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Established Member
mattwarner
Posts: 23
Registered: ‎05-01-2007

Consumer Finance Companies

The MyFico report said one factor causing my lower score is my use of a consumer finance company.  I'm not entirely sure that this means, but I'm assuming it's my auto loan from HSBC.  The loan is about 13 months old, I'm paid three or four months ahead on it, and have never paid late.  Am I better off to try to refinance my car with a bank/credit union instead?  How much is this really hurting my score (635)?
New Contributor
Diamond
Posts: 117
Registered: ‎04-18-2007

Re: Consumer Finance Companies

It must be. I received that message also. At the time I had a card from HSBC, which is a finance company. I closed the acct. because it looks like finance co's look like u can't get credit elsewhere.If u could refinance through cu that would be good, plus they usually have great rates
Moderator Emeritus
Tuscani
Posts: 6,182
Registered: ‎03-29-2007

Re: Consumer Finance Companies

[ Edited ]
I would refi 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
Senior Contributor
ilovepizza
Posts: 3,071
Registered: ‎05-17-2007

Re: Consumer Finance Companies

[ Edited ]
Hmm. If paid and closed, it is good history, which raised your score. Removing it might lower your score and probably will. Personally I would never delete anything with good history. Anything with good history is better for your score. If you have a Consumer Finance Company high interest loan, PAY IT OFF, Close it! While it won't hurt your score, lenders will shy away from you until it is closed. After it is closed, it can only help your score.

It might be your auto loan too falling under finance company, ect installments. Open loans drop scores because they are debt. That simple. Pay it off and score will come up. I have never heard of any installment after being closed dropping a score if it was paid on time. Maybe if someone went to a debt consolidation place and set a fixed payment, but that would fall under something different than Consumer Finance. All closed installments raise scores not drop them regardless of title. If anyone has any documentation to show other wise please msg them to me or post them here.

Message Edited by ilovepizza on 05-18-2007 01:49 AM

If we never set higher goals we would never get as far.
sol, credit 101, acr, abbreviations, calc
Moderator Emeritus
Tuscani
Posts: 6,182
Registered: ‎03-29-2007

Re: Consumer Finance Companies



ilovepizza wrote:
Hmm. If paid and closed, it is good history, which raised your score. Removing it might lower your score and probably will. Personally I would never delete anything with good history. Anything with good history is better for your score. If you have a Consumer Finance Company high interest loan, PAY IT OFF, Close it! While it won't hurt your score, lenders will shy away from you until it is closed. After it is closed, it can only help your score.

It might be your auto loan too falling under finance company, ect installments. Open loans drop scores because they are debt. That simple. Pay it off and score will come up. I have never heard of any installment after being closed dropping a score if it was paid on time. Maybe if someone went to a debt consolidation place and set a fixed payment, but that would fall under something different than Consumer Finance. All closed installments raise scores not drop them regardless of title. If anyone has any documentation to show other wise please msg them to me or post them here.

Message Edited by ilovepizza on 05-18-2007 01:49 AM



I wouldn't agree that "All closed installments raise scores not drop them regardless of title".
Once it becomes a closed account instead of open you can take a score hit.
However, IMO paying off or down on installment loans has no effect on our FICOs. In fact, My brother paid off a car loan after having it for a year. He had $13,000 left on it. EX dropped 50 point... EQ dropped 30 points... and TU 20 points. Believe me FICO loves a good mixture of accounts. Luckily his scores rebounded a few months later so it was short lived!
 
Contributor
devhip
Posts: 210
Registered: ‎04-28-2007

Re: Consumer Finance Companies

[ Edited ]
Agree with Tuscani. The last loan I financed was a debt consolidation loan. I have a Cap One auto loan that I've toyed with just paying off because it's high interest and I only owe $7K. But because I had paid and/or closed a bunch of accounts in the last year as part of my credit rebuilding process, I only had a few open TL's thus my file was rather thin. His advice: Keep the Cap One open for another year. Let your other TL's build up a little. Every month it reports as paid on time it's another brick in the foundation, and shows future creditors that you can pay your bills responsibly. I think it was the right move in retrospect. This applies to a specific scenario of course. If I had a gang of open positive TL's then closing one wouldn't have as much effect and I'd dump it to save the interest.

Message Edited by devhip on 05-18-2007 10:28 AM
Moderator Emeritus
fused
Posts: 16,253
Registered: ‎03-12-2007

Re: Consumer Finance Companies



Tuscani wrote:


ilovepizza wrote:
Hmm. If paid and closed, it is good history, which raised your score. Removing it might lower your score and probably will. Personally I would never delete anything with good history. Anything with good history is better for your score. If you have a Consumer Finance Company high interest loan, PAY IT OFF, Close it! While it won't hurt your score, lenders will shy away from you until it is closed. After it is closed, it can only help your score.

It might be your auto loan too falling under finance company, ect installments. Open loans drop scores because they are debt. That simple. Pay it off and score will come up. I have never heard of any installment after being closed dropping a score if it was paid on time. Maybe if someone went to a debt consolidation place and set a fixed payment, but that would fall under something different than Consumer Finance. All closed installments raise scores not drop them regardless of title. If anyone has any documentation to show other wise please msg them to me or post them here.

Message Edited by ilovepizza on 05-18-2007 01:49 AM



I wouldn't agree that "All closed installments raise scores not drop them regardless of title".
Once it becomes a closed account instead of open you can take a score hit.
However, IMO paying off or down on installment loans has no effect on our FICOs. In fact, My brother paid off a car loan after having it for a year. He had $13,000 left on it. EX dropped 50 point... EQ dropped 30 points... and TU 20 points. Believe me FICO loves a good mixture of accounts. Luckily his scores rebounded a few months later so it was short lived!
 


Maybe you can give your insights on this Tuscani.  This raises a very interesting question!  If FICO scoring models/formulas can distinguish btw prime and subprime loans (i.e. consumer finance companies like say citifinancial), shouldn't they able to distinguish btw prime discover or amex cc's versus subprime cc's such as orchard bank or first primere when arriving at a score?  I have read on other threads FICO does not punish someone for having one, some or too many subprime cc's but they do for subprime loans.  Just food for thought
Credit Cards:
Amex BCP 25K ~ Amex Clear 25K ~ Amex Platinum NPSL ~ Chase Freedom Visa 19.3K ~ CITI Dividend World Mastercard 20.3K ~ FIA Fidelity Investments Platinum Plus Visa 40K ~ First Hawaiian Bank Gold Visa 10K
Moderator Emeritus
Tuscani
Posts: 6,182
Registered: ‎03-29-2007

Re: Consumer Finance Companies

The FICO formula does not distinguish between prime/subprime per se. The way it identifies a 'consumer finance' account is through the bureau subscription code -- the lender's ID# at the bureau -- that, among other things, indicates what kind of business it is. (This is also how mortgage and auto inquiries are distinguished from other inquiry types.) I believe the reason why the suggestion above won't work is because the portion of these codes that provide this identification are industrywide and not unique to a particular lender, although a lender typically has multiple subscriber codes for different parts of the business. So, for example, while the score can tell if the lender is considered a consumer finance company, it can't identify a particular product of that lender's as prime/subprime.
Senior Contributor
ilovepizza
Posts: 3,071
Registered: ‎05-17-2007

Re: Consumer Finance Companies

[ Edited ]
Could other installments such as personal misc. loans from a sub prime lender ie, CapOne be be confused as a negative type of account loan?

Message Edited by ilovepizza on 05-23-2007 06:46 AM
If we never set higher goals we would never get as far.
sol, credit 101, acr, abbreviations, calc
Moderator Emeritus
fused
Posts: 16,253
Registered: ‎03-12-2007

Re: Consumer Finance Companies



Tuscani wrote:
The FICO formula does not distinguish between prime/subprime per se. The way it identifies a 'consumer finance' account is through the bureau subscription code -- the lender's ID# at the bureau -- that, among other things, indicates what kind of business it is. (This is also how mortgage and auto inquiries are distinguished from other inquiry types.) I believe the reason why the suggestion above won't work is because the portion of these codes that provide this identification are industrywide and not unique to a particular lender, although a lender typically has multiple subscriber codes for different parts of the business. So, for example, while the score can tell if the lender is considered a consumer finance company, it can't identify a particular product of that lender's as prime/subprime.


Very interesting, how did you find this out?  Personally, do you think it would be fair for consumers if FICO had the capability to distinguish btw prime and subprime for loans and cc's and changed their scoring models accordingly?  For example, reward those who have more prime TL's than those who do not.
Credit Cards:
Amex BCP 25K ~ Amex Clear 25K ~ Amex Platinum NPSL ~ Chase Freedom Visa 19.3K ~ CITI Dividend World Mastercard 20.3K ~ FIA Fidelity Investments Platinum Plus Visa 40K ~ First Hawaiian Bank Gold Visa 10K

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