12-15-2009 03:47 AM
I'm sure this is an accurate statement about lenders' view of "consumer finance companies" ...
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.
... but I think a lot of people get into loans of this type for reasons other than having poor credit histories. CFCs are also commonly the lenders that contract with small retailers for the "no interest until 2020!" type promotions. Big companies have their own credit operations for this purpose, but smaller ones often don't. So you might easily be able to pay for that monster TV or cushy couch on your regular CC, but take the no-interest offer anyway, on the theory that if you can borrow money at no interest, you should. That was my attitude at one time. And if you don't read the paperwork carefully (which you should, of course) or think about what you're doing (ditto), you could easily find yourself in a CFC loan.
11-26-2012 03:40 PM
Just my two cents, I've been trying like crazy the past 6 months to get get my score up just 5 points to get into the best mortage rates with little success. My report is spotless, my use of unsecured credit at 1%, and I only have a car payment at the credit union. Amongst other revolving credit cards (Amex, chase, zero balance) I also have an HSBC card. It only had with a $200 balance with a low rate, so I figured I'd pay that off last. What I found out according to MyFico after paying it off, was it was considered a 'CFC'. My score went up 22 points!! Reasons my score changed from MyFico?...'your consumer finance account is not hurting your score as much as before'. Keep in mind that I've never been late on any account, but bringing this account to $0 gave me a 22 point bump. Go figure...
11-27-2012 07:06 PM
I agree with Tuscani. FICO can tell by the industry code that is a part of subcriber code that reports the trade line. For example the Equifax subscriber code 999AA99999 the two alpha characters are te industry code of the subscriber.