Do Lenders Know if They're a CFA?

[Anonymous]

I have multiple Honda Financial loans on my CR from 2012-2018 and none were ever coded as a CFA.

[IPIF]

I am not sure but my understanding is that you cannot tell if loan is coded as CFA by looking at your credit report.

The credit report will just show "installment loan" whether it is CFA or not CFA.

CFA will appear in a reason list but it is a minor reason. So it may not appear if you have other reasons that are more important than the CFA reason.

[sarge12]

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@IPIF wrote:

I am not sure but my understanding is that you cannot tell if loan is coded as CFA by looking at your credit report.

The credit report will just show "installment loan" whether it is CFA or not CFA.

CFA will appear in a reason list but it is a minor reason. So it may not appear if you have other reasons that are more important than the CFA reason.

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I agree it is difficult to determine which account is a CFA by just looking at a report, and for FICO 08, or 09, there is not any difference between the effect on a score. On the scores used for mortgages however, the existence of a CFA account is usually fairly large, and I believe it is hard to determine which accounts are coded as CFA accounts intentionally. It is solely the reason my fico 08 was over 800 and yet my mortgage scores were in the very good area vs the excellent area for fico 08. Last I checked, my middle mortgage scores would barely qualify me for the lowest rate. It took considerable effort for me to identify Honda Financial as the CFA, which to this day makes me a bit angry that it was not disclosed to me when I financed my Goldwing. What made it even worse, is that I found out the next day my rate at the CU was lower so I re-financed it with the CU. It was financed with Honda Financial for 1 day. It affects my mortgage scores for 10 years. If anybody thinks it is just an accident that the lender does not disclose this debt as a CFA, and might result in a slightly higher interest rate on a mortgage, I have some beach front property to sell you in Arizona. An average of an extra quarter of a percentage point added to mortgages Nationwide equates to Billions of dollars. I have no issue with the CFA causing such a decrease in these scores if the consumer is made aware of that, as well as knowing which lenders are coded as a CFA. I am just guessing, but I suspect there are laws that prevent auto manufacturers from also owning banks, likely created to protect the consumer from them having that much power. I think it created their being coded as a CFA, and can anybody really give me a common sense reason why a perfectly re-paid CFA loan equates to a higher risk of default on any debt than a perfectly re-paid bank loan does. Call me skeptical if you want, but I do not believe that unknowingly  getting a loan from a lender that does not tell us they are a CFA, and then having higher mortgage rates for 30 years, is accidental. IMO it should be illegal, and is crooked at best.

[IPIF]

To make this auto loan CFA thing more confusing... if you buy a Subaru and finance through Subaru Motors Finance then the loan is not a CFA. This is because "Subaru Motors Finance" is a trade name that is licensed to JPMorganChaseBank ("Chase").

Chase owns the loan so Chase is the lender leading to a non-CFA coding.

[sarge12]

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@IPIF wrote:

To make this auto loan CFA thing more confusing... if you buy a Subaru and finance through Subaru Motors Finance then the loan is not a CFA. This is because "Subaru Motors Finance" is a trade name that is licensed to JPMorganChaseBank ("Chase").

Chase owns the loan so Chase is the lender leading to a non-CFA coding.

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I have been patiently waiting for someone to explain to me how repaying a loan as agreed to a CFA makes the borrower more at risk for defaulting on any debts. The credit score is after all, suppose to be a numerical representation of credit risk. So who, the individual owes and pays the debt to, even when the borrower is unaware that the lender is a CFA, increases their risk for ten years? Under what logic is this true? Of course that is not the only thing in the credit world that defies logic. I have yet to figure out how bad credit scores somehow make an individual more likely to wreck his or her car. Credit scores are still often used to set rates for auto insurance. I guess it is possible that someone with good credit might be more likely to pay for the damage out of pocket to protect their driving record. If you do that, you would be well advised to not borrow the funds to fix the car from a CFA.

[Anonymous]

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@sarge12 wrote:

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@IPIF wrote:

To make this auto loan CFA thing more confusing... if you buy a Subaru and finance through Subaru Motors Finance then the loan is not a CFA. This is because "Subaru Motors Finance" is a trade name that is licensed to JPMorganChaseBank ("Chase").

Chase owns the loan so Chase is the lender leading to a non-CFA coding.

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I have been patiently waiting for someone to explain to me how repaying a loan as agreed to a CFA makes the borrower more at risk for defaulting on any debts. The credit score is after all, suppose to be a numerical representation of credit risk. So who, the individual owes and pays the debt to, even when the borrower is unaware that the lender is a CFA, increases their risk for ten years? Under what logic is this true? Of course that is not the only thing in the credit world that defies logic. I have yet to figure out how bad credit scores somehow make an individual more likely to wreck his or her car. Credit scores are still often used to set rates for auto insurance. I guess it is possible that someone with good credit might be more likely to pay for the damage out of pocket to protect their driving record. If you do that, you would be well advised to not borrow the funds to fix the car from a CFA.

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While I certainly understand what you are saying and agree with you, IMO it is the presence of the CFA that FICO has a problem with.  Most people would finance a vehicle because they can't pay for a car in full.  However if you go to your local mattress warehouse, you know the "no credit needed" financing stuff, people that would typically take out these kinds of loans are considered more risky either if they have no credit or have bad credit.

It seems to all come down to how it is coded.  IMO, maybe FICO scores don't seem to differentiate between an installment loan from a mattress shop or an installment loan from an auto lender...at least not 100% of the time.  I have a CFA from ALLY financial for my car loan that I got from a Chevy dealer.  However it only codes on Experian as a CFA, none of the other bureaus.  Why?  I don't know and probably will never know.  Experian seems to interpret the code a little different than TU or EQ.

[sarge12]

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@Anonymous wrote:

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@sarge12 wrote:

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@IPIF wrote:

To make this auto loan CFA thing more confusing... if you buy a Subaru and finance through Subaru Motors Finance then the loan is not a CFA. This is because "Subaru Motors Finance" is a trade name that is licensed to JPMorganChaseBank ("Chase").

Chase owns the loan so Chase is the lender leading to a non-CFA coding.

---

I have been patiently waiting for someone to explain to me how repaying a loan as agreed to a CFA makes the borrower more at risk for defaulting on any debts. The credit score is after all, suppose to be a numerical representation of credit risk. So who, the individual owes and pays the debt to, even when the borrower is unaware that the lender is a CFA, increases their risk for ten years? Under what logic is this true? Of course that is not the only thing in the credit world that defies logic. I have yet to figure out how bad credit scores somehow make an individual more likely to wreck his or her car. Credit scores are still often used to set rates for auto insurance. I guess it is possible that someone with good credit might be more likely to pay for the damage out of pocket to protect their driving record. If you do that, you would be well advised to not borrow the funds to fix the car from a CFA.

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While I certainly understand what you are saying and agree with you, IMO it is the presence of the CFA that FICO has a problem with.  Most people would finance a vehicle because they can't pay for a car in full.  However if you go to your local mattress warehouse, you know the "no credit needed" financing stuff, people that would typically take out these kinds of loans are considered more risky either if they have no credit or have bad credit.

It seems to all come down to how it is coded.  IMO, maybe FICO scores don't seem to differentiate between an installment loan from a mattress shop or an installment loan from an auto lender...at least not 100% of the time.  I have a CFA from ALLY financial for my car loan that I got from a Chevy dealer.  However it only codes on Experian as a CFA, none of the other bureaus.  Why?  I don't know and probably will never know.  Experian seems to interpret the code a little different than TU or EQ.

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Well, the skeptic in me believes it only affects the earlier versions of fico used for mortgages is due to mortgages running 30 years. I get what you are saying about the CFA used at Billy Bobs furniture outlet, but Honda Financial is tied into a major manufacturer, and the vast majority of people have no clue that financing a car there might prevent them from receiving the lowest mortgage rates 5 years later. Since that can happen, IMO these issuers should be legally required to tell potential customers that it will be a CFA, and may lower the fico scores commonly used for mortgages. I wonder what kind of kick-backs the car dealerships and Politicians are getting to make sure that does not happen. Sadly, most borrowers do not even know that CFA's being on a report will hurt their mortgage scores. Fewer still, have any idea that some of the major auto manufacturers financing results in a CFA on the report. I know at the time I did not know either. I wonder if a back room deal was reached between mortgage lenders and the big 3 CRA's to keep the CFA coding harm in the earlier versions. When you just look at how much extra interest every home owner has to pay if an extra 1 percent is added to the interest on every mortgage, it is easy to see there is a motive for keeping those scores lower.

[sarge12]

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@IPIF wrote:

To make this auto loan CFA thing more confusing... if you buy a Subaru and finance through Subaru Motors Finance then the loan is not a CFA. This is because "Subaru Motors Finance" is a trade name that is licensed to JPMorganChaseBank ("Chase").

Chase owns the loan so Chase is the lender leading to a non-CFA coding.

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Thank you for adding to the CFA confusion, I hope that might hold you over until you can ruin Christmas in December for someone...lol. Seriously though, that is good to know that the word finance in the company name is not necessarily a CFA. I hope there might be some future laws written that will force lenders to make potential borrowers aware that they are a CFA, and how that might lower their mortgage scores. At least that would make signing on the dotted line an informed decision. It has kept my mortgage scores between 20 and 50 points lower than fico 08. The lowest one was 775, so that would still result in the best rates, but the hit on the score might cost someone who is close to qualifying for the lowest rate, thousands over the 30 year mortgage.

[Queen_Etherea]

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@sarge12 wrote:

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@Anonymous wrote:

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@sarge12 wrote:

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@IPIF wrote:

To make this auto loan CFA thing more confusing... if you buy a Subaru and finance through Subaru Motors Finance then the loan is not a CFA. This is because "Subaru Motors Finance" is a trade name that is licensed to JPMorganChaseBank ("Chase").

Chase owns the loan so Chase is the lender leading to a non-CFA coding.

---

I have been patiently waiting for someone to explain to me how repaying a loan as agreed to a CFA makes the borrower more at risk for defaulting on any debts. The credit score is after all, suppose to be a numerical representation of credit risk. So who, the individual owes and pays the debt to, even when the borrower is unaware that the lender is a CFA, increases their risk for ten years? Under what logic is this true? Of course that is not the only thing in the credit world that defies logic. I have yet to figure out how bad credit scores somehow make an individual more likely to wreck his or her car. Credit scores are still often used to set rates for auto insurance. I guess it is possible that someone with good credit might be more likely to pay for the damage out of pocket to protect their driving record. If you do that, you would be well advised to not borrow the funds to fix the car from a CFA.

---

While I certainly understand what you are saying and agree with you, IMO it is the presence of the CFA that FICO has a problem with.  Most people would finance a vehicle because they can't pay for a car in full.  However if you go to your local mattress warehouse, you know the "no credit needed" financing stuff, people that would typically take out these kinds of loans are considered more risky either if they have no credit or have bad credit.

It seems to all come down to how it is coded.  IMO, maybe FICO scores don't seem to differentiate between an installment loan from a mattress shop or an installment loan from an auto lender...at least not 100% of the time.  I have a CFA from ALLY financial for my car loan that I got from a Chevy dealer.  However it only codes on Experian as a CFA, none of the other bureaus.  Why?  I don't know and probably will never know.  Experian seems to interpret the code a little different than TU or EQ.

---

Well, the skeptic in me believes it only affects the earlier versions of fico used for mortgages is due to mortgages running 30 years. I get what you are saying about the CFA used at Billy Bobs furniture outlet, but Honda Financial is tied into a major manufacturer, and the vast majority of people have no clue that financing a car there might prevent them from receiving the lowest mortgage rates 5 years later. Since that can happen, IMO these issuers should be legally required to tell potential customers that it will be a CFA, and may lower the fico scores commonly used for mortgages. I wonder what kind of kick-backs the car dealerships and Politicians are getting to make sure that does not happen. Sadly, most borrowers do not even know that CFA's being on a report will hurt their mortgage scores. Fewer still, have any idea that some of the major auto manufacturers financing results in a CFA on the report. I know at the time I did not know either. I wonder if a back room deal was reached between mortgage lenders and the big 3 CRA's to keep the CFA coding harm in the earlier versions. When you just look at how much extra interest every home owner has to pay if an extra 1 percent is added to the interest on every mortgage, it is easy to see there is a motive for keeping those scores lower.

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Well the mortgage score is the one I need to increase as we're planning on buying a house maybe next year or early 2021. Had I known that my car loan was going to give me that CFA code, I would've fought a little harder to go with a different bank. I don't see that reason code anymore when looking at my mortgage scores because it's all just "too many new accounts". My CIG Financial loan mysteriously fell off my TU and EX reports over the weekend, so we'll see if that reason code eventually creeps back up once my accounts age a bit. I'm like 98% that CIG loan was coded as a CFA because that reason code was there before I got my new car last year. Now if EQ would play ball and delete that account, I'd be a super happy camper! Still no resolution on the CFPB complaint I filed against them. 

[sarge12]

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@Anonymous wrote:

I have multiple Honda Financial loans on my CR from 2012-2018 and none were ever coded as a CFA.

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That is a bit strange...why would mine from 2010 have been coded as a CFA then? I am not just speculating that was the CFA on my report. I spent quite some time, including calls to the CRA's to find out.