Reply
Established Contributor
Revike
Posts: 720
Registered: ‎05-04-2007
0

Closing possible consumer finance account

Last year, we bought furniture at a local store, used the 0%-for-6-months financing offered, and then paid it off. The financing was provided by American General Finance. The financing established a $2500 credit limit and EQ lists it as a "Revolving" account. I have read elsewhere that so-called second-tier companies are classified as "consumer finance" companies and might be considered an undesirable type of credit in calculating the FICO score. If this account could be a negative factor, I'd want to close it; if not, I might as well let the $2500 be included in my available revolving credit total. My other TLs are all normal (mortgage, equity line of credit, several major credit cards, and a Macys card).
Senior Contributor
smallfry
Posts: 4,831
Registered: ‎04-20-2007
0

Re: Closing possible consumer finance account

I'd close that one in a flash.
Moderator Emeritus
Tuscani
Posts: 6,182
Registered: ‎03-29-2007
0

Re: Closing possible consumer finance account

[ Edited ]
Agreed. Close it or ask them to remove the "consumer finance" notation.
 
Consumer finance companies typically grant loans to people with poor credit histories. Their customers often cannot get loans from traditional lending companies such as banks or credit unions. These are often high-interest loans because the consumer finance company is assuming more risk by lending to people with less than perfect credit.
 
The fact that you have a consumer finance company loan on your credit report means that you represent a higher risk to lenders than someone with no consumer finance loans. Even if this consumer finance account is closed, it will still lower your FICO score. However, its impact on your score will lessen as time passes.


Message Edited by Tuscani on 05-05-2007 03:00 PM
Established Contributor
Revike
Posts: 720
Registered: ‎05-04-2007
0

Re: Closing possible consumer finance account

[ Edited ]

Tuscani wrote:
Agreed. Close it or ask them to remove the "consumer finance" notation.
Consumer finance companies typically grant loans to people with poor credit histories. Their customers often cannot get loans from traditional lending companies such as banks or credit unions. These are often high-interest loans because the consumer finance company is assuming more risk by lending to people with less than perfect credit.
The fact that you have a consumer finance company loan on your credit report means that you represent a higher risk to lenders than someone with no consumer finance loans. Even if this consumer finance account is closed, it will still lower your FICO score. However, its impact on your score will lessen as time passes.
Message Edited by Tuscani on 05-05-2007 03:00 PM
Actually, part of my question is how I can determine if this particular company is regarded by the CBs to be a "consumer finance" company. There is no "consumer finance" designation on the report - EQ only classifies this account as "Revolving". Would EQ use a different designation if American General is considered a CF company? Or is any company other than a bank, credit union, or major credit card issuer automatically classified as a CF company?

Message Edited by Revike on 05-05-2007 01:24 PM
Moderator Emeritus
Tuscani
Posts: 6,182
Registered: ‎03-29-2007
0

Re: Closing possible consumer finance account

I would call EQ and ask.
Frequent Contributor
HouseHunter
Posts: 351
Registered: ‎04-02-2007
0

Re: Closing possible consumer finance account

[ Edited ]
I got new furniture through a finance company at the first part of this year.  It did not hit my CR until after I started monitoring them.  When it hit, it did not change my score at all.  It only went on one report and neither raised nor lowered that score even though it was #2 of two TL's and my other TL was just 9 months old.  There is nothing on the report stating that it is a finance company loan.  There is nothing in in the "negative" section at either myFICO or TC indicating that it is a problem.   Hope this helps.


Message Edited by HouseHunter on 05-05-2007 07:37 PM
Established Contributor
Revike
Posts: 720
Registered: ‎05-04-2007
0

Re: Closing possible consumer finance account

[ Edited ]
Thanks for all the responses.

Of course, before I posted I should have followed the almost-golden rule: When in doubt, Google. It turns out American General Finance is universally described as a major "consumer finance" company, with all the connotations. The AFSA website says: "Consumer finance companies include: American General Finance Corporation, CitiFinancial, HSBC North America (formerly Household), Wells Fargo Financial, Inc. ..."

I will check with EQ first, but it appears the safe thing to do is close this account - the $2500 credit limit is a small percentage of my available revolving credit total, and this account is the youngest TL on my report, so the effects on utilization and history would be negligible.

Message Edited by Revike on 05-05-2007 07:24 PM

myFICO is the consumer division of FICO. Since its introduction 20 years ago, the FICO® Score has become a global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries. 90 of the top 100 largest U.S. financial institutions use the FICO Score to make consumer credit decisions.

>> About myFICO
FICO Score - The Score that matters
Click to Verify - This site chose VeriSign SSL for secure e-commerce and confidential communications.
Fair Isaac Corporation is a BBB Accredited Financial Service in San Rafael, CA
FOLLOW US Social Media Facebook Twitter Pinterest Google+
}