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Established Contributor
Posts: 557
Registered: ‎10-07-2007
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Consumer Finance Loans

As I continue to read here, I am curious about the CFL issues.  Years ago, when we knew nothing about our credit reports or FICO scoring, we did periodically use store offered CFLs ... not having any idea that they could negatively impact our credit.  Each time we did so, we had the cash to pay for the purchases, but used their 0% financing instead of losing interest on money in the bank.  We also could have easily obtained personal loans through our CU ... just not 0% loans.
 
As we educate our children about the wise use of credit, this is something we need to discourage them from?  Obtaining a 0% loan and paying it off before the date the finance charges start hitting them?  Even when we do that ... it is still bad???  I never realized that as consumers, we needed to evaluate the status of our lender and how THEY could be a risk for us instead of the other way around.  :smileysad:
 
 
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Registered: ‎03-12-2007
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Re: Consumer Finance Loans



denbar2003 wrote:
As I continue to read here, I am curious about the CFL issues.  Years ago, when we knew nothing about our credit reports or FICO scoring, we did periodically use store offered CFLs ... not having any idea that they could negatively impact our credit.  Each time we did so, we had the cash to pay for the purchases, but used their 0% financing instead of losing interest on money in the bank.  We also could have easily obtained personal loans through our CU ... just not 0% loans.
 
As we educate our children about the wise use of credit, this is something we need to discourage them from?  Obtaining a 0% loan and paying it off before the date the finance charges start hitting them?  Even when we do that ... it is still bad???  I never realized that as consumers, we needed to evaluate the status of our lender and how THEY could be a risk for us instead of the other way around.  :smileysad:
 
 


FICO scoring does punish those with CFL TLs but not sub-prime CC TLs. Considering revolving accounts carry considerably more weight in scoring, you would think this would be the other way around. This is one aspect of FICO scoring that baffles me...it also irritates me.
 
That said, don't fret. It's better to have CFL TLs in good standing than not having any positive installment accounts on your reports.
Credit Profile -
FICO 08 Scores (03-26-2015): EQ 814, EX 817, TU 822
All three scores were 850. Lost points for not having an open installment TL. So, BE WARNED!!!!!
Credit History: 26 years ~ AAoA: 13 years ~ Util: 1% ~ Inqs: EX 1, EQ 1

Credit Cards: Amex BCP ~ Amex Clear ~ Amex Platinum ~ Barclay Ring Mastercard ~ Chase Freedom Visa ~ CITI Dividend Platinum World Mastercard ~ FIA Fidelity Investment Platinum Visa ~ First Hawaiian Bank Gold Visa
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Registered: ‎08-04-2007
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Re: Consumer Finance Loans

I was offered one last week from Citi. I really don't have any debt, but thought it might be a good idea to take the offer of $6k and get a secured card somewhere. I decided to hold off and I read on these boards and elsewhere that you could take a hit to your scores by having a CFL. Some folks even cited a hit to their scores after accepting the loan from Citibank. It seems unfair, but maybe FICO is lumping a CFL in the same category as a payday loan.
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Registered: ‎04-01-2007
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Re: Consumer Finance Loans

I would STILL like to know how exactly one determines if a loan is a consumer finance loan, and if all the powers that be define them the same way. Pretty obviously, the Wells Fargo Finance offer that came in the mail (and was gladly taken) a couple of years ago was a CFL, but signature loans from a credit union? Free financing from a furniture store? What is the precise definition?

And how exactly are they "penalized?" Maybe they're not so much penalized as not given equal weight with car loans and mortgages, similar to store and gas cards not having as much oomph in scoring as do the Big Four credit cards.
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Moderator Emeritus
Posts: 16,375
Registered: ‎03-12-2007
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Re: Consumer Finance Loans



haulingthescoreup wrote:
I would STILL like to know how exactly one determines if a loan is a consumer finance loan, and if all the powers that be define them the same way. Pretty obviously, the Wells Fargo Finance offer that came in the mail (and was gladly taken) a couple of years ago was a CFL, but signature loans from a credit union? Free financing from a furniture store? What is the precise definition?

And how exactly are they "penalized?" Maybe they're not so much penalized as not given equal weight with car loans and mortgages, similar to store and gas cards not having as much oomph in scoring as do the Big Four credit cards.

Rather any of these loans report as a CFL will depend on how it's coded. "Payday loans" and a lot of furniture loans are CFLs and will probably report as one. Here are some keys to help identitfy a CFL.
 
Look for the word financial with the loan company. Here are some examples:
 
Wells Fargo = Prime, Wells Fargo Financial = sub-prime (a CFL)
CITI Bank = Prime, CITI Financial = sub-prime (a CFL)
High interest rates are another sign obviously.
 
But again it's how it's coded that matters. It's certainly possible to have a true CFL not coded as one on a report.

Credit Profile -
FICO 08 Scores (03-26-2015): EQ 814, EX 817, TU 822
All three scores were 850. Lost points for not having an open installment TL. So, BE WARNED!!!!!
Credit History: 26 years ~ AAoA: 13 years ~ Util: 1% ~ Inqs: EX 1, EQ 1

Credit Cards: Amex BCP ~ Amex Clear ~ Amex Platinum ~ Barclay Ring Mastercard ~ Chase Freedom Visa ~ CITI Dividend Platinum World Mastercard ~ FIA Fidelity Investment Platinum Visa ~ First Hawaiian Bank Gold Visa
Established Contributor
Posts: 557
Registered: ‎10-07-2007
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Re: Consumer Finance Loans

Wouldn't it be nice if these credit reports would show us clearly how our lenders are truly "coded."  If we knew the "status" of a prospective lender we might truly think twice before we accepted that 0% financing offer. 
 
The last time we did that, we were stuck with a Transouth Financial installment loan (that we paid off in three months) because the family owned carpet store talked us into it.  We were going to pay cash, but they begged us to sign up for this ... some perk for them. We actually were so nervous about dealing with Transouth, that we paid them off in three months.  I haven't checked my DH's reports yet, but that one should have dropped off last spring (doesn't show on my reports because it was set up as an "individual" account.)
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