There's a lot of debate about whether or not loans from companies like Prosper and Lending Club are a negative when it comes to Fico scoring. They are. See where these state "You have a consumer finance account on your credit report" under negative factors? That's a Lending Club loan.
CFA's have always been on the bottom of the installment pyramid sort of like store cards on the revolving side; however, it's hardly a major ding.
If the interest rate makes sense, finances > FICO. While I am not a fan of doing suboptimal things FICO wise, in this case if a loan is required for XYZ, assuming XYZ is a good reason, the FICO implications of such should realistically be ignored.
@Anonymous wrote:I agree, the ding is pretty minor. So I look at it this way. If the loan is done to pay off credit cards, reduce excessive utilization, and get a better APR than it's absolutely worth the minor ding. Ideally, a consolidation loan from a traditional bank would be the best option but for many, (myself included), a traditional bank is frequently not an option.
If personal loans from the traditional lending solutions were options, the P2P lending space never would've come to be; the fact P2P has gotten so large really demonstrates the gaping hole that was in the market.
Several of the top 5 financial institutions just don't do personal loans at all, and those that do, well, UW standards may well be above 760 there for all that they're basically unobtainable by mortals. It's not like LC/Propser are lending to the subprime strata even, I've seen the FICO scores and snippets of information from someone's credit report on LC as an investor... and I know there's some companies with big pockets that are basically buying whole loans off the site, and I think that likely includes said traditional lending companies too.
@Anonymous wrote:Thanks for sharing this.
Do you have the before and after pulls to show the impact of this adding the consumer finance account?
Yes, however it doesn't paint an accurate picture because my file has been very active with new accounts and new inquiries that have negatively impacted my scores. So, take this with a grain of salt.
That's strange; the second one was the before pull? You gained points on some models, mix of credit from installment loan or installment utilization if you reindeer gamed it on FICO 8?
@Revelate wrote:That's strange; the second one was the before pull? You gained points on some models, mix of credit from installment loan or installment utilization if you reindeer gamed it on FICO 8?
The second one is before my Lending Club loan was reporting. Fico 8 at that time was 805. Fico 8 at the time of the first one, (yesterday), is 816. Both include my smaller secured installment loan. In the first one I posted that loan is paid way down from $2050 to $101. In the second one, it was at about 50%.
Weirdsauce; any thoughts why the auto-enhanced scores specifically were higher? Having the second open installment loan for mix of credit maybe?
Your 04 classic score took something of a beating between AAOA change and inquiries presumably in addition to any potential CFA penalty.