Prosper loan

[RobertEG]

For years, loans from lendors identified as a "consumer finance company" was viewed by others and by scoring algorithms as a negative.

Consumer finance companies are generally defined as lendors who offer credit at higher interest rates than those generally prevailing with major banks.

Back in the day, many rural consumers had no choice other than to drive to a major city or else seek credit with a local lendor, who usually had higher rates.

However, with the advent of internet electronic access to credit application, consumers now have general access to national banks, and can shop for the best rates for which they qualify. 

Thus, use of a consumer finance company was viewed as an indication that the consumer could not obtain better credit from a major creditor, and was thus a negative in manual reviews and scoring algorithms.

However, many consumer finance loans are offered at low or zero introductory rates, such as that new stove from Sears.

Thus, using a consumer finance company can actually be an indication of a consumer getting better, not worse, terms.

Gradually, the general stigman on use of a consumer finance company is waning, as demonstrated by newer scoring models.

It is kinda an archaic view that is in transition.

[Anonymous]

RobertEG - good to hear this is turning around as we just used a finance company TD Bank Renovate to purchase a new sectional.  We have 100k in available credit however the best card we have has 17 mos left with zero interest or our lowest APR is 10%.   They offered 3 years at no interest so we took that deal. 

I was surprised to then see comments that using this type of company meant we were likely 'unable to find better credit options'.  My thought was really?  Where can you get better than 0% for 36 month?

Now I get where it can go wrong - if you pay late or dont pay it off in time, then you owe all that interest which is likely a high rate. I am sure this is where the stigmata comes from; but that can happen with any promo offer you fail to meet the terms on.

[SouthJamaica]

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@RobertEG wrote:

For years, loans from lendors identified as a "consumer finance company" was viewed by others and by scoring algorithms as a negative.

Consumer finance companies are generally defined as lendors who offer credit at higher interest rates than those generally prevailing with major banks.

Back in the day, many rural consumers had no choice other than to drive to a major city or else seek credit with a local lendor, who usually had higher rates.

However, with the advent of internet electronic access to credit application, consumers now have general access to national banks, and can shop for the best rates for which they qualify. 

Thus, use of a consumer finance company was viewed as an indication that the consumer could not obtain better credit from a major creditor, and was thus a negative in manual reviews and scoring algorithms.

However, many consumer finance loans are offered at low or zero introductory rates, such as that new stove from Sears.

Thus, using a consumer finance company can actually be an indication of a consumer getting better, not worse, terms.

Gradually, the general stigman on use of a consumer finance company is waning, as demonstrated by newer scoring models.

It is kinda an archaic view that is in transition.

---

Let me offer an alternate theory on why there might be a 'stigma' built into the FICO algorithms.

Possibly it's because banks are in control of the FICO world, and don't like competition.

[Anonymous]

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@SouthJamaica wrote:

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@RobertEG wrote:

For years, loans from lendors identified as a "consumer finance company" was viewed by others and by scoring algorithms as a negative.

Consumer finance companies are generally defined as lendors who offer credit at higher interest rates than those generally prevailing with major banks.

Back in the day, many rural consumers had no choice other than to drive to a major city or else seek credit with a local lendor, who usually had higher rates.

However, with the advent of internet electronic access to credit application, consumers now have general access to national banks, and can shop for the best rates for which they qualify. 

Thus, use of a consumer finance company was viewed as an indication that the consumer could not obtain better credit from a major creditor, and was thus a negative in manual reviews and scoring algorithms.

However, many consumer finance loans are offered at low or zero introductory rates, such as that new stove from Sears.

Thus, using a consumer finance company can actually be an indication of a consumer getting better, not worse, terms.

Gradually, the general stigman on use of a consumer finance company is waning, as demonstrated by newer scoring models.

It is kinda an archaic view that is in transition.

---

Let me offer an alternate theory on why there might be a 'stigma' built into the FICO algorithms.

Possibly it's because banks are in control of the FICO world, and don't like competition.

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A brand new conspiracy theory.