This is off the mark. I used to research credit reports for mortgage loans. The "perfect" report has a mortgage, auto loan, edu loan, bank credit card, and a retail store credit card.

While the balances vs limits are a factor in scoring, it's just one factor among many. Retail credit cards won't trash your report unless you hit on specific bad patterns, like opening a bunch at once.

I see this pattern all the time, where someone will take a true statement, like that the balance to limit ratio and absolute high water mark are a factor in the scoring, and then mistakenly turn it around into normative advice about how you should shape your report. You're not going to fix a bad score by dropping a retail card or two.

Here's the secret to having a good credit report: use credit often, pay it on time, don't run large balances relative to your regular spending. That's what lenders want to see and what the score aims for.

Appreciate the correction! Credit (to most people including myself) is somewhat of a black box. I've just always done what I've done and maintained scores high enough to get access to credit with great rates, etc. I'm very surprised to hear having a store card (who they seem to hand out to anyone with a pulse) with a $300 limit can ever be a good factor on a report. This goes against everything I've ever "heard" and read about these cards. I trust your experience but I'm really struggling to understand how being issued a card in minutes at checkout at Best Buy (or wherever) is any sign of credit worthiness and a contributer to a "perfect" report.

To be pedantic I don't think I ever implied dropping a store card will have any significant impact on an otherwise bad (or good) credit report.

That said, OP started with his nightmare of an experience with the shady banks store cards end up with so (to me) that's reason enough to stay away from them.

Yeah, it's very opaque, way more than most consumers know.

For example you don't have a single FICO or XPN score. When a lender pulls a report they pick an option for the purpose, and that picks one of a couple dozen different models. All the models come from Fair Isaac but are tweaked to context.

I have a bit of a unique perspective on all this because my job was basically to research negative items on mortgage applicant credit reports, and if I could get the creditor to say something that met one of a couple dozen criteria then I could pull the item off the report and resubmit it to the big 3 for a new score.

A big part of my job was explaining to loan officers what the score impact of particular changes to the report would be. Fair Isaac obviously keeps the details of their models proprietary, but doing my job you'd accumulate an intuition for what would do what. This was all in the early 00's and I've no doubt things have changed in detail but not really in the overall picture I'm presenting.

The main thing to understand about credit scores is creditors want to see you using credit but paying reliably. They want to see you carry some balance because that's where they make money, but they don't want to see you running into what looks like unsustainable balance growth relative to your payment history. Retail credit cards are a positive signal because it shows you're a good little consumer that will float a balance for a few months to buy that new whatever but you always end up paying on time.

The mistake a lot of people think about these scores is that they're some sort of measure of personal fiscal discipline. They aren't. They're a score of how likely you are to make a lender money as a borrower. They want debt addicts that pay interest reliably, something that is pointed a different direction from personal fiscal prudence in most cases.

As long as I'm rambling a couple other tips:

Creditors will often remove negative payment history if you simply ask. You've got nothing to lose by trying, and it works doubly well if you're applying for a new product at the same bank. There is no more effective bank customer service agent than a loan officer determined to get that commission. They will go on a hilarious scorched earth warpath of conference calls with the borrower to get it done.

Most lenders are only really interested in the last 2 years of history. If you're in a bad spot just make getting 2 years of clean payments on a couple sources of credit your goal. Get a secured card if you have to. Use it for ordinary daily expenses vs a cash or debit card, and pay it off each month.

If you want to game the system, the most effective way is to file a dispute with the big 3 on Monday, then apply for the loan or whatever on Tuesday. Disputes temporarily knock items off the report, so you can try to work within the lag time of the bureau processing the dispute. This is particularly effective vs Transunion, which is the main reporter for collection agencies and other really bad stuff on reports, and also is a hilariously lazy and incompetent company.

As to your last point I totally agree about that part. But it's getting hard to avoid the shady in banking. I worked for Wells Fargo, and it was very apparent to me that quality control was structured to whitewash not find fraud. So much obvious fraud that met the law and rules came across my desk. I was totally unsurprised by the 2008 crash as well as the story about Wells Fargo branch managers opening second accounts for customers with forged permission.

The whole credit reporting industry needs severe reform, but it's not even a visible issue on capital hill.

> They have obscenely low limits which adversely affects your credit score as relatively small purchases can end up using a substantial portion of the available credit. Balance vs total credit (available credit) is a very important factor in calculating scores and credit worthiness.

I mean yes but if you have other credit cards that aren't maxed out, it should not make a huge overall difference compared to if you put that same amount on another card; while one card having a high balance load has an impact, the overall load on your credit is the bigger store factor.

> The interest rates are extremely high even when compared to most other major CCs from the usual suspects. All of these merchants don't push these things because they're doing you a favor - they likely have agreements in place with the issuing bank to get kickbacks on interest.

They get kickbacks, and the high interest rates help cover some of the cost of store CC customers that use promotional financing but consistently pay the item off before interest gets added.

> They have obscenely low limits which adversely affects your credit score as relatively small purchases can end up using a substantial portion of the available credit. Balance vs total credit (available credit) is a very important factor in calculating scores and credit worthiness.

I would say this was my experience with them - having large credit limits elsewhere, I could only get an initial 300 later increased to 1500.

I was stupidly lured in by an initial 25% off a 4-figure purchase and 5 cents on the dollar reward.

Ultimately, I was a responsible pay-off-the-balance customer so one wonders if this wasn't a way of ridding themselves of an unprofitable consumer...

Hard lessons learned there, sadly.

> All of these merchants don't push these things because they're doing you a favor

Generalized, this is good advice. If somebody is shilling something to you, it's not for your own good. Ads aren't PSAs and even many PSAs aren't really PSAs.