topic Re: Is Affirm considered Sub Prime? in Personal Finance

Is Affirm considered Sub Prime?

Toastmaster — Fri, 26 Aug 2022 05:23:18 GMT

I see a fantastic way to finance a new computer on Amazon for a ridiculously low rate, but I am worried that Affirm would make my credit profile look bad. I have scores around 760 on all 3 major bureaus. I have 3 cards, Cap One Quicksilver $4800 (Rebuilder, started at $500), Navy Federal Cash Rewards $25,000, and Navy Federal More Rewards $25,000. I also have a new mortgage $144,000 from a few months ago plus $7900 in Student Loans. I just don't want to hurt my credit long term trying to get a great short term deal. Thank you for your insight!

Re: Is Affirm considered Sub Prime?

Hex — Fri, 26 Aug 2022 05:45:41 GMT

I think it reports as a consumer finance account. If so it would probably hurt your scores for many years. Not worth a huge amount of savings in my opinion.

Re: Is Affirm considered Sub Prime?

USMC_Winger — Fri, 26 Aug 2022 07:35:56 GMT

@Toastmaster wrote:
I see a fantastic way to finance a new computer on Amazon for a ridiculously low rate, but I am worried that Affirm would make my credit profile look bad. I have scores around 760 on all 3 major bureaus. I have 3 cards, Cap One Quicksilver $4800 (Rebuilder, started at $500), Navy Federal Cash Rewards $25,000, and Navy Federal More Rewards $25,000. I also have a new mortgage $144,000 from a few months ago plus $7900 in Student Loans. I just don't want to hurt my credit long term trying to get a great short term deal. Thank you for your insight!

If Affirm reports as a consumer finance account (CFA), stay far away. Another MyFICOer reported a gain of about 20 points on her FICO scores when the fully paid-on-time and closed account finally aged off of her CRs 10 years after closure.

Decades ago, I had a really tough time getting credit. It took me 13 years to get my first CC, despite applying every 6 months to a year, even for secured CCs, and having perfect payment histories for a 1-year Navy Fed personal loan, a 1-year auto loan, and a 2-year CFA (for a new computer, coincidentally). The CFA was probably on my CRs for 12 years, making me look like a bad credit risk.

Not worth it.

Re: Is Affirm considered Sub Prime?

Hoben02 — Fri, 26 Aug 2022 10:13:02 GMT

Your credit profile will definitely take a hit. I used affirm to pay over time for my annual ski pass and took a 19 pt hit.

Re: Is Affirm considered Sub Prime?

OmarGB9 — Fri, 26 Aug 2022 13:06:50 GMT

I suppose the exact point loss varies by profile, but yes, in a way, Affirm is viewed as "subprime" by the FICO algorithm since it is considered a "consumer finance account", which is bad.

Re: Is Affirm considered Sub Prime?

SDMarik — Fri, 26 Aug 2022 14:27:47 GMT

Thats interesting, my girlfriend actually financed something on affirm last year, did the 6 month plan. It never reported until after it was paid and closed, and it had zero impact on her score. She has a relatively thin file as well.

Edit: I have done it twice as well, never a HP and never reported until after it was paid. Posted as "installment account" and never impacted my score.

Re: Is Affirm considered Sub Prime?

teekay629 — Fri, 26 Aug 2022 14:26:24 GMT

Just to add, I had used Affirm and it is only on my Experian report and under the same section as my student loans - Account Type: Installment Loans. When I open up the account, it says it is an unsecured loan. I am including a picture of what it looks like. How this is actually affecting, I am not sure. I did it to try since it was when it first became popular, not necessarily needing to go this route. When I first started with them, they did not report so it was not of a concern. Once they did, I stopped using them.

Re: Is Affirm considered Sub Prime?

Bill77 — Fri, 26 Aug 2022 14:50:15 GMT

Looks like this is kind of an evolving thing with the BNPL companies and the credit bureaus:

https://www.cnbc.com/select/bnpl-loans-to-be-reported-on-credit-reports/

Re: Is Affirm considered Sub Prime?

MT64 — Fri, 26 Aug 2022 15:27:02 GMT

Regardless of what it may or may not be considered as, since it seems to be quite subjective on a personal opinion and as noted by others can be drastically different based on your credit profile, history, etc. but why wouldn't you just use one of the cards you already have instead anyway? I don't think their rates are that great unless it's a first time purchase with them, then they may offer crazy low APR? I've used Affirm with no problem for the past 3 years and it only dinged me for an initial HP but bounced back not long after and ever since I've had an on-going revolving amount of credit to use with no noticable affect to my credit.

In the end, I just can't believe that having this type of account is going to seemignly wreck you for 10 or more years, let alone past 6 months. This is coming from someone who has used and continues to use Affirm for multiple little loans since it doesn't hit your utilization, I actually favor it. Currently I have a 12-month Apple loan out with Affirm and 2 other smaller loans with Affirm totalling under $2,000 with a score of 706. I've been utilizing my Discover card quite a bit and have 2 $200 medical baddies, otherwise I'm generally around 763 even with the multiple Affirm loans.

I am curious now though, to see what kind of affect it may or may not have on my credit after the loans are paid off in full and see just how much of a difference it might make. Think my last payment will be end of year and will know shortly after.

Re: Is Affirm considered Sub Prime?

teekay629 — Fri, 26 Aug 2022 16:34:17 GMT

I know a lot of these companies are having deals to use them. So like you can get a 20% discount if used through them. This is if you can not find one elsewhere. Some do offer 0% APR if you qualify.

Re: Is Affirm considered Sub Prime?

TheRedHat — Fri, 26 Aug 2022 16:49:56 GMT

Define "ridiculously low rate." With your score, why not just get a loan from a bank or credit union instead? There are quite a few out there where checking the offered rates would only be a softpull.

Re: Is Affirm considered Sub Prime?

UncleB — Fri, 26 Aug 2022 19:31:14 GMT

@MT64 wrote:
Regardless of what it may or may not be considered as, since it seems to be quite subjective on a personal opinion and as noted by others can be drastically different based on your credit profile, history, etc. but why wouldn't you just use one of the cards you already have instead anyway? I don't think their rates are that great unless it's a first time purchase with them, then they may offer crazy low APR? I've used Affirm with no problem for the past 3 years and it only dinged me for an initial HP but bounced back not long after and ever since I've had an on-going revolving amount of credit to use with no noticable affect to my credit.

In the end, I just can't believe that having this type of account is going to seemignly wreck you for 10 or more years, let alone past 6 months. This is coming from someone who has used and continues to use Affirm for multiple little loans since it doesn't hit your utilization, I actually favor it. Currently I have a 12-month Apple loan out with Affirm and 2 other smaller loans with Affirm totalling under $2,000 with a score of 706. I've been utilizing my Discover card quite a bit and have 2 $200 medical baddies, otherwise I'm generally around 763 even with the multiple Affirm loans.

I am curious now though, to see what kind of affect it may or may not have on my credit after the loans are paid off in full and see just how much of a difference it might make. Think my last payment will be end of year and will know shortly after.

About this part, I don't think anybody has insinuated that an Affirm loan would "wreck" one's credit profile/score, but for some it can have a negative impact. For others, though, it could have a positive impact... it's all profile specific.

In a nut shell, for some people with a strong credit profile who get a loan such as an Affirm Loan they do see a 'ding' on their credit with the reason listed as, "You have a consumer finance account on your credit report." Usually folks will see this reason listed when there are no other negative reasons that apply, so it's not a terrible thing, but it is a thing.

Keep in mind, though, this is profile-specific. For someone with a thinner file or with credit blemishes a CFA could be a positive addition to the credit profile. There's much more chatter about this over in Understanding FICO Scoring (and people there are much more articulate than I am with explaining the nitty-gritty).

Re: Is Affirm considered Sub Prime?

Lou-natic — Thu, 01 Sep 2022 07:40:31 GMT

Not long ago I did a prequal with Chrysler Financial (It wasn't super serious but I was looking at a Wrangler) and they declined it because of "too many consumer finance accounts".

I had exactly one.

Paid off in 2018 and have 0 derogs listed anywhere in my reports. I used it to buy a new laptop before I knew any better.

Honestly if I could dispute that account and have it removed I gladly would. At the time I had a very thin file and I thought it would help me but I have since discovered that it hurts more than helps. The only redeeming thing about it is that they only report to Experian. When I got the loan I complained that they didn't report to all 3 bureaus thinking it would help me more. Now Experian is my lowest credit score (going by F8 for this) and they all have identical profiles except for that one CFA on experian...EQ and TU are always within just a few points of each other and in fact only 1 point off from each other right now. EX is 17 points lower. I don't think it's a coincidence.

Re: Is Affirm considered Sub Prime?

Toastmaster — Fri, 02 Sep 2022 02:03:56 GMT

Wow....thank you EVERYONE for your insight. I will definetly pass for now. Appreciate you!

Re: Is Affirm considered Sub Prime?

teekay629 — Sun, 04 Sep 2022 20:27:00 GMT

@Lou-natic wrote:
Not long ago I did a prequal with Chrysler Financial (It wasn't super serious but I was looking at a Wrangler) and they declined it because of "too many consumer finance accounts".

I had exactly one.

Paid off in 2018 and have 0 derogs listed anywhere in my reports. I used it to buy a new laptop before I knew any better.
Honestly if I could dispute that account and have it removed I gladly would. At the time I had a very thin file and I thought it would help me but I have since discovered that it hurts more than helps. The only redeeming thing about it is that they only report to Experian. When I got the loan I complained that they didn't report to all 3 bureaus thinking it would help me more. Now Experian is my lowest credit score (going by F8 for this) and they all have identical profiles except for that one CFA on experian...EQ and TU are always within just a few points of each other and in fact only 1 point off from each other right now. EX is 17 points lower. I don't think it's a coincidence.

This is so interesting to me since I used Affirm so it is on my Experian report and Experian is mu highest score! These things are really all over the place sometimes.