Subprime CC's and score.

That assumption would be incorrect.

 

How the heck would the FICO scoring system know if an account is sub prime? It only looks at the credit limit, the balance, the age and the payment history.

 

One thing the FICO score does take into consideration is if the company doing the financing is considered a finance company instead of a bank. If you read closely in some of the FICO materials a finance compaines reporting does effect your score adversely. Also, charge accounts vs credit card accounts.

 

I'm aware of that. Finance companies are generally considered "charge" accounts just like department store accounts are. FICO scores weigh these differently because carrying balances on charge accounts might possibly mean that you are over extending yourself. It doesn't make much sense but that is how FICO sees those types of accounts.

I was referring only to revolving credit accounts in my post.

 

In that case, I guess the answer is "it doesn't know". As long as they are the same type of account (revolving, installment, etc.) the FICO score will not take into account whether the card is secured, provided by "Credit Builders Bank" or whatever.

As an example, back a few years ago when I needed sub-prime cards, I opened up a Cross Country Bank credit card account. Obviously, Cross Country is a rebuilder card. Now, I don't need the account anymore because I can get prime cards. But, I keep the account open anyway because it helps me with my FICO ratios. My Fico is 720 on Equifax and the Cross Country Bank account is not hurting my score one bit even though it is a "sub prime" account. It's just another tradeline.

 

Would this be what worthknowing.com makes reference to in my "recommendations?" They mention that there is evidence of "Personal finance loans" and that they "are seen by creditors as a sign of financial trouble."

I don't have any personal finance loans, but I do have a household card and a providian card. They are both at 0 balance, should I chuck 'em? I've got other credit cards through my CU and bank?

 

Worthknowing isn't worth the bandwidth you used to pull up your report. The scoring model they use is absurd and doesn't reflect the actual scores that will be used by creditors. The fact is said you have personal loans when you don't just illustrates my point.

Your credit accounts won't hurt you if they are 0 balance and they are revolving accounts. The personal loan accounts that are looked on unfavorably include loans from finance companies that are reported as installment accounts on your credit report. These loans are scored differently by FICO than revolving accounts. They might be looked at as negative because creditors may think that you have cash flow problems and therefore needed to take out a loan from one of these companies (usually at high interest and short terms).

Keep in mind that FICO is a sham anyway, and that what I've said isn't gospel and might not apply to your situation. However, as a rule, having too many finance accounts is not good. Having revolving accounts is good as long as the balances are kept low in relation to the credit limits.

As far as closing your accounts, it would depend on how recently they were opened and what other credit you have on your reports. FICO takes the length of your credit history into account, as well as the average age of your tradelines. Try not to close accounts soon after you open them. A general rule is to allow at least six months betwen account opening and closing. If the accounts aren't too old, and it won't affect your ratios (balance to total available credit limits) then closing them shouldn't hurt.

 

Go it. Good point.

30ft

 

Re: Re: Subprime CC's and score.

This morning looking at my Efx report I noticed an account (a car loan) that I paid off last week, which was through a financing company, just updated to zero balance, well I was expecting this huge increase or SOMETHING< anything but the drop that I got. dropped from a 685 to 672. The scoring system is TOTALLY bogus. Minimum, the score should not have changed.

 

If I may interject one question: What point is there to keep the subprime credit cards open if they have annual fees and you can get prime credit cards?

I have Providian and Orchard. Providian and Orchard are my oldest tradelines at almost 3 years old - but both carry a hefty annual fee.

When I can get prime credit cards, I have to got to close Orchard and Providian - even though both are my oldest tradelines. It doesn't make economic sense to keep them open.

 

I agree. My annual fee is due on in June, and I will close the account before then. I need it open now, because I can't apply for any new credit until I close on my house the end of March. Then I will get a couple of new prime cards and close the sub prime card.