Understanding FICO® Scoring

[nearlythere]

What kinds of accounts are considered to be consumer finance accounts by FICO?  

I took a peek at the FICO high achievers thread, and wanted to understand what I was reading.

Thank you

[Mustanglvr2006]

---

nearlythere wrote:

What kinds of accounts are considered to be consumer finance accounts by FICO?  

I took a peek at the FICO high achievers thread, and wanted to understand what I was reading.

Thank you

---

The division of retail banking that deals with lending money. This includes a wide variety of loans, including credit cards, mortgage loans, and auto loans etc......

[GregB]

"Consumer Finance Accounts" according to FICO, and probably other scoring systems, are NOT the normal CC, Auto Loans, etc.

Example would be a furniture store might offer a customer the ability to buy $5,000 worth of furniture but the person wouldn't have a CC that could handle that purchase. The furniture store might have an account with a "Consumer Finance Company", like GE Capital. The customer fills out an application that goes to GE Capital. The customer might pay a high interest rate or the store might underwrite part of it so the customer doesn't see the high rate.

Payday loans, and other extremly high interest loans are other examples.

There has been some posts lately about Home Depot card being listed as "consumer finance", including mine. It doesn't seem to quite fit the catagory.

[pizzadude]

---

GregB wrote:

"Consumer Finance Accounts" according to FICO, and probably other scoring systems, are NOT the normal CC, Auto Loans, etc.

Example would be a furniture store might offer a customer the ability to buy $5,000 worth of furniture but the person wouldn't have a CC that could handle that purchase. The furniture store might have an account with a "Consumer Finance Company", like GE Capital. The customer fills out an application that goes to GE Capital. The customer might pay a high interest rate or the store might underwrite part of it so the customer doesn't see the high rate.

Payday loans, and other extremly high interest loans are other examples.

There has been some posts lately about Home Depot card being listed as "consumer finance", including mine. It doesn't seem to quite fit the catagory.

---

+1.   And it is difficult sometimes to know how your accounts are classified, whether they are consumer finance revolving account or revolving accounts can be difficult to determine.

But the good news is that from a FICO scoring perspective, the consumer finance scoring ding is relatively minor.

[Mustanglvr2006]

---

GregB wrote:

"Consumer Finance Accounts" according to FICO, and probably other scoring systems, are NOT the normal CC, Auto Loans, etc.

Example would be a furniture store might offer a customer the ability to buy $5,000 worth of furniture but the person wouldn't have a CC that could handle that purchase. The furniture store might have an account with a "Consumer Finance Company", like GE Capital. The customer fills out an application that goes to GE Capital. The customer might pay a high interest rate or the store might underwrite part of it so the customer doesn't see the high rate.

Payday loans, and other extremly high interest loans are other examples.

There has been some posts lately about Home Depot card being listed as "consumer finance", including mine. It doesn't seem to quite fit the catagory.

---

Great info Greg, thank you for correcting me, I just googled "consumer finance accounts" and that's what I found after sifting through several definitions of CFA's.

I'm sorry to the OP for posting inaccurate info, I hate when I do that, thankfully Greg came in and clarified it for you, and gave you the correct answer.

Again my apologies.

[RobertEG]

"Back in the Day," many consumers, particularly those in rural areas, did not have the ability to credit-shop, so often had to rely on local lendors who often did not offer the best rates and terms.  With the advent of internet home banking, personal access to most creditors can be obtained at home, and thus lower risk consumers can now obtain better terms without the need to go to the creditor.

There is a portion of the credit industry that will grant credit to higher risk consumers, obviously in compensation for higher rates and less favorable terms.

As I understand the negative view of such consumer finance companies, when a consumer chooses to use such creditors, it is no longer viewed as a physical necessity, but rather as an indication that they were unable to secure better terms.

Ergo, the viewing of consumer finance companies as an indication of increased consumer credit risk.

What I dont understand is who classfies accounts as CFCs.  Obiously, using a small lendor can actually result in lower rates and better terms if the consumer uses them wisely.

One can get a low or zero interest rate loan at Sears, for example, to finance that new refrigerator.  While going through a CFC, that does not necessarily indicate a negative consumer risk.  So who pegs creditors with such a designation?

[nearlythere]

Thanks, for the details and background, RobertEG.

[nearlythere]

Thanks, Mustanglvr 2006.   When I first didn't understand the term, I did the whole google thing, too, then figured that my sources were getting too far afield from FICO, so I returned here to post the question.  Thanks again for your help.

[nearlythere]

Much appreciated, Greg B.  Thank you.

[Mustanglvr2006]

---

nearlythere wrote:

Thanks, Mustanglvr 2006.   When I first didn't understand the term, I did the whole google thing, too, then figured that my sources were getting too far afield from FICO, so I returned here to post the question.  Thanks again for your help.

---

You did the right thing by posting your question here, unfortunately I was the first to respond with the wrong answer

But thankfully our experts chimed in and gave you the correct answer.