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Loan for furniture

Boxermom1
Valued Member

Loan for furniture

I need some new furniture, so I am considering financing with Johnny Janosik for about $7500.  They go through Wells Fargo.  How big of a hit is this on my credit report, and how long will it negatively affect it.  My scores now are between 650 and 700.  Does anyone have any advice on the best way to go to finance something like this with the least negative results?

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Message 1 of 8
7 REPLIES 7
SouthJamaica
Mega Contributor

Re: Loan for furniture


@Boxermom1 wrote:

I need some new furniture, so I am considering financing with Johnny Janosik for about $7500.  They go through Wells Fargo.  How big of a hit is this on my credit report, and how long will it negatively affect it.  My scores now are between 650 and 700.  


It's probably a big hit and some of the hit will probably stay on your reports for a long time as a "consumer finance account", which is a slightly derogatory factor.


Total revolving limits 689000 (587000 reporting) FICO 8: EQ 718 TU 714 EX 695

Message 2 of 8
Phana24
Regular Contributor

Re: Loan for furniture


@Boxermom1 wrote:

I need some new furniture, so I am considering financing with Johnny Janosik for about $7500.  They go through Wells Fargo.  How big of a hit is this on my credit report, and how long will it negatively affect it.  My scores now are between 650 and 700.  Does anyone have any advice on the best way to go to finance something like this with the least negative results?


Unless you have a CL of at least 5K with someone like Amex, you don't have a lot of options.  If they're claiming some low APR or "0% financing for "X" number of years, all that means is you're paying for it in the price of the furniture.  Unless you have a car or other form of collateral you can refi, you're not going to find any good options.  Any chance you can postpone the purchase until you get your scores higher?  I just hate paying high APRs(real or hidden) for something that depreciates so quickly.  Good luck

Message 3 of 8
Aim_High
Senior Contributor

Re: Loan for furniture


@SouthJamaica wrote:

@Boxermom1 wrote:

I need some new furniture, so I am considering financing with Johnny Janosik for about $7500.  They go through Wells Fargo.  How big of a hit is this on my credit report, and how long will it negatively affect it.  My scores now are between 650 and 700.  


It's probably a big hit and some of the hit will probably stay on your reports for a long time as a "consumer finance account", which is a slightly derogatory factor.


I can verify that's not always the case, and may not even often be the case.   I have three closed accounts still reporting on my credit report from furniture stores from larger purchases that I financed.  All three are reporting account types as "Charge Cards" and one of them was specifically from Wells Fargo.  The accounts were from Haverty's (Synchrony), Basset (Wells Fargo), and "The Dump" (don't laugh! Lol ... they are outlet seller of luxury branded furniture) which had in-house financing.  

 

I believe that the "Consumer Finance Account" is more likely to be associated with 90 days same as cash type financing programs or specific financing for one purchase.  However, a lot of furniture store accounts are set up as revolving accounts which a consumer can continue to use for purchases if they so desire.  In my case, I didn't plan to use any of these long term so I closed them when the accounts were paid off.



Length of Credit > 35 years; Total Credit Limits > $600K
AoOA > 29 years (Jun 1993); AoYA (Nov 2021)
* Hover cursor over cards to see name & CL, or press & hold on mobile app.
Message 4 of 8
Aim_High
Senior Contributor

Re: Loan for furniture


@Phana24 wrote:   ... If they're claiming some low APR or "0% financing for "X" number of years, all that means is you're paying for it in the price of the furniture ...  I just hate paying high APRs(real or hidden) for something that depreciates so quickly. 

While obviously stores don't offer 0% financing as a purely goodwill gesture and the costs are built in, they don't normally raise the difference in price for a cash purchase versus a credit purchase.  They're built into the store's overall cost structure and EVERYONE pays for these financing programs indirectly.  Offering financing is just another marketing tool that stores use to bring in new business, especially since furniture tends to be a larger purchase that many people can't afford to pay easily or quickly without a lot of advance planning.  Yes, you might be able to save some money by shopping somewhere that doesn't offer 0% financing programs (if you can even find such a place today that sells furniture) but you also may not be getting the same quality of furniture with similar features if you're shopping at a different chain.  

 

Furniture doesn't have to depreciate quickly either. I've had furniture hold up well for decades in some cases, much longer than a lot of other things you can buy.   The key is buying the best quality furniture that you can afford and then taking care of it. 

 

About the only way to totally avoid these costs would be to only buy used furniture for cash which would save money on the inherent financing costs and on some of the furniture depreciation as well.  (I'm not making fun of anyone buying used furniture. I've done a little of this myself over the years since it's possible to find some great gently-used bargains if someone shops carefully.)



Length of Credit > 35 years; Total Credit Limits > $600K
AoOA > 29 years (Jun 1993); AoYA (Nov 2021)
* Hover cursor over cards to see name & CL, or press & hold on mobile app.
Message 5 of 8
Yasselife
Established Contributor

Re: Loan for furniture

@Boxermom1 

Loans for furniture usually report as credit cards. Fico is very sensitive on credit card usage utilization, individual and overall are calculated; need to watch out not to have a balance over 50%. If it was an unsecured loan might not affect scores significantly other than 4-5 points from the hard inquiry, and maybe lose another 5 because of a new account[AAoA].


Message 6 of 8
SoCalGardener
Valued Contributor

Re: Loan for furniture


@Aim_High wrote:

Furniture doesn't have to depreciate quickly either. I've had furniture hold up well for decades in some cases, much longer than a lot of other things you can buy.   The key is buying the best quality furniture that you can afford and then taking care of it. 

 


^ This!! I couldn't agree more.

 

Purely by luck, I happened to be working at a high-end furniture store when I bought my first house--so I got the employee discount of 40% off! I filled my 4-bedroom home with top-of-the-line brands, solid wood, heavy, classic/traditional furniture that doesn't go out of style. That was in the late '80s. I STILL HAVE most of it! The only pieces I no longer have are gone because they were no longer needed/useful. I expect my beautiful, heavy, cherry-finish roll-top desk to be passed down as a family heirloom.

 

I can't say enough about buying high quality furniture, especially if you're like me and your tastes don't tend to change continually. I don't follow fads/trends at all. Buying classic furniture works for me; it will never look dated or out of place.

 

As for financing, one thing I want to point out is that most store cards have ridiculously high APRs. Sure, they may draw you in with their 0% for X months financing--but if you're not going to pay it off by the date the promo ends, you'd better have a contingency plan, such as a 0% BT offer from a credit card. I'd hate to get stuck paying 25% (or more) APR on several thousand dollars worth of furniture! OUCH.

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Message 7 of 8
Aim_High
Senior Contributor

Re: Loan for furniture


@SoCalGardener wrote:

Purely by luck, I happened to be working at a high-end furniture store when I bought my first house--so I got the ... employee discount of 40% ... off! I filled my 4-bedroom home with top-of-the-line brands

 

As for financing, one thing I want to point out is that most store cards have ridiculously high APRs. Sure, they may draw you in with their 0% for X months financing--but if you're not going to pay it off by the date the promo ends, you'd better have a contingency plan




Now that's the way to do it @SoCalGardener!  Big score getting 40% off a big ticket item like furniture! Smiley Very Happy 

 

The financing point is spot-on.  I said that the financing costs are built into the store's marketing programs, and that is true.  But part of the funding for that marketing comes from people who either don't plan ahead or are unable to pay off their balances before the end of the promotional period.  I imagine there's a fair number of consumers who don't understand how all this works and don't realize the long-term costs involved.  So yes, if you're not going to pay off a large balance in the promotional period (which is what I just assumed anyone would do), then financing will cost you a LOT more than paying cash.



Length of Credit > 35 years; Total Credit Limits > $600K
AoOA > 29 years (Jun 1993); AoYA (Nov 2021)
* Hover cursor over cards to see name & CL, or press & hold on mobile app.
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