Affirm Installment Loans

[indiolatino61]

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@Thomas_Thumb wrote:

In-store (retail installment loan) financing is a common type of CFA. It is frequently used for furniture, appliance purchases and home improvement projects. Many consumers opt in when offered with a 0% financing promotion.

Car dealerships have access to CFA loans available through institutions such as GE capital. The loan may carry high interest rates for higher risk applicants or could be 0% incentive loans from the manufacturer for those with high credit scores.

Unfortunately, all CFAs are considered elevated risk by Fico. Probably because the classification includes payday loans and debt consolidation loans.

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So why not add yet another data point separating payday loans, et al, from "legitimate" sources such as dealer financing or appliance 0% purchases? It just seems to me that data points that hinder scores are immediate, while one which actually helps the end consumer is slow as molasses.

[Thomas_Thumb]

I've read there are 3 classifications for CFAs. Payday loans may or may not get reported as far as I know. So, it is hit/miss if one will factor into scoring. BNPL loans are/will be reported (Affirm now Klarna later?). Debt consolidation loans do get reported as a standard practice.

My understanding is reporting of retail/manufacturer CFAs is conditional. If no interest is paid they are not reported. In that case, the 0% promo loans associated with furniture, appliance, car purchases are excluded from reporting. CFA reporting would happen if loan was not paid off before the promo period ended or if the payment plan included monthly interest initially.

[Zoostation1]

Looks like the stuff I previously looked up on Klarna is out of date or I misread it.  Klarna is reporting to TU, but not the pay in 4 or pay in 30 days products.

[Thomas_Thumb]

Those 2 products are likely interest free - atleast the 4 payment Klarna shows as such on Ebay.

If Klarna experiences to many BNPN accounts I suspect they will report the 4 installment loans as well.

[firefox100]

That is one good reason why I don't use these type of financing services, if they say we not going to report they can change how they do their business practices in the future. The Question I do have I finance Iphone 15 for 36 months at 0% with spectrum mobile at time said it does not report it has not, If it every did report how would it show up. At time I did the financing I was told that it would never report as long as all the payments where made on time can they change and start reporting legally.

[Thomas_Thumb]

If the terms at the time of the loan state it won't report and payments are made per plan, it won't report. The reporting changes apply to new loans and possibly old ones in default.

The negatives of CFAs are over blown. These loans, even the 4 payment plans, can build positive credit history. This can be quite beneficial for those with thin files and no installment payment history. 

My only remaining loan on file, a closed mortgage, will age off in 5 years. I might use one of these 4 payment plans to re-establish recent loan history before then. It's much simpler than a SSL.

[firefox100]

My fico scores are over 815 at this point and only have creditcards reporting at this point.

[Thomas_Thumb]

In your case I would expect score to be higher with the CFA loan reporting a positive payment history and remain higher after the loan closes. The benefit from increased credit mix (say 20 points) outweighs any CFA negative (perhaps 5 points)