must have been reported by the creditor in the past 12 months and be considered open.
2. How does this affect my insurance risk score? Insurance industry research shows that consumers who maintain open/active accounts experience fewer insurance losses. 3. What can I do to improve this aspect of my score? Consider keeping some of your accounts active, especially the account that you have had the longest. Managing your credit obligations in a responsible manner indicates that you are a lower risk.
Numbers 3160 - 3168:
Total Amount of Balances on Open Accounts is $XXX to $X,XXX
Less than $666 in Total Balances on Open Accounts is Better
1. What information is this message derived from? The sum of balances for all open accounts (excluding mortgages and disputed accounts). An account is considered open if it has been reported in the last 12 months and has not been reported as closed. Installment type accts must have balance greater than $0 to be open. Mortgages are not included in the calculation.
2. How does this affect my insurance risk score? Insurance industry research shows that consumers who have medium to high balances on their accounts experience more insurance losses.
3. What can I do to improve this aspect of my score? Only utilize what you need and pay more than the minimum amount owed each month. This helps to bring the total amount owed down more quickly and reduces finance charges. The score will improve as the balance owed on accounts is decreased.
Numbers 3176 - 3189:
Time Since Oldest Account Opening on File is XXX to XXX Months
175 Months or Less Since Oldest Account Opening is Better
1. What information is this message derived from? The score considers how long your oldest account has been on your credit report, as well as how long all of your accounts have been open on average. Your oldest account was established between xx years x months and xx years x month ago.
2. How does this affect my insurance risk score? Insurance industry research shows that consumers whose oldest account was established less than 14 years 7 months but whose average account age is more than 7 years 8 months experience fewer insurance losses.
3. What can I do to improve this aspect of my score? Over time, as your average account age increases, your score will improve.
Numbers 3190 - 3195:
Percent of Balance to Credit Line is x.xx% to x.xx%
6.22% or Less Balance to Credit Line is Better
1. What information is this message derived from? The sum of balances divided by the sum of credit limits for all open accounts (excluding mortgages and disputed accounts). An account is considered open if it has been reported in the last 12 months and has not been reported as closed. Installment type accounts must have a balance greater than $0 to be considered open.
2. How does this affect my insurance risk score? Insurance industry research shows that consumers that utilize more of their available credit experience more insurance losses.
3. What can I do to improve this aspect of my score? Only utilize what you need and try to pay more than the minimum amount owed each month. This helps to bring the total amount owed down more quickly and reduces finance charges. The score will improve as the utilization on accounts is decreased.
Numbers 3234 - 3237:
Number of Auto Financing Accounts is X
Having no Auto Financing Accounts is Better
1. What information is this derived from? The score considers if an account has been opened with an auto financing company. An auto finance account is primarily an account established with an auto lender such GMAC, Ford Motor Credit, etc.
2. How does this affect my insurance risk score? Insurance industry research shows that consumers with accounts with auto financing companies have more insurance losses.
3. What can I do to improve this aspect of my score? Accounts stay on your credit report for seven years after they are closed. Open new accounts only when needed.
Numbers 3238 - 3245:
Total number of accounts Established is XX to XX
11 Accounts or Less is Better
1. What information is this derived from? The score considers the number of accounts that you have opened.
2. How does this affect my insurance risk score? Insurance industry research shows that consumers who open a large number of accounts experience more insurance losses.
3. What can I do to improve this aspect of my score? Once you have opened an account, regardless of whether you use it, your score will be impacted by this factor. Open new accounts only when needed.
EQ8:850 TU8:850 EX8:850
EQ9:847 TU9:847 EX9:839
EQ5:797 TU4:807 EX2:813 - 2021-06-06
