topic Re: How bad are consumer finance accounts really? in Understanding FICO® Scoring

How bad are consumer finance accounts really?

EaglesFan2006 — Tue, 06 Jul 2021 23:19:50 GMT

I got two personal loans last year to consolidate debt. It's going well for me and I'm sticking to my plan. So much so that I don't obsess about every day. Score is up and I'm happy about that.

that said I saw on my Barclays score alert that one of the negatives is "too many consumer finance accounts". I didn't realize they were reporting as such. Now I don't plan on seeking any credit for a few years, and these two loans would be paid off well before then. However, how bad is the impact that they're on there? Will they sting me down the road for ever even having one?

Re: How bad are consumer finance accounts really?

Brian_Earl_Spilner — Wed, 07 Jul 2021 00:41:52 GMT

Nobody knows. Sometimes it's really difficult to pin down what account is a CFA. Then you have lenders like Honda and Toyota whose financing shows up as a CFA. From what I've seen, it doesn't appear to drag down your score much. Issue is more with lenders on a manual review who see them. Even then, it seems to be a non-issue for most.

Re: How bad are consumer finance accounts really?

Anonymous — Wed, 07 Jul 2021 02:19:22 GMT

@EaglesFan2006 wrote:
I got two personal loans last year to consolidate debt. It's going well for me and I'm sticking to my plan. So much so that I don't obsess about every day. Score is up and I'm happy about that.

that said I saw on my Barclays score alert that one of the negatives is "too many consumer finance accounts". I didn't realize they were reporting as such. Now I don't plan on seeking any credit for a few years, and these two loans would be paid off well before then. However, how bad is the impact that they're on there? Will they sting me down the road for ever even having one?

I know my Lending Club unsecured loan is the reason for my Discover CLI denial. they told me that in writing. Now after seeing your post I went on the Barclays site to check my two credit card score cards. I am in shock, you are correct, my FICO on Barclay's is 786 yet my Lending Club loan is considered a negative just as you posted. The only good thing is that my loan only has about 8 payments left. But once it is paid off I am sure they will find something else that they do not like. LOL. My Lending Club loan is on auto debit each month so I have never been late and it does show as excellent, however, Discover does not think so LOL

Thanks

Mark

Re: How bad are consumer finance accounts really?

Hex — Wed, 07 Jul 2021 03:25:55 GMT

The consumer finance account score penalty will remain as long as the account continues to be reported. About 10 years after the account is closed.

Re: How bad are consumer finance accounts really?

Anonymous — Wed, 07 Jul 2021 04:39:18 GMT

@EaglesFan2006 wrote:
I got two personal loans last year to consolidate debt. It's going well for me and I'm sticking to my plan. So much so that I don't obsess about every day. Score is up and I'm happy about that.

that said I saw on my Barclays score alert that one of the negatives is "too many consumer finance accounts". I didn't realize they were reporting as such. Now I don't plan on seeking any credit for a few years, and these two loans would be paid off well before then. However, how bad is the impact that they're on there? Will they sting me down the road for ever even having one?

It may be negligble for some, but for both me and my SO on dirty scorecards, it was significant.

We both had our CFAs (student loans, mind you) age off 10 years post last update. These were not negative accounrs for either of us, they were completely positive and some of our oldest accounts, so it dropped both of our avergae age of accounts quite significantly, which almost certainly should have lowered both our scores, but it did not!

I had 4 such CFA accounts age off and I gained 19-22pts in my scores

My SO had 2 such CFA accounts age off and he gained upwards of 34-40+ pts in his scores!

Those are just the points we gained and there is no way to tell how many points we were penalized for AAoA going down, so it vould be even more significant.

For us, that is significant. It may only be a few points on clean score cards, we dont really know, first off CFAs may be hard to determine since it depends on the coding of the account and no way to readily determine except if the negative reason code comes up. Second, you have to wait 10 years post closing of these account (or 10 years post last update, depending on bureau) to see such changes and it would have to be your only or last CFA(s) aging off.

Re: How bad are consumer finance accounts really?

sarge12 — Wed, 07 Jul 2021 04:53:44 GMT

@Brian_Earl_Spilner wrote:
Nobody knows. Sometimes it's really difficult to pin down what account is a CFA. Then you have lenders like Honda and Toyota whose financing shows up as a CFA. From what I've seen, it doesn't appear to drag down your score much. Issue is more with lenders on a manual review who see them. Even then, it seems to be a non-issue for most.

From personal experience, it affects mortgage scores mainly. American Honda Finance showed as a negative on my mortgage scores for 10 years, in spite of the fact I only actually had the loan for 1 day. I re-financed the day after buying my Goldwing to get a better rate from my credit union. I can't attribute all the lower scores to that alone, but my fico scores used in mortgages were about 50 points lower than fico 08 scores. They are still lower, even after falling off the report, but are closer now than they were then FWIW.

Re: How bad are consumer finance accounts really?

sarge12 — Wed, 07 Jul 2021 05:13:37 GMT

@Hex wrote:
The consumer finance account score penalty will remain as long as the account continues to be reported. About 10 years after the account is closed.

Even though that might seem unfair, and it does, I can vouch for that fact. The fact that it is on the report is seen as a negative for as long as it remains on the report, so it being paid off does not even keep it from being a negative. It is only the amount it might be harmful that is in doubt. I do not think it affects fico 08 scores any more than any loan does, but showed on my mortgage scores as a negative for the full 10 years. Don't mis-interpret that, it is not a negative that will be as harmful as delinquincies, BK, or public records, but as far as I could tell, it is worse than an inquiry.

Re: How bad are consumer finance accounts really?

Hex — Wed, 07 Jul 2021 06:03:24 GMT

@sarge12

I know it's not considered a negative that's why I said it usually takes 10 years to go away. It is unfair (and should be illegal) because people are never warned that they are applying for a CFA account and it will lower their scores for up to ten years. I've heard it happens to people with fantastic credit who unwittingly take 0% car loans from the manufacturer. These people qualify for these loans because they have great credit and then the very same loans damage their credit for a decade. The only other penalty I know of that lasts that long is a chapter 7 bankruptcy. It's a pretty crappy deal if you ask me. At least a "bad" account penalty goes away after 7 years. I've never had a CFA but only because I was lucky before I found this site. Most people who have CFA's have never heard of CFA's or myFICO and they get screwed by this. I'm sure lenders love it. Lower scores without genuine increase risk = more profit.

Re: How bad are consumer finance accounts really?

Anonymous — Wed, 07 Jul 2021 06:18:04 GMT

@Hex wrote:
@sarge12
I know it's not considered a negative that's why I said it usually takes 10 years to go away. It is unfair (and should be illegal) because people are never warned that they are applying for a CFA account and it will lower their scores for up to ten years. I've heard it happens to people with fantastic credit who unwittingly take 0% car loans from the manufacturer. These people qualify for these loans because they have great credit and then the very same loans damage their credit for a decade. The only other penalty I know of that lasts that long is a chapter 7 bankruptcy. It's a pretty crappy deal if you ask me. At least a "bad" account penalty goes away after 7 years. I've never had a CFA but only because I was lucky before I found this site. Most people who have CFA's have never heard of CFA's or myFICO and they get screwed by this. I'm sure lenders love it. Lower scores without genuine increase risk = more profit.

To make it worse, it is 10 years *after* it is closed or last updates! Imagine having a 6 or 7 year loan or, like myself and my SO, SLs that are repayment upwards of 10-15+ years and then tack on an extra 10 years?

Some of us do have these accounts on our credit reports upwards of 20+/- years! I know I got my first CFA SL (the ones that aged off) in 2002, so yeah, almost 20 years I was pinged for them!

Re: How bad are consumer finance accounts really?

sarge12 — Wed, 07 Jul 2021 06:25:24 GMT

For the sake of clarity, I will state the only place I have seen the negative reason codes for a CFA are on the earlier fico versions of fico used for mortgages or auto loans maybe. Due to the fact that my fico 8 scores were over 800 during this decade, I do not think it affects fico 8 scores in the same way. I think the negative reason codes being absent, and my scores not dropping significantly in fico 08 is evidence of that. I can not factually state that the lack of the negative reason code in fico 08 proves that it does not affect that score more than other loans, but I believe that to be true. Perhaps others will chime in...has anyone here seen it as a reason code in fico 08?

Re: How bad are consumer finance accounts really?

EaglesFan2006 — Wed, 07 Jul 2021 12:08:21 GMT

@sarge12 wrote:
For the sake of clarity, I will state the only place I have seen the negative reason codes for a CFA are on the earlier fico versions of fico used for mortgages or auto loans maybe. Due to the fact that my fico 8 scores were over 800 during this decade, I do not think it affects fico 8 scores in the same way. I think the negative reason codes being absent, and my scores not dropping significantly in fico 08 is evidence of that. I can not factually state that the lack of the negative reason code in fico 08 proves that it does not affect that score more than other loans, but I believe that to be true. Perhaps others will chime in...has anyone here seen it as a reason code in fico 08?

Wow so it looks like it's quite the ding. Frankly doesn't make any sense why it would be so bad but it is what it is. Luckily I refinanced my mortgage before the loans. That said 2 years to pay them off plus another 10 is a long time. So it sounds like this could cause me to miss out on a mortgage down the line because I have paid off CFAs on my account. Im sure it's subjective, but assuming all other credit aspects are in gear are CFAs really a potential dealbreaker?

Re: How bad are consumer finance accounts really?

Anonymous — Wed, 07 Jul 2021 13:31:19 GMT

@EaglesFan2006 wrote:
@sarge12 wrote:
For the sake of clarity, I will state the only place I have seen the negative reason codes for a CFA are on the earlier fico versions of fico used for mortgages or auto loans maybe. Due to the fact that my fico 8 scores were over 800 during this decade, I do not think it affects fico 8 scores in the same way. I think the negative reason codes being absent, and my scores not dropping significantly in fico 08 is evidence of that. I can not factually state that the lack of the negative reason code in fico 08 proves that it does not affect that score more than other loans, but I believe that to be true. Perhaps others will chime in...has anyone here seen it as a reason code in fico 08?
Wow so it looks like it's quite the ding. Frankly doesn't make any sense why it would be so bad but it is what it is. Luckily I refinanced my mortgage before the loans. That said 2 years to pay them off plus another 10 is a long time. So it sounds like this could cause me to miss out on a mortgage down the line because I have paid off CFAs on my account. Im sure it's subjective, but assuming all other credit aspects are in gear are CFAs really a potential dealbreaker?

CFAs I do not believe will be a sole or even major reason to be denied, it will just be score ding, no telling how much (a lot or a little), but as long as your scores and rest of your profile is in order, it should not be any sort of deal breaker just because they are present.

Re: How bad are consumer finance accounts really?

sarge12 — Wed, 07 Jul 2021 17:12:41 GMT

@Anonymous wrote:
@EaglesFan2006 wrote:
@sarge12 wrote:
For the sake of clarity, I will state the only place I have seen the negative reason codes for a CFA are on the earlier fico versions of fico used for mortgages or auto loans maybe. Due to the fact that my fico 8 scores were over 800 during this decade, I do not think it affects fico 8 scores in the same way. I think the negative reason codes being absent, and my scores not dropping significantly in fico 08 is evidence of that. I can not factually state that the lack of the negative reason code in fico 08 proves that it does not affect that score more than other loans, but I believe that to be true. Perhaps others will chime in...has anyone here seen it as a reason code in fico 08?
Wow so it looks like it's quite the ding. Frankly doesn't make any sense why it would be so bad but it is what it is. Luckily I refinanced my mortgage before the loans. That said 2 years to pay them off plus another 10 is a long time. So it sounds like this could cause me to miss out on a mortgage down the line because I have paid off CFAs on my account. Im sure it's subjective, but assuming all other credit aspects are in gear are CFAs really a potential dealbreaker?
CFAs I do not believe will be a sole or even major reason to be denied, it will just be score ding, no telling how much (a lot or a little), but as long as your scores and rest of your profile is in order, it should not be any sort of deal breaker just because they are present.

Denial is not the only issue with the mortgage scores...your middle mortgage scores are used to set the interest rate. When you are talking about a 30 year mortgage it could cost you an extra 50 bucks a month, or even 100, for 30 long years. Ideally, you want approval at the lowest possible interest rate.

Re: How bad are consumer finance accounts really?

Anonymous — Thu, 08 Jul 2021 03:54:22 GMT

@sarge12 wrote:
I can't attribute all the lower scores to that alone, but my fico scores used in mortgages were about 50 points lower than fico 08 scores.

I don't think you can blame the CFA for that, or even a portion of that based on that fact alone. My mortgage scores for a large portion of time ran 40-50 points lower than my Fico8s and I never had any CFAs. That's just the way it is on some profiles.

Re: How bad are consumer finance accounts really?

chijo — Thu, 08 Jul 2021 08:34:16 GMT

I am sure glad I ran across this thread. Helps me with my decision to keep my old truck running another few years until I can get going on a mortgage first when my last baddie drops off next year. Thanks to all who post their experience.

Re: How bad are consumer finance accounts really?

Curious_George2 — Mon, 12 Jul 2021 03:20:18 GMT

@sarge12 wrote:
For the sake of clarity, I will state the only place I have seen the negative reason codes for a CFA are on the earlier fico versions of fico used for mortgages or auto loans maybe. Due to the fact that my fico 8 scores were over 800 during this decade, I do not think it affects fico 8 scores in the same way. I think the negative reason codes being absent, and my scores not dropping significantly in fico 08 is evidence of that. I can not factually state that the lack of the negative reason code in fico 08 proves that it does not affect that score more than other loans, but I believe that to be true. Perhaps others will chime in...has anyone here seen it as a reason code in fico 08?

I have seen it on EQ8.

CB76C2EC-4E73-4CD3-913F-539CD2B910CC.png

Re: How bad are consumer finance accounts really?

REDBOYYY56 — Fri, 09 Jul 2021 21:54:56 GMT

This is one topic that no one has a definite answer for. With all things being equal, my Experian fico 8 score has been my lowest score at 756. There are currently 3 CFA showing paid that go back since 2018. Since I'm not looking for a mortgage anytime soon I've never really dug into it.

Currently, it's listed as the second negative item on my Experian, so it has some impact but it's hard to quantify how much!

The fact that it's my lowest score across the board tells me that it has some impact.

I wished I was warned of those CFA, but that's another story for another day!!

Re: How bad are consumer finance accounts really?

EaglesFan2006 — Fri, 09 Jul 2021 22:15:50 GMT

@Anonymous wrote:
@sarge12 wrote:
I can't attribute all the lower scores to that alone, but my fico scores used in mortgages were about 50 points lower than fico 08 scores.
I don't think you can blame the CFA for that, or even a portion of that based on that fact alone. My mortgage scores for a large portion of time ran 40-50 points lower than my Fico8s and I never had any CFAs. That's just the way it is on some profiles.

So it sounds like these ding you after they're paid off.

Curious if these can really hurt your mortgage chances. I'm not looking again for another few years at least. But I have a few CFAs on my reports now. My regular scores are low 700s. Assuming when these are paid off and I have good DTI and all will they really make more mortgage scores that much lower?

Re: How bad are consumer finance accounts really?

Anonymous — Sat, 10 Jul 2021 00:00:24 GMT

FWIW, my spouse and I both had CFAs in early 2020 and we each hit 850 while they were still active. We admittedly have long, clean credit histories, but after hearing all the negatives about CFAs, I didn't think it would happen. We hit a rough business stretch again earlier this year and took out several loans from Lending Club and Lightstream (unclear to me as to whether or not that reports as a CFA) and we are still in the low 800's.

Edited to add: We have a paid off mortgage that will fall off our reports in 2 years, and these are our only active loans.

Re: How bad are consumer finance accounts really?

sarge12 — Mon, 12 Jul 2021 03:21:27 GMT

@Curious_George2 wrote:
@sarge12 wrote:
For the sake of clarity, I will state the only place I have seen the negative reason codes for a CFA are on the earlier fico versions of fico used for mortgages or auto loans maybe. Due to the fact that my fico 8 scores were over 800 during this decade, I do not think it affects fico 8 scores in the same way. I think the negative reason codes being absent, and my scores not dropping significantly in fico 08 is evidence of that. I can not factually state that the lack of the negative reason code in fico 08 proves that it does not affect that score more than other loans, but I believe that to be true. Perhaps others will chime in...has anyone here seen it as a reason code in fico 08?
I have seen it on EQ8.

CB76C2EC-4E73-4CD3-913F-539CD2B910CC.png

I learned something new...I only ever saw it on earlier fico versions. I wonder why the reason code never appeared on my fico 08, while it always showed on the fico versions used for mortgages?