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Registered: ‎10-17-2014
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How do zero % accounts report for furniture and such?

Looking at buying some furniture and going to take advantage of the zero % financing they are offering.  So besides the obvious this will be a HP how do these type of accounts show up on credit reports?



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Re: How do zero % accounts report for furniture and such?


MissingCalifornia wrote:

Looking at buying some furniture and going to take advantage of the zero % financing they are offering.  So besides the obvious this will be a HP how do these type of accounts show up on credit reports?


They show up as installment loans from consumer finance agencies, with 100% utilization.

 

Not good.

 

It will be a short term loss from having an installment loan with 100% utilization.

 

And it is widely believed that consumer finance agency loans are treated worse than bank and credit union loans by the FICO algorithms.

 

 


FICO8 EQ 782 TU 804 EX 787 FICO5 EQ 722 Total revolving 395000
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Re: How do zero % accounts report for furniture and such?

They are typically tagged as something called Finance Company accounts.  The mere appearance of an FC account on your report harms your FICO score, even if you make perfect payments.  In this sense they are very different from other kinds of installment accounts or credit cards.

 

FC accounts are opened typically when a person sees an awesome dining room set at Rooms To Go, or a greater washer/dryer at Lowes, or a huge home theater system at Best Buy, or a sweet power laptop at Dell.  He doesn't want to buy it with his credit card and doesn't have the money to pay for it (typically any of it).  So the merchant explains that the merchant can get him a special "financing" offer, often at 0% with no payments due for a while.  The company that the merchant gets to provide this financing is called a Finance Company.

 

If the situations I describe above sound kinda like what yours might be, then the safest thing to do is to assume it will be tagged as an FC account and that it will therefore harm your score.  Is it certain to be tagged as an FC account?   No.  But it it is safest to assume it will be.

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Re: How do zero % accounts report for furniture and such?

YIKES!  Should I stay away because of how those accounts are profiled?  I do not lack the cash to pay for any of this but figured why burn cash if I can get it at zero %.

 

Hiow bad of a hit might I be looking at (ballpark obviously).  Right now all score are mid 770's.



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Re: How do zero % accounts report for furniture and such?

Pay cash.   Suppose the furniture costs $2000 and you pay it off in two years.  You will be saving the average amount ($1000) you would have had if you kept that principal in a high interest savings account (current rates are at 1%).  Thus $20 total, except that you'd then pay taxes on the $20.  So maybe $14?

 

If you'd like to harm your score for 12 years in order to get $14, then it is a good deal.  I am guessing that's not how you feel about it.

 

Remember that, although FC accounts do indeed harm your score, they are not classified as a negative the way a late is.  Thus the FC account will stay on your report for 10 years after if closes, rather than 7.  That's why I suggested that you'd be purchasing 12 years of harm for $14.

 

Another person (a newcomer to the Forums) described recently how he ran up a lot of debt on a 0% card because, you know, Zero Percent And Stuff.  He got hit with some fine print and is now paying a lot in fines and interest.  In an economy where the best savings accounts are earning close to zero, a zero percent "offer" is almost never a good deal.  Even when it works out perfectly, you are making less profit than one dinner at Applebees.

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Re: How do zero % accounts report for furniture and such?


MissingCalifornia wrote:

YIKES!  Should I stay away because of how those accounts are profiled?  I do not lack the cash to pay for any of this but figured why burn cash if I can get it at zero %.

 

Hiow bad of a hit might I be looking at (ballpark obviously).  Right now all score are mid 770's.


Yes, stay away.

 

I don't know how much of a hit you would take.

 

 


FICO8 EQ 782 TU 804 EX 787 FICO5 EQ 722 Total revolving 395000
Valued Contributor
Posts: 1,434
Registered: ‎03-22-2012

Re: How do zero % accounts report for furniture and such?


MissingCalifornia wrote:

YIKES!  Should I stay away because of how those accounts are profiled?  I do not lack the cash to pay for any of this but figured why burn cash if I can get it at zero %.

 

Hiow bad of a hit might I be looking at (ballpark obviously).  Right now all score are mid 770's.


Your scores are great so you should do what I did. I just closed on a house and want to buy some new furniture for it. I have the cash to pay for it but why should I pay cash when somebody is willing to give me a 0% APR card?

 

Good cards for this are:

 

Citi Diamond Preffered: 0% APR for 21 months

Discover IT and Discover Miles: 0% APR for 14 months

AMEX Blue Cash Everyday: 0% APR for 12 months


Starting Score: EQ 653 6/21/12
Current Score: EQ 738 8/5/16 - EX 828 8/5/16 - TU 739 8/5/16
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Re: How do zero % accounts report for furniture and such?

Is there a simple way to tell if a FC account is coded as such?

 

I financed some furniture back in 2013 and paid it off during the 0% period in 2014.  When looking at the closed account via 2 different monitoring services, I see two different things.  CCT lists the account type as "unknown" where CK states "credit card" so there's definitely an inconsistency there.  I suppose I could take a look at a real hard copy of my credit report and see what that says.  I never considered that the presence of this account even though closed/PIF could be adversely impacting my scores based on it's type.

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Re: How do zero % accounts report for furniture and such?


BrutalBodyShots wrote:

Is there a simple way to tell if a FC account is coded as such?

 

I financed some furniture back in 2013 and paid it off during the 0% period in 2014.  When looking at the closed account via 2 different monitoring services, I see two different things.  CCT lists the account type as "unknown" where CK states "credit card" so there's definitely an inconsistency there.  I suppose I could take a look at a real hard copy of my credit report and see what that says.  I never considered that the presence of this account even though closed/PIF could be adversely impacting my scores based on it's type.


Yep, the Finance Company hit is a very poorly publicized part of FICO's algorithm.  Some arcane tips/tricks I don't object to being obscure, since they can be easily fixed (e.g. avoid all cards at $0).  But once you add an FC account, it's on there for a long time: ten years post closing. 

 

My feeling is that, now that there are ways to get free copies of one's reports (for all three bureaus) at least as often as once per month, there's no longer a reason to be stingy about pulling your true full blown reports via ACR (annualCreditReport.com).  If you haven't done an ACR pull in 366 days, I'd do that, at least on EQ and/or TU (so you can compare it to Karma and CCT).  And if you sign up with Experian for their free monthly EX report, that will give you another source of EX reports data.

 

In theory an FC account should have a tag on it that says FC, but I can't promise that all tags are visible for even ACR reports.  Even with an ACR report, you are still seeing a "high-level" interpretation of the data in the report, designed to be intelligible to an ordinary consumer.  Not every single field is listed, I am told.

 

Do you remember whether the account was indeed a credit card of some sort, as Karma claims?  If so, that reduces the chance that it was tagged as an FC account.

 

Certainly the major credit card products that Jamie just mentioned (with 0% intro offers) are not FC accounts.

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Re: How do zero % accounts report for furniture and such?


CreditGuyInDixie wrote:

BrutalBodyShots wrote:

Is there a simple way to tell if a FC account is coded as such?

 

I financed some furniture back in 2013 and paid it off during the 0% period in 2014.  When looking at the closed account via 2 different monitoring services, I see two different things.  CCT lists the account type as "unknown" where CK states "credit card" so there's definitely an inconsistency there.  I suppose I could take a look at a real hard copy of my credit report and see what that says.  I never considered that the presence of this account even though closed/PIF could be adversely impacting my scores based on it's type.


Yep, the Finance Company hit is a very poorly publicized part of FICO's algorithm.  Some arcane tips/tricks I don't object to being obscure, since they can be easily fixed (e.g. avoid all cards at $0).  But once you add an FC account, it's on there for a long time: ten years post closing. 

 

My feeling is that, now that there are ways to get free copies of one's reports (for all three bureaus) at least as often as once per month, there's no longer a reason to be stingy about pulling your true full blown reports via ACR (annualCreditReport.com).  If you haven't done an ACR pull in 366 days, I'd do that, at least on EQ and/or TU (so you can compare it to Karma and CCT).  And if you sign up with Experian for their free monthly EX report, that will give you another source of EX reports data.

 

In theory an FC account should have a tag on it that says FC, but I can't promise that all tags are visible for even ACR reports.  Even with an ACR report, you are still seeing a "high-level" interpretation of the data in the report, designed to be intelligible to an ordinary consumer.  Not every single field is listed, I am told.

 

Do you remember whether the account was indeed a credit card of some sort, as Karma claims?  If so, that reduces the chance that it was tagged as an FC account.

 

Certainly the major credit card products that Jamie just mentioned (with 0% intro offers) are not FC accounts.


Curious question for those that can clarify.  I have confirmed that the furniture company I am looking to buy from uses Wells Fargo for its 0% deal.  Would this possibly help to make sure it is not flagged as an FC account/trade?



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