Does in store installment loan negatively affect credit?

[jg1983]

I have been shopping around for a bed and found a couple options I like. One of the stores I found a bed at offers 12 months interest free financing in an installment loan. They ran my credit and approved me for $2000. The other store I went to where I found a bed I like is Matress Firm. They ran my credit for what I thought was an installment loan and then I was told I was approved for a $1500 Matress Firm credit card with 12 months interest free financing.

I found beds I like at both stores for well under my credit limits. The Matress Firm credit card is on its way in the mail and has already reported on my credit. The store with the installment loan has the bed I like the most but I don't want to do anything that will have a negative impact on my credit. Over the last year or so I have gone from no credit score and some collection accounts to mid to upper 600s FICO scores and 6 credit cards (7 now) with no negatives on my credit. Right now I am working towards 700s and don't want to do anything that would negatively impact that. Keeping that in mind am I better off using the Matress Firm credit card or the installment loan?

[Anonymous]

I think either one should be fine, for CC you get the TL for revolving and for the installment loan you get that TL....the down side of an instalment loan is that your UTI (on that TL)  is high until you pay past the 80-90% range but from what I've been told in the past is that you need a good mix of credit such as CC, instalment,vehicle, home to max out your scores.  I do know the banks like to see you can take a loan and pay it back, not just manage CCs and also if Mattress Firm CC dosn't have visa/mc logo would you ever use it again?

Your going to take a small temporary hit for the HPs and new credit but they are small

Good Luck and Sleep Well

**edited to add: I would ask if you take instalment loan is there any pre-payment penalty?

[Anonymous]

It's common to find something like this...

     a sofa at Rooms to Go

     a washer/dryer at Home Depot

     a big screen TV at Best Buy....

          etc.  etc. etc.

... and the merchant offers you an amazing deal wherein you get the item at 0% interest "financing" especially in the form of an installment loan.

The installment loan has a very high likelihood of being tagged by FICO or the CRA as a "Consumer Finance Account."  CFAs harm your score, even if you make perfect payments, and they probably harm your score for the ten years after it closes to (while it remains on your report).

There have been a lot of threads here at the forums discussing this in the last year or two.  THere's been two in the last two months.    I would run from the installment loan.  There's a very good chance that the CC will not be tagged as a CFA, though I'd be certain about that if it were a run of the mill 0% interest major credit card like a Chase Slate.

[jg1983]

I thought I had read something a while back about store installment loans being a bad thing. That is why I am asking. The credit card is through synchrony bank (I have two other cards through them) and it has already been issued and is reporting on my credit.

[Anonymous]

Yeah I am almost sure that the credit card is fine, and in the 1 out of a 1000 chance it isn't, it's already been opened, so there's no point in not using it.  By all means avoid the store installment loan which will likely be talked as a Consumer Finance Acccount.  Which is bad news.

[medicgrrl]

Do you have any 0% promotions on your current cards?

[jg1983]

Unfortunately I don't. I think I'm just going to go ahead and use the Matress Firm card. Like I said it is already reporting to my credit. As far as I can tell it is being reported just like any other credit card.

[Revelate]

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@jg1983 wrote:
Unfortunately I don't. I think I'm just going to go ahead and use the Matress Firm card. Like I said it is already reporting to my credit. As far as I can tell it is being reported just like any other credit card.

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As near as I can tell Synchrony cards aren't CFA's.  My own file is complaining about a CFA on both EX and EQ (EX FICO 3 / EQ FICO 5 explicitly) but not on TU FICO 4 which really should have it there as well, except what's assuredly my CFA (a 120% APR unsecured installment loan) only reports to EX/EQ whereas I have a Wally card which reports to all three.

Until I find someone who provides screenshots of reason codes and tradelines to prove otherwise, I'll continue to operate under that assumption.  We just don't really know that much about CFA's but CGID got it right from what we do know: that installment loan from a retail outlet has a high probability of being categorized as one... I don't know if it affects FICO 8 at this point, but I do know it affects my Equifax FICO 5, and since mortgages underwrite on that score as one of the three and those are the only scores I truly care about, I'm really unhappy having a CFA on my file and I'm basically stuck with it for another 5 years.