Consumer Finance Account

[Anonymous]

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@Anonymous wrote:
Did not know that.

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They partner with Cross River Bank. 

https://www.forbes.com/sites/antoinegara/2019/12/17/the-forbes-investigation-inside-the-secret-bank-behind-the-fintech-boom/#3a6a96c33c10

Plenty of people love Affirm. I don't object to people being able to make up their own mind. What I object to is the lack of transparency which I don't blame Affirm for. 

They make it really easy to get financing. Out of curiosity just now, I went to Avocado Matteess Company and added their most expensive $1700 mattress to my cart to see what Affirm would offer me. They offered me $2K @ 0% for 12 months. All I would have needed to do to finalize it is check out. 

[Anonymous]

Very interesting thank you for the education. They can definitely serve a purpose.

[Anonymous]

I've never used consumer financing, but this is probably one of the only things that truly irritates me about the FICO scoring model, and just seems predatory on the part of the model itself.

For one, it punishes credit users for events that no one would intuitivelly believe to hurt their score (i.e. financing on a retail purchase that has been paid down in full, and on time). Why would anyone expect this to negatively impace their credit? While there are nuances, someone can have a good FICO score just from things that just make sense logically speaking. Don't max out my cards, pay all my bills on time, don't go crazy on new credit, etc. (AKA be responsible) This is a ding for something entirely innocent assuming it's paid off on time.

Two, it's kicking someone when they're down, even when they haven't wronged any new creditors. It's one thing to ding someone's score for an old late-payment or charge-off. But now you're going to hit them just because they can't get credit anywhere else? It's recursive and dumb. Banks and Credit Unions not lending to you because of your poor credit history is already the punishment.

And third, and applying to both of the above. It's not even clear to a customer that what they're getting is qualified as "Consumer Financing" and will hurt their score.

It just rubs me wrong. The whole "reason" behind this just seems ridiculous when the score's very existence is already filling this role.

[Anonymous]

For what it’s worth I agree with you.

[RootDet]

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@Anonymous wrote:

OK let’s think about this from the lender's viewpoint. Why would someone use a finance company and pay a higher interest rate if they were able to use a bank or credit union and get a lower rate?

Now true enough it may be due to ignorance on some peoples part. However for many its because they cannot procure financing at a bank or credit union.

As a consequence when you use a finance company there is a negative marker applied and it does have a negative impact on your score.

It’s just like loan modifications are now negatives in version 9 and will reduce your score. Doesn’t matter if I agree with it, it’s the way it is.

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The problem is it is highly inaccurate. I went to citizens bank, got a loan from the bank. they chose to outsource servicing of firstmark. because of that, I have a CFA for the next ten years when it wasn't a CFA. 

[Anonymous]

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@RootDet wrote:

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@Anonymous wrote:

OK let’s think about this from the lender's viewpoint. Why would someone use a finance company and pay a higher interest rate if they were able to use a bank or credit union and get a lower rate?

Now true enough it may be due to ignorance on some peoples part. However for many its because they cannot procure financing at a bank or credit union.

As a consequence when you use a finance company there is a negative marker applied and it does have a negative impact on your score.

It’s just like loan modifications are now negatives in version 9 and will reduce your score. Doesn’t matter if I agree with it, it’s the way it is.

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The problem is it is highly inaccurate. I went to citizens bank, got a loan from the bank. they chose to outsource servicing of firstmark. because of that, I have a CFA for the next ten years when it wasn't a CFA. 

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@RootDet  Now that is downright dirty! I'd file a CFPB complaint on that! It's already dirty enough, but that's overboard! Wow! I'm sorry this has happened to you despite your due dilegence.

[sarge12]

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@RootDet wrote:

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@Anonymous wrote:

OK let’s think about this from the lender's viewpoint. Why would someone use a finance company and pay a higher interest rate if they were able to use a bank or credit union and get a lower rate?

Now true enough it may be due to ignorance on some peoples part. However for many its because they cannot procure financing at a bank or credit union.

As a consequence when you use a finance company there is a negative marker applied and it does have a negative impact on your score.

It’s just like loan modifications are now negatives in version 9 and will reduce your score. Doesn’t matter if I agree with it, it’s the way it is.

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The problem is it is highly inaccurate. I went to citizens bank, got a loan from the bank. they chose to outsource servicing of firstmark. because of that, I have a CFA for the next ten years when it wasn't a CFA. 

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OK, let me throw in on this again. I do not believe the newer scoring models like Fico 08 considers CFA debt any different than any other debt. It is the earlier versions that are used to set your mortgage rates that do that. I at least believe that is the case, as I have never seen the existance of a CFA account as being a reason for not having higher scores on Fico 08. I did however see it on the scores primarily used for mortgages. As far as which lenders are considered a CFA, it might surprise you. American Honda Finance that I had a loan with a grand total of 1 day was considered as a CFA and a negative on my scores used for mortgages for years. I think there might be laws preventing auto makers from owning banks, but that is just a guess. I think it might be considered a negative in part due to the fact the lender is partially motivated on some CFA accounts to approve those a bank wont due the the manufacturer and lender being the same entity. Car dealers often offer customer choice of cash discounts or very low finance rates. Since banks are more regulated, such choices likely could not be offered. For appliances, I know GE finance company used to be a heavy lender. CFA's other than those motivated by being seller financed, generally caters to those that might not be able to get bank financing. The only thing I know for a fact is the scores used for setting mortgage rates, do indeed show as a negative reason code. I too think the existence of a CFA account, paid perfectly, as a negative is ridiculous. I doubt that Fico cares what I think though, the practice exists. There are many more negative reason codes for the scores used to set mortgage interest rates. My Fico 08 scores usually say due to my very high score, no negative reason code exists. The scores used for mortgages almost always have had at least one negative reason listed.

[Anonymous]

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@sarge12 wrote:

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@RootDet wrote:

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@Anonymous wrote:

OK let’s think about this from the lender's viewpoint. Why would someone use a finance company and pay a higher interest rate if they were able to use a bank or credit union and get a lower rate?

Now true enough it may be due to ignorance on some peoples part. However for many its because they cannot procure financing at a bank or credit union.

As a consequence when you use a finance company there is a negative marker applied and it does have a negative impact on your score.

It’s just like loan modifications are now negatives in version 9 and will reduce your score. Doesn’t matter if I agree with it, it’s the way it is.

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The problem is it is highly inaccurate. I went to citizens bank, got a loan from the bank. they chose to outsource servicing of firstmark. because of that, I have a CFA for the next ten years when it wasn't a CFA. 

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OK, let me throw in on this again. I do not believe the newer scoring models like Fico 08 considers CFA debt any different than any other debt. It is the earlier versions that are used to set your mortgage rates that do that. I at least believe that is the case, as I have never seen the existance of a CFA account as being a reason for not having higher scores on Fico 08. I did however see it on the scores primarily used for mortgages. As far as which lenders are considered a CFA, it might surprise you. American Honda Finance that I had a loan with a grand total of 1 day was considered as a CFA and a negative on my scores used for mortgages for years. I think there might be laws preventing auto makers from owning banks, but that is just a guess. I think it might be considered a negative in part due to the fact the lender is partially motivated on some CFA accounts to approve those a bank wont due the the manufacturer and lender being the same entity. Car dealers often offer customer choice of cash discounts or very low finance rates. Since banks are more regulated, such choices likely could not be offered. For appliances, I know GE finance company used to be a heavy lender. CFA's other than those motivated by being seller financed, generally caters to those that might not be able to get bank financing. The only thing I know for a fact is the scores used for setting mortgage rates, do indeed show as a negative reason code. I too think the existence of a CFA account, paid perfectly, as a negative is ridiculous. I doubt that Fico cares what I think though, the practice exists. There are many more negative reason codes for the scores used to set mortgage interest rates. My Fico 08 scores usually say due to my very high score, no negative reason code exists. The scores used for mortgages almost always have had at least one negative reason listed.

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@sarge12Well, we can check the list of codes for Score 8 and easily determine that I think. Neverthless, if the company name has the word "financial" in it, I'd say that'a a clue. And I agree, the auto manufacturers set up these finance companies to assist in selling; they have a conflict of interest in approving those applicants.

[sarge12]

I think my last post might open questions about the 1 day loan I mentioned, so I will explain. In, I think, 1996 I declared ch.7 due to a bad marriage. I had an existing mortgage, and until 2010, that remained my only debt. In 2010, my firiend I worked with and I were at the Honda dealership...he had a goldwing. I was riding a 1500 cc Suzuki Intruder. He said I shoud buy a Goldwing, but I thought my credit was bad, but the BK had fallen off the report, so my score was high, well over 750. I bought the bike but was wishing I had financed it at my Credit Union, so I refinanced it there the next day. My credit score has never been below 750 since, and has in fact been over 800 most of that time. This was just to satisfy those curious as to why I had a CRA for 1 day. It might also indicate another fact...I never did a traditional rebuild. My mortgage was in 1995, and was always paid ontime. I did refinance the bike when converting it to a 3 wheeler. I also refinanced my house for a lower interest rate and to get my ex-wife off of the loan. I have also since gotten over 20 credit cards, and gotten a car loan in my name, but my Niece is paying that and I will sign it over to her when paid. That was a 1.75% interest rate. I have paid everything early since 1996.

[Anonymous]

BTW, Score 8 reason codes suck, usually only 1. I would look that up, but hitting the hay! GN/GM!