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Should I open a credit card?


Lisa71
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As you know my GOAL is to buy a house, will a credit score about 20 points higher help or make no difference?

I did the estimated score increase thing and it showed a score increase of about 20 points with a credit card opening, currently, I don't have one at all.

If yes, any suggestions as to which card, I guess I need one that uses EQ.

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Household is listed by the credit scoring algorithims as a "BCD" lender and it can actually lower your score if you get such a card.

If you open a new credit card your score will probably go down until the account is seasoned, (about 6 months of payments.)

Be careful here, Credit Pulls cost you 7 points on average.

What does the rest of your CR look like? That will determine if you will get any points from a new trade line.

*******************************************************

If you really want to add points to your score either

1. get added as an authorized user on your parents ( or friend's,) credit card.

or

2. Take an existing trade line that isn't reported and get it reported (like the electric company or your water bill.) There is a way to do this through your full Tri-merge Mortgage credit report and your lender.

Good luck,

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Well A credit lenders are the lenders that offer the best rates to A debtors.

There are a couple of A + lenders that the FICO people give you a couple of more points because you qualified for a TL from them, ( BoA and Chase are the two names I remember.)

Remember we are talking about Less than 10 points here, but if you are looking for 20 points, a 3 or 4 point drop could really hurt you.

BCD lenders deal with people with troubled credit, (AKA Hard money lenders.). The Fair Issac people know who these lenders are, (Household is probably at the top of the list,) and they actually take points away from your score if you have trade lines with these Bad credit specialists. The idea is that you must have credit or income problems if you deal with these lenders so even if there is nothing on your CR they assume that something bad will show up in the not to distant furture.

There is a list of who is A and who is BCD lenders somewhere on the web. I saw it listed here in the forums several months back if I find it I will post it again. You can start here at:

http://www.rebuz.com/Directory/Bad-Credit-Loans.htm

You should read this sticky to get some more data about scoring.

http://debt-consolidation-credit-repair-service.com/phpBB2/viewtopic.php?t=301&highlight=list+lenders+affect+score

and here is another post that warns about new credit lines and mortgagers...

http://debt-consolidation-credit-repair-service.com/phpBB2/viewtopic.php?t=6426&highlight=list+lenders+affect+score

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How ludicrous. So I can have a good payment history with my own Household card, but I'll get more "credit," so to speak, for piggybacking onto someone else's more respectable accounts, and payment history that I didn't even have anything to do with earning.

Why even bother getting your own accounts, then? Just latch on to the good credit earned by your family and friends, and suddenly "you" will have good credit! All the reward with none of the work! Why didn't I think of that sooner?

The whole thing is just absurd. :roll:

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The whole thing is just absurd.

Well - YEAH it is absurd. But there is some logic behind their algorithim.

Now if the FICO people didn't give you a boost for being a AU on another account they would be overlooking a possible demonstration of your positive credit behavior and that would be morally wrong.

So I can have a good payment history with my own Household card, but I'll get more "credit," so to speak, for piggybacking onto someone else's more respectable accounts, and payment history that I didn't even have anything to do with earning.

If all you do is piggyback on some else's credit you will never qualify for your own credit, so this is ONE factor in your credit worthiness, not the only factor.

Household is a HARD MONEY LENDER.. Do you know what that means?

They are one step away from " Guido" The Mafia Loan shark. The only difference is they sent Guido to Law School and he no longer breaks your fingers. FICO has statistics that tell them, people who open a Household card are most likely going to default within "X" months, ( I don't remember the exact number of months off the top of my head.)

So YES, FICO has a fairly good reason for dinging your score because you open a HARD MONEY Trade Line. Most people never recover from predatory Hard Money lending. Now the account you open may not be a Hard Money loan that will sink you, but Fair Isaac doesn't know that nor do they care to research your individual situation.

Until recently, most Household Credit Cards were secured by hard money real estate loans. I don't know what the current figures are but it will take FICO 5 - 10 years to figure out that this may not be true any longer.

Personally I think the whole scoring mess is discriminatory and terrible. Our job to is understand as much as we can and beat them at their own game.

Good Luck,

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But Radio Guy, If you are rebuilding with a small unsecured line of, let's say $500, your credit will not be adversely affected. Considering, of course, you use the card in a responsible fashion.

Oh yes that is correct, you have to start somewhere. But in the short term you will probably lose points.

Don't forget you take a 7 point hit for the original credit pull and you have to use the card to get it reported as a current "in-use" account so Ding there goes a few more points because you having increased you overall indebtedness on an UNSEASONED account, (less than 6 months old.) You get no points for unused accounts.

Once the account is seasoned, you will get a nice little increase in points that will keep building your score higher.

Lisa71 was asking about adding 20 points to help qualify for a home mortgage. The implication was this is needed quickly. Perhaps I misinterpreted her timeline.

Also Lisa71 was asking about Household Finance. As far as FICO is concerned that is NOT an regular unsecured credit card.

Remember, the scoring algorithim is HUGE! There are tons of variables, (factors,) the affect of an individual TL can be different for alot of people.

Lisa71's score indicate that she has a fair amount of good credit already so any additional TLs have less affect than on her score than on a person just starting to rebuild or initially building their credit.

All I am saying is be careful if you are trying to buy a house soon, and

avoid lenders that are believed by FICO (Fair Isaac) to be Hard Money lenders.

If you want a quick 20 points, without the inevitable subtractions that come with a new TL, consider the AU method or get a good lender who will have your positive Utility or Rental company accounts added into your CR.

Good luck,

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Don't forget you take a 7 point hit for the original credit pull and you have to use the card to get it reported as a current "in-use" account so Ding there goes a few more points because you having increased you overall indebtedness on an UNSEASONED account, (less than 6 months old.) You get no points for unused accounts.

I agree you take a hit for the credit pull. My question, using Orchard Bank card as the example, once you have used the card and paid it on-time, aren't you getting a bump back to the points you lost? Even if the card is unseasoned, after two moths of them reporting that you are paying as agreed, you will more that recapture the points you originally lost. Correct?

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Yes, you COULD get enough NEW points to offset any losses, but you can't count on it.

You can only count on getting all your points back after 6 months,

--------and probably a few extra points for the new trade line, utilization percentage, etc....

Also, Orchard is not a Hard money lender so you wouldn't lose any points there.

The CRAs are SO bad at what they do your TLs can be correctly reported by your Creditors but the CRA screws up the posting of the data and it takes a couple of posting cycles to fix the errors.

I have had both situations, a new TL that tanks my score for 2 or 3 months and new a TL that boosts my score almost immedately. I have high scores so it takes a huge reporting error or data conversion error to lower my scores alot.

Usually, my score drops for about 3 - 5 months.

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But isn't Orchard considered below Household in the grand scheme of things? All this time, I thought Orchard was the poor relation. :shock:

It just still amazes me that FICO sees you in a better light for essentially borrowing someone else's credit card than maintaining your own, if that card happens to be Household. Ridiculous. Responsible credit use is responsible credit use, whether it's Household or AmEx.

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But isn't Orchard considered below Household in the grand scheme of things? All this time, I thought Orchard was the poor relation.

Orchard is a Federally Chartered Bank Regulated by the Comptroller of the Currency and the Federal Reserve.

Household is a Finance Company regulated by no one entity, and infamous for questionable lending practices.

Don't forget that the point loss for having a Hard Money Lender is 3 or 4 points, not alot.

But if you're trying to squeeze out 20 points quickly, 3 or 4 points can hurt.

It just still amazes me that FICO sees you in a better light for essentially borrowing someone else's credit card than maintaining your own, if that card happens to be Household. Ridiculous. Responsible credit use is responsible credit use, whether it's Household or AmEx.

I couldn't agree more... these "all-powerful" scoring models are really bad.

Radio Guy, what other cards do you suggest besides Orchard? Of the non-secured variety. Something comparable to Orchard, not the predatory lending nature of cards like first premier that exploits people with fees after fees.

I don't recommend ANY cards or banks. They all are, or have the potential to become, horrible lenders.

Even the A+ lenders like Chase or BoA - miss a payment and see how fast the turn into Guido the loan enforcer, no matter how long you've been a good customer.

All I originally said was, for for SCORING considerations, try to avoid the FICO identified Hard Money Lenders, there are only a handful on the list like Household, AVco Financial and a few others...

Orchard has a good reputation on this forum, RIGHT NOW, but that can change. They were just taken over by HSBC, Hong Kong and ShangHi Banking Corp. My first cousin worked at their HQ as an accountant and told me all about them. They would kill their own mothers for an extra nickle of profit.

The CC cos change so often no one can keep up. Check out bankrate for the best current deals. There are no easy answers here... you have to research the best deals and then "Pick your poison and pay your price."

As a rule Local Credit Unions and Banks will give you the best treatment. They usually have a little tougher lending requirements, but frequently they have secured Credit Card programs or they will work with you to help you get approved.

However, don't be surprised if in 2 or 3 months your local bank or credit union gets gobbled up by a large national holding company and everything changes.

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OK, so where have I been? As far as I'm aware, Orchard has been under the Household umbrella for many years, if not always--before HSBC came into the picture. I got my Household card in 2002, and even then, Orchard was the card you'd get if Household said no. They have application fees and high annual fees, unlike Household. Household, Orchard and the others under the umbrella were all taken over by HSBC recently.

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HSBC bought a dirt bag finanace company named Household Finanace. Household was a bunch of dirt bags long before HSBC bought them.

Household happened to own a legitimate bank named Orchard. Orchard doesn't not have a reputation with Fair Issac (FICO) for higher than average charge offs.

Did you ever now a person who was real nasty, but the drove a nice car?

Just because the car is owned by a nasty person doesn't mean the car is nasty.

Remember this is FICO-Land, not the real world, the facts are irrelevant.

I suspect that Houshold is doing less of these nasty loans that result in higher than average charge offs. This trend took YEARS to identify and incorporate into the scoring model. It will probably take a fair amount of time to remove it from the scoring models.

The scoring models are top secret. Most of our knowledge of the scoring details is anecdotal or heresay. People who track this compare notes and arrive at best estimates of the affect of certian situations.

Best estimates put the point drop from such a TL at 3 or 4 points. Now if you pay on time these Hard money TL's will give you more points than you started with, but not as many as a similar TL at a Non-Hard money lender. - Supposedly.

The whole point of this thread was about increasing a credit score,(and protecting an existing score,) to help a person qualify for a better mortgage in the near future. In other words, see if you can get a TL from somebody other than a lender FICO thinks will sink you, because consumers have identified a loss of points associated from TLs from such lenders.

If a person wants to gamble with his or her score when they are trying to buy a house that is their decision. Personally, I would want to use every available trick (heresay or not,) to maximize and/or protect my score.

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I missed all of this great information!!!!!!!!!!!!!!!!!!!!!!!

Okay, radio guy, my credit looks like, 2 negatives from a cable company in the same year with different account #s :?: Which I am DV'ing for the third and I suspect final time. And then I have a credit card that I closed - never late, had for like 7 years (sears). Student loans either paid or never late - a bunch of these like 6 I would say. Last inquires were dec last year and they were from cable, light and phone companies.

I think that is it.

I was offered a discover card with 0% interest rate, but you know how those things go. I don't use Credit cards, I can get on someones card as an AU. I was thinking of getting a card the discover and just using it and paying it off before the interest rate kicks in. Which is actually in 6 months or a year, I forget.

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Hi Lisa71,

At the risk of boring you to death, I'll try to answer some of your questions...

First, take everything I say with a Huge load of salt. I left banking 5 years ago and a alot has changed.

The Mortgage Forum Moderator, FirstSource, (Charles,) is up to date and currently a Mortgage "guy" so he is the man you want to listen to. He does do mortgages for people on this forum and comes highly rated so he may be the man to see... :wink:

Second, you would probably qualify right now for some sort of B loan program.

Third, the credit pulls for the utilities won't hurt you and supposedly the points are added back after 1 year anyways so these aren't a problem.

Fourth, You are very close to qualifying for A loans so you might want to put in a little more effort so you can qualify for the better loan programs. The rates and dollar amount you can borrow is much better on an A loan program.

In the Olde days A credit was all three scores at 620 or above and no collections for four years prior to applying for a mortgage.

( Yes - we did have running water in houses water back then and electricity, however, the Dinosaurs were already extinct...)

Fifth, You do need more trade lines. You also need a 2 year rental history with cancelled checks showing timely payment.

I was offered a discover card with 0% interest rate, but you know how those things go. I don't use Credit cards, I can get on someones card as an AU. I was thinking of getting a card the discover and just using it and paying it off before the interest rate kicks in. Which is actually in 6 months or a year, I forget.

No you weren't offered a Discovery Card. Welcome to Corporate America Lie Number 158. You were offered the chance to apply for a Discover card.

They still would pull your credit and DING there goes seven more points ! And with your current cable collection items you would be denied or sent to the lovely Alternate Cardholder Program with the low low low interst rate of 49.99% ...

( and you KNOW that this would be the ONE ( Insert your favorite word or words here) time Discover would pull a TransUnion CR instead of the other two...)

Now I am guessing that both these cable collections are only showing on your TU report because of your credit scams, Oooophs silly me, I meant credit scores. :oops:

-It sounds like these cable collections will be gone shortly so the TU score should jump up to right around 620.

You're best bet is getting the AU TL. If the person you hook onto has $990 outstanding on a $1000 limit card and your score DROPS because of the AU - No problem just remove the AU and the TL dissappears and you get your points back! Because of this there is no down side to an AU TL.

(Protect yourself !)

Discover is not a very good card to get. Besides you currently would qualify for a VISA or Mastercard as long as the lender doesn't use TransUnion for the credit report. (But wait -not yet...)

What is your time frame for purchasing?

You really do need at least three open trade lines. The first is your rental history , which you prove through your cancelled checks. Then you need two active TLs reported on your CR.

For the second you could use the AU account, -kinda shaky but it could squeeze you through the underwriting requirements. (If you use this as a TL they would require 2 years of cancelled checks from a Utility Company account IN YOUR NAME to back it up.)

For the Third you SHOULD have your own MC or Visa (forget Discover,) that has been used for six months and paid on time. (Technically Mortgage underwriters want a 2 year seasoning on all accounts. So again if you use this as a TL they may require 2 years of cancelled checks from a different Utility Company account IN YOUR NAME to back this one up as well.)

So here is my suggested plan...

1. Get the Cable Collections cleared up first -if that will happen very soon.

2. As soon as the Collections are off -Add the AU account .

3. Compare your score make sure the monthly payment of the AU is not going to bounce your Debt to Income ratio too high (like a $400 dollar monthly payment.)

- An AU account should up your score about 40-50 points , I am guessing - remember if it tanks your score, one 37 cent letter sent via the US post Office and you get all your points back. This is not true if you get your own new credit card/TL - if you lose the points as a result, it takes months to get them back.

4. Once you have the additional 40 or so points you can apply for and receive almost any MC/Visa card account. Get a card and USE it, just buy gas once a month and pay it ALMOST all the way off each month. You get no points for dormat / unused cards in fact they say points are subtracted for dormant TLs.

Your credit file is thin, meaning that any new trade lines could lower your score for a period of time.

Then even if you lose 20 points because of the new TL, you are still over the magic 620 credit score, so you have your new trade line and you still have enought points to qualify to A credit loan programs.

With your credit scores you want to Stay Low and Go Slow as they say...

Nothing here will mess you up and will probably get you where you want to be score-wise...

__________________________________________

Now - aren't you sorry you asked ?

You can wake up now and go upstairs to sleep in bed, doesn't it hurt sleeping with your face on that uncomfortable keyboard?

-Ouch ! :lol:

Good luck,

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Good advice radio guy.

Actually, I decided to go ahead and purchase the other two scores and reports. THe two negatives I mentioned are actually on all three reports,

TU, just happens to have a bunch of other crap on it that really needs to go

and

EX has 4-City of SD account 180 days late but paid. I shouldn't have paid those things!!!

I would like to buy a house soon, but I am thinking around this summer if possible.

I also need a new car, but I wanted to buy a house first.

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Another question:

I have consolidated my stud loans and on my EX, they have each loan (4) as transfered (not reported on the other two). Should I call the lender and ask them to remove this?

Tu also has my student loans reported as no status when the other two have pays on time, jerks!

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TU, just happens to have a bunch of other crap on it that really needs to go

Do any of these items currently have an unpaid blance?

If yes are they still within the SOL?

If yes DON't get any more credit until you clear unpaid balances. The CAs pay for account monitoring and if you get new credit they swoop in like a Airborne Rangers trying to get more money out of you...

and

EX has 4-City of SD account 180 days late but paid. I shouldn't have paid those things!!!

Yes and No...

Since there is no outstanding balance they can't pursue more collection activity.

Mortgage companies will work with you if all your balances are zero.

You can get this deleted with a little work.

Is the account Closed? If yes, then try for CHOD immediately.

or keep investigating and pestering them and they might get sick of it and just "forget" to answer the investigation inquirey.

If the account is still open you can try for a Good will credit letter.

I would like to buy a house soon, but I am thinking around this summer if possible.

Good that is six months away. Plenty of time to open a new TL and not mess up your score.

I also need a new car, but I wanted to buy a house first.

If you get the car loan first it will tank your score for a LONG time...

Go for the house first.

Don't forget, you should be using the Dispute - DV or 1-2 punch for all your baddies...

Otherwise, you won't be able to get everything cleared up in your timeframe.

I have consolidated my stud loans and on my EX, they have each loan (4) as transfered (not reported on the other two). Should I call the lender and ask them to remove this?

No -as long as there aren't alot of lates these are probably helping your score.

Tu also has my student loans reported as no status when the other two have pays on time, jerks!

I think I already answered this one-

The CRAs are SO bad at what they do your TLs can be correctly reported by your Creditors but the CRA screws up the posting of the data and it takes a couple of posting cycles to fix the errors.

Good luck...

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THANKS!!!

Quote:

TU, just happens to have a bunch of other crap on it that really needs to go

Do any of these items currently have an unpaid blance?

All of the crap TL's are unpaid, but I will get them off. THe only one is the City of San Diego and they are big jerks, I can try and get those 4 off again, but I have tried and there was actually a post just about them in this forum, that is how horrible they are!! I forget (more like wishful thinking) is the SOL 7 years from when paid or when it opened as collection.

Since there is no outstanding balance they can't pursue more collection activity.

Mortgage companies will work with you if all your balances are zero.

You can get this deleted with a little work.

Is the account Closed? If yes, then try for CHOD immediately.

or keep investigating and pestering them and they might get sick of it and just "forget" to answer the investigation inquirey.

Yep - paid/closed/past due 180 days.

This stuff gets frustrating but I just need to suffer a little longer and I will be in good shape.

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