In an earlier thread I was having a discussion with Michael whether it truly makes a difference how its reported. Now the common, prevailing thought is that having a secured card reported as secured to the credit bureaus is bad. Thats why all these banks go out of their way to state in their disclaimers that this card will be reported as unsecured. Thats why people avoid institutions such as Wells Fargo which reports their card as secured. Does it truly make a difference, does the need to have it reported unsecured have any place in this age of scoring and decision matrixes that are seen fewer and fewer times by a 'real person' totally antiquated and should be discarded. I welcome your thoughts.
It COULD Make A Difference Steven: I believe having any credit that shows an unsecured status is of benefit to the consumer, because not ALL lenders reply entirely on scoring nor are they as automated as is generally thought. While FICO scoring is helpful itâ??s not the end all to credit grantors, because acceptance of a loan is generally based (in part) on recovery risk. Many LARGE creditors still rely on seemingly antiquated means, human underwriters notwithstanding. Take GMACâ??s mortgage asset recovery division, as a prime example of the latter. As huge as GMAC Mortgage is, it still relies on fax deliveries of property valuations â?? as opposed to the current standard of Intra or Internet delivery. Itâ??s origination underwriting staff still look at every loan, still does direct-checks when appropriate, and only uses FICO as a base criteria. Technologically speaking GMAC-Mortgage is about ten (10) years behind the times, but perhaps thatâ??s what makes them so strong (the human factor). When it comes to granting heavier credit (aside from credit cards), an underwriter will consider aspects of recovery in the event of loan default. The more current status â??unsecuredâ? credit that is reported, demonstrates a propensity to pay without need for reliance on security (and equity concerns). An underwriter will naturally consider that if the consumer has performed well with unsecured credit, he/she is likely to do as well when the lender is backed by security. Itâ??s a matter of performance and reliance upon it. Also, heavier lenders (mortgage, autos, etc.) know which creditors grant secured credit, and report as unsecured. Itâ??s certainly no secret such grantors havenâ??t discovered. Yet as long as the reported credit meets or exceeds their underwriting guidelines, all the better. This of course doesnâ??t apply to ALL lenders. Thatâ??s my take anyway, for whatever itâ??s worth. Anthony Villasenor
RE: SECURED OR UNSECURED does The question becomes this....is the number of points contributed to the FICO score greater for an unsecured account vs. secured account when all other characteristics of the two accounts are identical.
RE: SECURED OR UNSECURED does How could it not? In one case you are borrowing against a lenders money and in the other you are borrowing against your own money. I would much rather have the unsecured line on the report. And regarding Alex's comments about the "human review" of credit worthiness... this is true in your examples of "High Finance", but the majority reading these messages are only interested in consumer lines of credit. And most of those applications are most certainly relegated to the dreaded 20 sec. review.(computer/decision matrix=score) So I personally base my suggestions on those criteria. Get unsecured over secured, thats my opinion. Peace, BarryN
RE: SECURED OR UNSECURED does Barry, It would make sense for an unsecured account to contribute more points than a comparable secured card. But when did the CRA's and unFAIR ISAAC seem sensible!!!! I wouldn't be surprised if the amount points were equal! Then on the other hand, that would advantageous for the consumer. We all know they don't allow that! LOL
RE: SECURED OR UNSECURED does Berry: I agree but let me ask, where is Alexâ??s post? Iâ??d like to read what he said about â??High Financeâ? as it relates to this topicâ?¦ Just curious. Anthony Villasenor
RE: SECURED OR UNSECURED does I think Killer has hit the nail on the head about the number of points given on 2 accounts one reported as secured the other not reported as such. As for the High Finance, considering that secured credit is used to get started then is this equation even relevent? Even when one would get into this situation we would expect by then that he/she has closed those Net First & Orchard bank cards and be using Citibank or MBNA. I hardly feel that a secured card 4-5 years back would make a bit of differance!
RE: SECURED OR UNSECURED does Michael: While I respect your opinion, perhaps youâ??re missing the point? After all were the basis for establishing credit, a secured credit card for instance, not relevant; why then do mortgage underwriters evaluate credit worthiness based on an over-all seven year track? Certainly all credit reporting bears weight on obtaining larger credit amounts, like a mortgage or auto loan; things I presume most folks here would someday like to acquire (if they havenâ??t already)? Nonetheless, while higher end credit granting (an area Iâ??m more familiar with) may differ from credit cards. To presuppose a mortgage or auto lender may not consider a paid status on closed Providian or Orchard Bank cards, even five (5) years hence? Well, frankly that doesnâ??t take into account the bigger picture of over-all credit stability. Were your questions of relevance accurate, there would be no point in establishing a long-term credit history. Because you may agree the best way to evaluate oneâ??s payment performance is over the long haul, even if that performance started by a secured card showing unsecured. Now if what youâ??re suggesting is that folks who read this board have no intention of ever obtaining a mortgage, finance an auto, or acquire larger loans. Then I suppose youâ??re correct, long-term credit purchases may not have relevance within this topic or thread. And in that instance, I offer my sincerest apologies for thinking otherwise. Keep The Faith, Anthony Villasenor
RE: SECURED OR UNSECURED does While I do not dispute Anthony's expertise in "higher end credit" I will point out that, and you have stated, this site has always focused on credit cards as the majority of posts demonstrate. With that in mind lets examine this secured issue more closely A. Lets accept the supposition that scorewise there is no difference between secured and unsecured. B. When applying online the decision is based on a computer/decision matrix derived score which does not differentiate whatsoever between the two. While I don't have a firm figure in front of me as to what percentage of applications are done this way for purposes of this discussion I'll give it an arbritrary percentage of 20%. Now as regarding the other 80% of applications (mail, phone, in person, etc.) how are these judged that is the big question. Do these real, human individuals discriminate against those with secured cards. How about all those financial institutions who purchase lists from the CRA's for the purpose of sending out various "pre-approved" offers do they discriminate, something along the lines of "no individuals with secured tradelines please" Yes, Anthony has explained quite well how "high financiers" would view these tradelines but what about those issuing credit cards. For example, say I obtained two secured cards that were reported as secured, held these tradelines for 1 1/2 (for whatever reason neither was converted to an unsecured) then proceeded to apply for say a Citibank card via an application I see at a restaurant. Now either due to recent credit history or due to the information being purged I have no negative information on my credit reports, no inquiries, would I be accepted for the card or declined strictly because of reasons Anthony has so well stated. Does it make a difference?
RE: SECURED OR UNSECURED does Steven: Oookaay, now your question has more resonance to me in the context of credit card only evaluations. So here goes my (revised) take, although bear in mind this is not my primary area of expertise. Barry, Michael, and others perhaps dealing exclusively with credit cards may be more specific. Having said thatâ?¦ I agree with Barryâ??s assessment in that the vast majority of credit card applications are done by automated means (if thatâ??s what his subtext meant to suggest). But if I understand your hypothetical correctly, concerning REAL person evaluations? If there were such a widespread thing attributed to credit cards now days, it would obviously be based on â??prevailing thoughtâ? of the lending industry. Balancing a set of criteria that match those industry presumptions: a model is a model is a model â?? computer generated matrix or otherwise. It all boils down to the same lending criteria. Personally, I donâ??t care who the lender is, credit card or no. Credit is granted based on probabilities of loss, risk factors if you will. And the â??prevailing thoughtâ? on an industry-wide basis is that unsecured debt posses greater risk of loss, period! Therefore, if a consumer demonstrates a suitable ability to repay unsecured debt (as reported or otherwise), MINIMIZING a lenderâ??s loss potential, then that is naturally counted in his/her favor. Hello? For one to claim that reported secured prior credit doesnâ??t matter to a lender offering an unsecured line..? Well thatâ??s a theory, but one that thwarts a basic lending principle â?? diminishing the likelihood of loss â?? one fostered by the likes of Harvard, Stanford, USC, and UCLA academia (to name just a few). Why do you think those credit card offers expressly state, the card is reported as UNSECURED? So to address your hypothetical (strictly from my perspective), lending is lending is lending, it makes little difference weather weâ??re talking credit cards or mortgagesâ?¦ Creditors follow pretty much all the same rules, if they want to hold down delinquency ratios. Yes having a secured CC trade listed as unsecured DOES matter, because it demonstrates a greater probability to meet the new (unsecured) CC obligation. Ahhhh, anyway, so much for my thoughts within a area where I obviously havenâ??t a clue <wink>â?¦ Iâ??m sure others will agree and those who donâ??t, but itâ??s all in the spirit of healthy conversation. Keep The Faith, Anthony Villasenor
RE: SECURED OR UNSECURED does Obviously, it is impossible to predict exactly how any all lenders with react, so I only have anecdotal evidence on this. I know someone who started out from absolutely nothing, (no credit history at all), but with a good income. So they got a secured Providian (reported as secured) with just a few hundred dollars. Then a store card several months later. Just on the basis of that, in less than two years, they obtained a card (@ 9.9%) from a major "prime" issuer (while the Providian was still partially secured, with some unsecured limit increases.) Within another year after that, they had two more "prime" cards, and several months later, yet another one. (By "prime" cards, I mean First USA, CitiBank, etc.) -- CardReport.Com - Credit Tools, News, And Reference http://www.cardreport.com/ Everything You Need To Know About Credit And Debt --
RE: SECURED OR UNSECURED does Hold on C.D. You disagree with me because you point to a personalized review of a credit grantor when getting a mortgage, or major financing which most people will wish to get sooner or later. My problem with what your saying is this. The credit grantor who looks at a report sees John Smith had a Secured First National Bank Visa for $300.00 in 1993, paid on time and closed in 1995. However credit grantor also now sees 6 other Visas, 7 Dept. stores, a Discover, Amex, a car lease, ect. All paid on time and doing good. Now are you going to tell me that this credit grantor is going to be so Anal Retentive that the secured card back in 1993 is going to have a negative effect on his approval? Look no one goes from Secured First National Bank or Net First to buying a house in 6 months time (usually). We all start small what I'm saying AND STAND BY THIS is that a Secured card will not affect you getting other store or bank cards, And unless you just have the secured card and never apply for more credit this secured status will not affect you. I also think that anyone who reviews credit knows that people must start somewhere if it's secured, or getting a co applicant, or guarantor, they know no one is born with good credit,It has to be built! Also I think these guys have seen so many people with R-9's on there reports that Secured is the least of there worries!
You Say Tomato, I say Tumato Michael: Hay, truly, now weâ??re on the same page where this topic is concerned. That is, especially after reading your post that clarifies perspectives much better. Under the context as youâ??ve stated, I totally agree, no argument here. Because, I didnâ??t aim to suggest that a â??securedâ? card way back when would have a negative impact; SO LONG as the consumer demonstrates credit growth. I think thatâ??s what weâ??re both saying; track record is everything. (But I DO know of some pretty anal mortgage lenders.) I believe itâ??s a matter of degrees and length of credit history that may cause some debate. Correspondingly, whatever confusion stems from these darn boards, only so much room to communicate sometimes complex and detailed issues â?? you know what I mean, Iâ??m sure. So please understand if Iâ??m glib in my comments, now or in the future, it is not (and never will be) meant as disrespect (or pure argument for that matter) but rather lightheartedness (in my own strange way). Irrespective, thanks for being a gent Anthony Villasenor
RE: SECURED OR UNSECURED does Wait a minute CardReport! I know this is slightly off the subject but it cuaght my eye! You stated " a secured Providian reported as secured". Please tell me it's not true! I am expecting my new Providian in the mail soon. I thought Providian reported as unsecured although it's actually secured!
RE: SECURED OR UNSECURED does Sorry for the bad news. Unless they have changed their policy within the past year or so, the credit report listing will say "secured." But my entire point was that that is *not* some kind of "kiss of death," and a discplined consumer can build up quite nicely from it. (Although there may *possibly* be some disadvantage with human loan officers, as opposed to the automated systems of large card issuers.) (BTW, Capital One does *not* mention the secured status to the bureaus.) -- CardReport.Com - Credit Tools, News, And Reference http://www.cardreport.com/ Everything You Need To Know About Credit And Debt --
RE: You Say Tomato, I say Tuma I'm glad that we both agree and I hope that others learn from this discussion. Personally if I was applying for a secured card I would choose the one that didn't report as such, but on the other hand I wouldn't get bent out of shape if one of my cards did say this Take Care.
RE: SECURED OR UNSECURED does I agree it is not a kiss of death. I've said this before and I will say it again everyone has to start somewhere, and credit grantors realize this! F.Y.I. I've had clients with this status on there report get bigger & Better credit than some without it (Starting from scratch).
RE: SECURED OR UNSECURED does I'm not sure what Providian's policy is now, but when I started with them in 1996, my account was partially secured. My credit report NEVER stated that the card was secured.
