Unsecured Installment Loan versus Consumer Finance

[Anonymous]

Hi There,

I have taken a total of four installment loans over the course of the last 18 months or so (super responsible and practical...right?).  These were from a few different sources, and I see different classifications among the three bureaus and am hoping to understand how they might impact my score negatively, and further how that negativity would diminish over time.

The first (Jan07) was a "note loan" from CashCall -- big mistake.  (paid and closed 9 months ago)

The second (Sep07) is from HSBC Credit Center (still open)

The third (Dec07) was from my bank (CitiBank...NOT from CitiFinancial) which was closed/refinanced in March into the fourth, largest so far, also from CitiBank (still open)

The report obtained by FairIsaac from Equifax gives me a negative reason factor of having many CF accounts (3 of them)...but the only one or potentially two that I was under the impression would meet the definition of CF would be the first and second.  Am I wrong?  Would paying/closing these with cash from another source, probably my 401(k)...not consumer credit...have any positive impact on my score?

Thanks,

Sean

[fused]

CFLs (consumer finance loans) will ding your scores a little bit. Keep them open and pay on time. Paying on time, no matter what type of loan it is, is the most important thing you can do to help your scores. Borrowing on a 401K just to pay the CFLs off is a very bad move and it will cost you money.

[Anonymous]

Now that I look, it was the #4 factor, so I guess it is more marginal.  Do you know whether any unsecured installment loan is considered by FICO (any of the bureau scores...not just Equifax) as a CF account? 

[fused]

---

tkmn21 wrote:

Now that I look, it was the #4 factor, so I guess it is more marginal.  Do you know whether any unsecured installment loan is considered by FICO (any of the bureau scores...not just Equifax) as a CF account? 

---

Yes! CFL and non-CFL installments are coded one way or the other. An unsecured loan with CITI bank will not be coded as a CFL, while an unsecured loan with CITIbank Financial will.

[Anonymous]

I got hit with incorrect coding. The lender is best at recoding it. With me the CRAs never got it right. They just changed the memo title and not the code.

[Anonymous]

Under "Type of Account" would it say instead of "Installment Loan" something like "Consumer Finance Loan"? Because I had a CitiFinancial account that listed as Installment Loan.

[haulingthescoreup]

They never display as a CFL. But they're coded in such a way that lenders can tell, and the scoring formula can tell.

Really, if you've got some on your reports, you just shrug and go on. But if you need a new loan, get one from a CU or an actual bank if you can. Just something to be aware of for the future.

[Anonymous]

Well, that's too bad. I didn't (before reading these boards) even consider the loan from them would be potentially a negative. I didn't even need the loan. I just needed some payment history on installment loans for variety since I'd had none (other than a student loan). Plus, the interest rate was so low that it wasn't a big deal (if it had been subprime high I would have figured something was up but I wasn't familiar that this was their niche back then). Well, I'd expect at worst it's not having a negative effect now, given the always positive payment history. It just might not be a positive....

[haulingthescoreup]

I whine repeatedly at poor Barry about the CFL ding (dinglet would be more correct), and he always patiently replies that the good payment history on a CFL carries far more weight than the dinglet.

From what I can see, it's almost good to get the "too many CFL's" comment. It generally means that the scoring formula is running out of real issues to carp about.

[fused]

---

haulingthescoreup wrote: 

From what I can see, it's almost good to get the "too many CFL's" comment. It generally means that the scoring formula is running out of real issues to carp about.

---

True, very true unless your FICOs are 800+