Understanding FICO® Scoring

[freecredit]

What are the implications of signing up for financing with retailers? For example, buying a $2000 Dell through the company website and receiving an offer such as 12 months 0% APR. Or furniture stores or anything like that.

I am NOT referring to simply signing up for retail credit cards to save xx% at the time of purchase. I'm talking about financing a major purchase through the retail at the time of the purchase.

And obviously I would not be buying something I could not afford, every monthly payment would be made and the balance would be paid off before the end of the promotional term.

[cheddar]

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freecredit wrote:
What are the implications of signing up for financing with retailers? For example, buying a $2000 Dell through the company website and receiving an offer such as 12 months 0% APR. Or furniture stores or anything like that.

I am NOT referring to simply signing up for retail credit cards to save xx% at the time of purchase. I'm talking about financing a major purchase through the retail at the time of the purchase.

And obviously I would not be buying something I could not afford, every monthly payment would be made and the balance would be paid off before the end of the promotional term.

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Many retail installment loans, particularly for furniture and the like, are classified by FICO as "Consumer Finance Loans."  FICO hates CFLs, and will ding you a few points if you have even one of them on your reports.

Otherwise, for non-CFL promotional offers, the effect would be the same as opening any new account.  There will be an inquiry, a new account, and a reaging of your file, all of which will have a small temporary negative effect.

FICO doesn't know and doesn't care about the APR on your accounts or the fact that you are taking advantage of a promotional rate.  This is one of those many cases where what's good for your score is not necessarily good for your wallet, and vice versa.

[freecredit]

How would I know if what I am being offered is a CFL or not?

Also, is billmelater a good or bad program, according to FICO?

[cheddar]

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freecredit wrote:
How would I know if what I am being offered is a CFL or not?

Also, is billmelater a good or bad program, according to FICO?

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Unfortunately, you can't always know.  In general, though:

1) If it's revolving, it's not a CFL.  The CFL designation applies only to installment loans.

2) If the lender has the word financial in its name, it's more likely to be a CFL.

For example, Wells Fargo Financial vs. Wells Fargo, and Citifinancial vs. Citi.

Wells Fargo Financial is the "subprime" arm of Wells Fargo.

As far as BillMeLater, I don't think it's any different than any other revolving account.  Is that the one issued by CIT?

Message Edited by cheddar on 02-27-2008 07:22 AM

[MidnightVoice]

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cheddar wrote:

As far as BillMeLater, I don't think it's any different than any other revolving account.  Is that the one issued by CIT?

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Does BillMeLater do a hard pull every time you use it?

[cheddar]

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MidnightVoice wrote:

Does BillMeLater do a hard pull every time you use it?

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No way!  Does it really?

WTH?

[MidnightVoice]

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cheddar wrote:

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MidnightVoice wrote:

Does BillMeLater do a hard pull every time you use it?

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No way!  Does it really?

WTH?

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I don't know - that is wht I asked

[MidnightVoice]

Maybe just one:

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annaz wrote:

I've been using BillMeLater for about 3 years now.  They only did a hard pull for me the 1st time I used it.  Every other time I have used it (last time was just a few days ago) they just do a soft pull to make sure that my credit didn't change drastically.  Basically if you're approved the 1st time you try to use it, you will be approved for all future transactions unless your scores drop dramatically (say from 700 to 600).  It's not exactly a credit account in that it does NOT show up on any of the CRs.  And there is no pre-set credit limit, but if you read the explanation BillMeLater gives on their website, they determine how much credit they'll give you when they do a soft pull for each transaction. 

This is all from personal experience, and maybe they haven't done any hard pulls (except the initial one) since I use this account a lot, but I thought it might be helpful info for other people.

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[1111mel]

Once upon a time I bought a vehicle with 0% interest for 48 months and was so excited....It was supposed to be financed through Mitsubishi's credit company, but a few days after I bought the car I got a nice letter from *** Financial advising me they bought out my loan and I would make my payments through them....so all of the sudden instead of the $30,000 Car Installment loan on my credit it looked like I took out a $30K cash loan instead

Be careful!  In reading a lot through MyFico I found one person that says this is a common practice when low apr offers are given......

[hazelhedge]

I have a dispute about an auto-charge on my Chase Visa account.  I don't use the card, and was unaware of the charge until it became delinquent for 4 months.  After I talked with them, they agreed to "re-age" the account immediately and send me a letter verifying this.  I also paid it off even though I am disputing it.  Will this repair the damage to my credit score?  If so, how long will it take before it affects my credit score?  My credit is otherwise very good.  Thank you in advance for your help.

Vicki