Some people are attracted to a retail store's credit card because you generally get a discount on your purchases when you apply. However, many people use retail store credit cards as a way to rebuild their damaged credit history. Because a store credit card is generally easier to be approved for, many people getting them have low credit scores and poor credit histories, which make them riskier customers for the store to take on. To offset this, store credit cards generally have lower credit limits and higher interest rates.
What Is a Good Score?
A credit score is also known as a FICO score and it can range from 300 to 850. Most people in the U.S. have a score in the 600s or 700s. Most lenders will see credit scores about 700 as being excellent, while scores below 600 are considered high risk. Scores in the 600s would be considered good to fair.
Department Store Requirements
Retail store credit cards that are for that store only have a reputation for being cards used by people rebuilding their credit. As such, anyone with good to excellent credit can find a better deal elsewhere. Though someone with good credit could easily be approved, department store credit cards are generally for people with a credit score in the mid-600s.
Switching to Visa and MasterCard
Many retail stores are switching from having their own credit card to having credit cards that are backed with either Visa or MasterCard. With these types of credit cards, the requirements to be approved are tighter because they follow Visa or MasterCard approval rules and not the retail store's. Typically, these credit cards will want your credit score to be around 700 to be approved.
Application Affects Score
When you apply for a credit card, it can lower your score up to 30 points because it generates a new inquiry into your report. New applications also lower the average age of your credit history, which accounts for 15 percent of your FICO score. Plus, credit card accounts with retail stores rather than banks are weighted less when your score is calculated.