topic Re: Is this for real ?!? in Understanding FICO® Scoring

Is this for real ?!?

teo77777 — Thu, 02 Apr 2015 04:47:30 GMT

Was reading excerpts from a blog written by Dana Neal, author of a book entitled "Best Credit:How to win the credit game" In a section he states the following..

"The quality of the lender also matters. There are captive and general lenders. Auto manufacturers are captive lenders—they loan money on their product only; the FICO scoring model treats them the same as a bank, which is good. Credit from auto manufacturing companies such as Toyota Motor Credit and General Motors is fine. But be wary of outside dealer financing; it's often from a finance company. Finance companies, unlike banks, are general lenders; they loan money on anything and are to be avoided because they will hurt your FICO score.

FICO's scoring algorithm attempts to detect if a consumer is making poor credit decisions—that is, getting poor credit terms such as paying a higher interest rate. It's assumed, with some merit, that consumers who use general lenders are making bad credit decisions, and thus any lender that has “Banc” or “Finance” in its name will lower your credit score."

This true?

Re: Is this for real ?!?

Anonymous — Thu, 02 Apr 2015 15:38:41 GMT

Yes, it's for real. Consumer finance loans are considered a negative in Fico scoring.

Re: Is this for real ?!?

sarahlee7 — Fri, 03 Apr 2015 00:34:09 GMT

I had 3 paid Consumer finance loans on my EQ. It was a small town family type lender.....After learning that those accts do indeed hurt your score, I called and spoke to the lady and asked if she couuld remove them.

She told me to dispute the accounts, and she would ignore the veriification process by the CRA...lo and behold, the 3 paid closed accounts (in good standing of course) were removed and I gained 24 pts.

Re: Is this for real ?!?

teo77777 — Fri, 03 Apr 2015 13:52:07 GMT

@sarahlee7 wrote:
I had 3 paid Consumer finance loans on my EQ. It was a small town family type lender.....After learning that those accts do indeed hurt your score, I called and spoke to the lady and asked if she couuld remove them.

She told me to dispute the accounts, and she would ignore the veriification process by the CRA...lo and behold, the 3 paid closed accounts (in good standing of course) were removed and I gained 24 pts.

You know, when I read that, it really made me think. I don't have any of these accounts on my report personally, but I see some major problems with this. There are a ton of people out there that have no choice but to take out such a loan, and even if they make great timely payments, the dings to Fico will keep them in the same boat repeatedly. That seems not only unethical, but almost profiling. I remember a tote the note car lot my Daughter went to that would not report positive history on the loan and wanted 18%. They don't want to report positive because they wanted you to have to use them for vehicles for life. Same kind of scenario here it seems.

Re: Is this for real ?!?

MidnightVoice — Fri, 03 Apr 2015 20:49:21 GMT

Even worse, some of the lenders are actually reputable!

Re: Is this for real ?!?

Anonymous — Sat, 04 Apr 2015 00:21:26 GMT

@MidnightVoice wrote:
Even worse, some of the lenders are actually reputable!

Yep, Prosper and Lending Club both report as consumer finance accounts.

Re: Is this for real ?!?

TheConstant — Sat, 04 Apr 2015 21:46:06 GMT

So then for example, CapOne sends me autofinancing stuff in the mail, and I use it to get a car.

Would this then be a negative lender because it is external to the car company, or a positive lender because it is a big bank?

Re: Is this for real ?!?

Anonymous — Sat, 04 Apr 2015 23:50:22 GMT

@TheConstant wrote:
So then for example, CapOne sends me autofinancing stuff in the mail, and I use it to get a car.
Would this then be a negative lender because it is external to the car company, or a positive lender because it is a big bank?

It depends on how it reports. For example, a loan from Wells Fargo is a positive installment loan. A loan from Wells Fargo Finance is a negative consumer finance account.

Re: Is this for real ?!?

CraigHwk — Sun, 05 Apr 2015 01:13:14 GMT

Would a "Note Loan" fall under this category? I have one from Spring Leaf financial and I am curious about the effects it might have. Have a years worth of on time payments, so that has to count for something?

Re: Is this for real ?!?

Anonymous — Sun, 05 Apr 2015 01:43:46 GMT

@CraigHwk wrote:
Would a "Note Loan" fall under this category? I have one from Spring Leaf financial and I am curious about the effects it might have. Have a years worth of on time payments, so that has to count for something?

What does the entry say in your files? If it says consumer finance account, it's a negative.

Re: Is this for real ?!?

CraigHwk — Sun, 05 Apr 2015 03:02:50 GMT

Note Loan is the account type. Individual Account. Nothing about a Finance Account. Guess I'm good. Thank you

Re: Is this for real ?!?

sarahlee7 — Sun, 05 Apr 2015 11:15:43 GMT

@CraigHwk wrote:
Note Loan is the account type. Individual Account. Nothing about a Finance Account. Guess I'm good. Thank you

The consumer finance loans I had said 'individual' too, but they were definitely CFA's. Small $750 loans but paid back like $2000 in payments.

The kinda loan where you use silverware and plungers to secure the loan with assets.

Re: Is this for real ?!?

teo77777 — Sun, 05 Apr 2015 13:34:39 GMT

@sarahlee7 wrote:
@CraigHwk wrote:
Note Loan is the account type. Individual Account. Nothing about a Finance Account. Guess I'm good. Thank you

The consumer finance loans I had said 'individual' too, but they were definitely CFA's. Small $750 loans but paid back like $2000 in payments.
The kinda loan where you use silverware and plungers to secure the loan with assets.

LOL...That's good stuff !

Re: Is this for real ?!?

Anonymous — Tue, 07 Apr 2015 14:21:38 GMT

I've got several CFL's on my reports, all with perfect payment history. On my FICO's credit report, they show as installments, but could these be hurting my score? Under "type of loan" it says "Secured with household goods".

Re: Is this for real ?!?

AKO17 — Wed, 17 Jun 2015 23:12:29 GMT

I'm wondering the same thing now. I have an installment loan that reports as "installment" on all three reports, however under the Equifax comments only it states "Secured" and "Fixed Rate" This loan has never once seemed to help my score even though it is four years old and paid on time each month.

Re: Is this for real ?!?

Anonymous — Wed, 17 Jun 2015 23:20:00 GMT

You have me wondering myself. I'm going to check my installment loans.

Re: Is this for real ?!?

Anonymous — Wed, 17 Jun 2015 23:23:41 GMT

My auto loan says BMW Financial Services? Should I take that as a negative?

Re: Is this for real ?!?

Anonymous — Thu, 18 Jun 2015 00:53:51 GMT

Here's a denial from today that specifically mentions consumer finance. It's one Lending Club loan.

We also obtained your credit score from TransUnion and used it in making our credit decision. Your credit score is a number that reflects the information in your consumer report. Your credit score can change, depending on how the information in your consumer report changes.

Your credit score: 791

Date: 2015-06-17 13:33:31 -0500

Scores range from a low of 300 to a high of 850

Key factors that adversely affected your credit score: "Proportion of loan balances to loan amounts is too high,Time since most recent account opening is too short,Length of time revolving accounts have been established,Too many consumer finance company accounts,The number of inquiries on the consumer's credit file has adversely affected the credit score."

Re: Is this for real ?!?

Revelate — Thu, 18 Jun 2015 04:21:43 GMT

CFA's are usually marked as retail or with the outright tag in my experience.

Positive installment loans do help score, auto loans are typically not consumer finance accounts. I have a ding in my reason codes for a CFA which is almost guarunteed to be my lone Walmart card.

FWIW I'm not sold on some of the statements made in the OP's message but that's me; there's never been evidence that the name of the lender on a tradeline matters to FICO, it'd be enormously complex to keep a database of all that anyway from an implementation perspective. That FP card counts just as much as an Amex on FICO as an example; however, that does not guaruntee that UW doesn't feel differently, it's just not part of the algorithm.

Re: Is this for real ?!?

flan — Fri, 19 Jun 2015 03:20:33 GMT

@Anonymous wrote:
Here's a denial from today that specifically mentions consumer finance. It's one Lending Club loan.

We also obtained your credit score from TransUnion and used it in making our credit decision. Your credit score is a number that reflects the information in your consumer report. Your credit score can change, depending on how the information in your consumer report changes.

Your credit score: 791

Date: 2015-06-17 13:33:31 -0500

Scores range from a low of 300 to a high of 850
Key factors that adversely affected your credit score: "Proportion of loan balances to loan amounts is too high,Time since most recent account opening is too short,Length of time revolving accounts have been established,Too many consumer finance company accounts,The number of inquiries on the consumer's credit file has adversely affected the credit score."

It doesn't tell you any such thing. It's a denial. And a score, with the scoring factors. The scoring factors have to tell you what's keeping you from getting a perfect score, so with a score that high, consumer finance will show up. But there's no telling what the denial reason is. It could be the consumer finance account. It could be you don't qualify for some other reason -- like your dti is to high, you have too many new accounts, you have too few new accounts, or they don't lend to people who spell their name in ALL CAPS. You can't tell from that letter, and they don't have to be more specific (though lenders often are, if there's an objective reason they can point to like "insufficent income").