Store Cards = "negative effect on FICO score" - true or not?

[Anonymous]

Hi all.  I keep seeing this suggestion about keeping store cards off of one's credit profile or accept the negative consequences of a "ding" on one's FICO score.  Is this true in all cases?  I ask because IIRC, my Home Depot card is a Citi Bank backed card and my Amazon card is a Chase Bank backed card.  Aren't these decent additions to my credit score or are they treated just like any other store card?  Thanks!

[pipeguy]

It is the mix of cards more than anything and yes some cards carry more weight (especially on a manual review) but that doesn't mean you can't have a few store cards. I have 24 active accounts (plus 2 AU on DW's - BJ's MC because I won't do business with Comenity and WF Cash Wise because the bank relationship was only in her name) included in that group are 3 "pure" store cards Amazon Prime $10k, Lowes $25k and HD $25k. I also have Costco Visa ($16k) backed by Citi and Amazon backed by Chase ($5k) - these are NOT considered store cards but co-branded cards - my NFCU AmEx ($20k) would also technically be a co-branded card. 

Store cards are like The Gap or Macy's or VS or the like that are JUST good in that store (the MC/V/AE version is not considered a store card). I have not seen any evidence that a few store cards in the mix will affect your credit scores in any way. Now a portfolio of just store cards would benefit from the addition of bank cards as long as they are not just sub-prime cards like Credit One with low limits. Again, this mostly has to do with a manual review looking at your tradelines and history. 

[Anonymous]

"Store" cards aren't "scored" any differently under FICO scoring.  I believe the thought that they can "ding" you is overplayed.

[HeavenOhio]

Retail cards negatively affect the non-FICO credit scores that insurance companies use as part of determining your rates.

The only way I can think of them coming into play with FICO is that they're not the best choice for an AZEO card. That's not a big deal because you can simply leave your positive balance on one of your major cards.

[sarge12]

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@Anonymous wrote:

Hi all.  I keep seeing this suggestion about keeping store cards off of one's credit profile or accept the negative consequences of a "ding" on one's FICO score.  Is this true in all cases?  I ask because IIRC, my Home Depot card is a Citi Bank backed card and my Amazon card is a Chase Bank backed card.  Aren't these decent additions to my credit score or are they treated just like any other store card?  Thanks!

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From all I can gather, store cards are treated the same any other card as far as fico score is concerned. The fico scores are not the only thing considered by a lender though, and many lenders do look at store cards less favorably. Finance companies can cause a significant dip in some fico scores, mainly on the fico scores used for mortgages. I personally steer clear of store cards, but if you do get one, make absolutely sure it is not tied to a finance company!!! I think I've seen some furniture store cards that were actually being funded by a finance company locally. A small independant furniture store does not have enough volume to get backing by synchrony or a bank so their financing may be through a finance company. Also, my mortgage scores are lower than they would be if I had not used Honda finance for a motorcycle purchase that I refinanced through my CU 2 days later. Myfico has previous finance company account as a reason for a lower score on my mortgage scores. I was also told by my mortgage broker years ago that when they see mainly store cards on the credit report, they are less likely to make the loan...and they went over my 3B reports with a fine tooth comb. If all they see are premium cards that are harder to get, it just looks better to a lender than exxon, belks, and JC penny.

[sarge12]

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@Anonymous wrote:

Hi all.  I keep seeing this suggestion about keeping store cards off of one's credit profile or accept the negative consequences of a "ding" on one's FICO score.  Is this true in all cases?  I ask because IIRC, my Home Depot card is a Citi Bank backed card and my Amazon card is a Chase Bank backed card.  Aren't these decent additions to my credit score or are they treated just like any other store card?  Thanks!

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The Amazon card backed by chase is a visa card. That is not really a store card, but a co-branded card, as is the Citi Costco Visa. The Amazon store card is a synchrony card I think, and can only be used at amazon. That is a store card. If it is backed by a major bank and has the visa, mastercard, or AMEX tags on them it is not a store card.

[Anonymous]

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@HeavenOhio wrote:

Retail cards negatively affect the non-FICO credit scores that insurance companies use as part of determining your rates.

The only way I can think of them coming into play with FICO is that they're not the best choice for an AZEO card. That's not a big deal because you can simply leave your positive balance on one of your major cards.

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What Heaven just said.  Store cards hurt your insurance score but not FICO.

I also like what other people have said about the issue of manual review.  I can imagine some creditors looking at a profile with a ton of "junk" cards and becoming mildly queasy whereas if they were major credit cards they'd be mildly impressed.

Also important to remember is that store cards are more likely to induce you to buy stuff you don't need, just to prevent them from being closed.  A Neiman-Marcus card, for example, or a Victoria Secret card, or a card at a jewelry store -- contrasted with a card with a VISA, MC, Discover, or Amex logo on it.  The plain Jane major CC can be used anywhere including and especially for things that are absolutely necessary.  A gallon of milk or a tank of gas or a cell phone bill is something you were absolutely going to have to buy anyway, so major CCs are very easy to keep open.

[Anonymous]

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@Anonymous wrote:

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@HeavenOhio wrote:

Retail cards negatively affect the non-FICO credit scores that insurance companies use as part of determining your rates.

The only way I can think of them coming into play with FICO is that they're not the best choice for an AZEO card. That's not a big deal because you can simply leave your positive balance on one of your major cards.

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What Heaven just said.  Store cards hurt your insurance score but not FICO.

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<snip>

OK, so back to the gist of the question.  I've got it (apparently?) - an Amazon Chase card is *not* a store card, it's a "Chase card" as seen by  FICO, for example.  So then, my new question would be this: For INSURANCE purposes, is my City-Home Depot a bad card to hold onto or should I ditch it?  Thanks to ALL who've weighed in!

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

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@HeavenOhio wrote:

Retail cards negatively affect the non-FICO credit scores that insurance companies use as part of determining your rates.

The only way I can think of them coming into play with FICO is that they're not the best choice for an AZEO card. That's not a big deal because you can simply leave your positive balance on one of your major cards.

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What Heaven just said.  Store cards hurt your insurance score but not FICO.

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<snip>

OK, so back to the gist of the question.  I've got it (apparently?) - an Amazon Chase card is *not* a store card, it's a "Chase card" as seen by  FICO, for example.  So then, my new question would be this: For INSURANCE purposes, is my City-Home Depot a bad card to hold onto or should I ditch it?  Thanks to ALL who've weighed in!

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You are close but not quite right.

The Amazon Visa is indeed not viewed as a store card.  That is not because it is seen as a "Chase" card, however, but because it has a major CC logo on it: Visa, MC, Amex, or Discover.

I have just googled the Citi Home Depot card and it appears to have no major CC logo on it.  Therefore it is considered a store card (the fact that it may be owned by a major CC issuer, like Citi or Chase, doesn't matter).

Now the question boils down to:

I have at least one store card (the Home Depot) -- should I close it?

To advise you best we'd need to know:

       * how many major CCs you have (ignore any you think you will close)

       * how many store cards you have (counting the Home Depot)

       * do you really like the Home Depot card?  Does it give you some kind of big advantage?

[sarge12]

@CGID....You hit the nail on the head...what determines if it is a store card is wheather or not it can be used places besides that store. If it has the Visa, MC, AMEX, Disc emblem on it, it is not a store card period. Citi bank in paticular backs a lot of store cards. In fact most store cards are either Synchrony, Comenity or Citi it seems. Citi Costco Visa however is not a store card as it can be used even at the Walmart run by Costco's competitor. I do not know for sure if it still happens, but some non-chain furniture stores used to issue cards that are not really credit cards in the traditional sense. They were tied to usually small local finance companies and would show on a CR as a finance company. I also know that some major auto lenders such as American Honda Financial shows as a finance company as well. The mere presence on your report of a Finance company account can lower especially your mortgage fico scores significantly. I found that out the hard way, as it is listed as one of the reasons my mortgage fico is not higher than it is.