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The CFA problem

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bradlin
Established Member

The CFA problem

I've done some reading on this topic. Some say it creates a flag which stays on your report for 10 years. They say it is 15 point off of your otherwise score as long as the flag is on your report. 

Others have said it is a minor impact to your score. 

However any denials I get include the "too many consumer finance account reason". 

This is despite scoring 793 on EX Fico. 

I don't get many denials but the ones I do always include that. A credit analyst I spoke to with Chase kept bringing those up in my conversation. It's almost as if given their current risk aversion they simply will not lend to people who have that flag. 

I had no idea when I took them out. Like little silly ones like Affirm 0%. But also important ones like LendingClub which helped me pay off my cards and attain the score I have now. Now i'm kicking myself for all those little stupid Affirm purchases. They are all paid off now and also the LendingClub loans. 

It's funny how with these loans you don't better your credit by paying on time/early and paying off the balance. You just get a 10 year negative mark on your report for choosing a creditor or credit product. 

That denial reason has to stop being used against me at some point right? Or do I fight them? They are paid. I doubt anyone would care to verify if requested. In fact keeping a balance and doing a pay for delete is probably a way to deal with these. 

Also why do they report paid trade lines? Do they want to be complicit in the process that makes people have to think 3 times before using their product? It doesn't make any sense why they report it after being paid in full. It only drives people away. 

 

Message 1 of 10
9 REPLIES 9
Kidcat
Established Contributor

Re: The CFA problem

Affirm especially.  I had some old paid off ones from years ago and all of a sudden they were all reported at once to Experian and that score lags consistently.  Some were even for items returned.  Lesson learned.




Last app 09/21/2021. Gardening Goal Oct 2023
Message 2 of 10
FinStar
Moderator Emeritus

Re: The CFA problem


@bradlin wrote:

I've done some reading on this topic. Some say it creates a flag which stays on your report for 10 years. They say it is 15 point off of your otherwise score as long as the flag is on your report. 

Others have said it is a minor impact to your score. 

However any denials I get include the "too many consumer finance account reason". 

This is despite scoring 793 on EX Fico. 

I don't get many denials but the ones I do always include that. A credit analyst I spoke to with Chase kept bringing those up in my conversation. It's almost as if given their current risk aversion they simply will not lend to people who have that flag. 

I had no idea when I took them out. Like little silly ones like Affirm 0%. But also important ones like LendingClub which helped me pay off my cards and attain the score I have now. Now i'm kicking myself for all those little stupid Affirm purchases. They are all paid off now and also the LendingClub loans. 

It's funny how with these loans you don't better your credit by paying on time/early and paying off the balance. You just get a 10 year negative mark on your report for choosing a creditor or credit product. 

That denial reason has to stop being used against me at some point right? Or do I fight them? They are paid. I doubt anyone would care to verify if requested. In fact keeping a balance and doing a pay for delete is probably a way to deal with these. 

Also why do they report paid trade lines? Do they want to be complicit in the process that makes people have to think 3 times before using their product? It doesn't make any sense why they report it after being paid in full. It only drives people away. 


I'm not sure how viable the outcome would be on whether you could "fight" or remove them from CRs given they are not treated like a variety of collection agencies where PFD is an option.  They're consumer loans, not collection items.

 

These types of alternative financing vehicles exist for a reason.   Sure, not many people may know about them (reporting-wise) until it's too late.  And, while it's unfortunate that you found out the hard way about the negative reason codes that are associated with the presence of some of these tradelines, I'm not sure I follow how there's a premise of complicity.

Message 3 of 10
bradlin
Established Member

Re: The CFA problem

I'm just saying from a business perspective I understand why they report while you are paying.  They want to make sure you have repercussions for not paying. But once it's paid why report it? You just ding the customer and words gets out. I wish it got out before I took them out. Why not stop reporting the account? It makes repeat business more likely. 

These affirm, afterpay products appear on many top quality merchant sites. When I search for this kind of information it's all so underground and only in the credit monitoring community. 

Why do none of the mainstream finance sites talk about this at all? 

Mostly I just don't understand reporting it from the business perspective of these companies. They don't gain anything. Why lose reputation and repeat business? 

 

 

Message 4 of 10
K-in-Boston
Credit Mentor

Re: The CFA problem

The effect of a CFA is generally exaggerated.  I've had FICO 8 scores in 830s while also having a ton of new accounts and a not-ideal amount of revolving debt and a fairly large number of accounts reporting balances.  It certainly wasn't the presence of several CFAs keeping those last 15 points away.  Of course things get weighted differently for different profiles. 

 

Keep in mind that CFAs are not created equally.  Why would someone with great credit get a 3.9% auto loan with a credit union for example if they can get 0% or 0.9% manufacturer financing?  Many of those seem to trigger the CFA flag but can save someone with good credit a lot of money.

 

When it comes to things like a manual review, they are more likely to be in question not because they are CFAs but because of the specific accounts.  An account like LendingClub or Prosper usually points to previous or current credit utilization issues, and those loans are generally not at all on favorable terms compared to personal loans from banks and credit unions.

 

As for the reporting for up to 10 years, that's just how credit reporting is set up.  As long as an account has a positive history, it's difficult for me to think of any negatives from that.  They contribute to your age of accounts and show a longer credit history than if loans and other accounts just dropped immediately once paid.  Imagine you just paid a mortgage off after 30 years of payments, closed your two old credit cards last year and just got a new one last month.  If everything fell off after being paid or closed, your total credit history after 30+ years of payments would be erased and you would now have the same credit history as for example a college student that just got their first credit card last month.

Message 5 of 10
bradlin
Established Member

Re: The CFA problem

You have some valid points. Certainly accessing those sources does point to utilization issues with revolving credit. Perhaps some time could help that. In the case of manual review. 


Certainly I would want all my positive payment history retained. I suppose this doesn't really count as positive history when it is clearly specified as a reason when you get denied. It is clearly a negative when the computer analyses your credit. I don't care to have that on my record. If it's so "positive" why not let the consumer delete it if they so choose? 

I may still get denied but I won't have "too many consumer finance accounts" in my denial reasons. 

 

Message 6 of 10
dragontears
Senior Contributor

Re: The CFA problem

You are not being denied because of CFA. They are just one of the negative reason codes from the scoring model used by a lender. Negative reason codes are indication of why your scores are not higher.

Lenders are required to provide a reason with a denial and many lenders just provide the negative reason codes as an easy way to be compliant with the law. That doesn't mean that those are why you were denied. i.e. A reason but not The reason that you were denied. 

Message 7 of 10
Revelate
Moderator Emeritus

Re: The CFA problem

I am deeply cynical on the handling of CFAs in the FICO algorithm.

 

At this point I want NOTHING to be published anywhere, because if EVERYONE has a CFA, then they're flat useless from a data analytics perspective and FICO will stop using them to penalize people.

 

They served their purpose back in the day, I get it... but the modern definition has become so skewed and what is vs is not a CFA is not fixed over time that it really should be struck down as anti-consumer.  

 

Trust me when I say though that the actual denial reason wasn't because you have a CFA explicitly as dragontears suggests, that indeed came back from the bureaus but there were other factors in your report that caused the UW denial.  We never see most of the reasons our credit and financial profiles don't cross the threshold to get an approval, we just get a reason code that they get from the bureaus because they can't be sued over those.  I also suspect there's a decent chance you can get to an 850 even with a CFA, I'd be really close if I didn't have mortgages right now once my last few blemishes are gone in a few months other than the CFA.

 

That said I know precisely when my single CFA that I got at the dawn of my credit building history is coming off.  Can't wait!  




        
Message 8 of 10
Anonymous
Not applicable

Re: The CFA problem

For my EX2, my single CFA is costing me more points than having 6 of 19 accounts with a balance but less than new accounts (1/12) so it is a ding but it's not a big one. That said, I agree with Revelate about the whole thing. It won't be long before everyone has one with how popular 0% financing with companies like Affirm has become and then it will be a moot point for everyone. 

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Message 9 of 10
Kidcat
Established Contributor

Re: The CFA problem

Not to mention as someone mentioned above car loans.  I have financed with Toyota and Mercedes Benz at 0%.  They definitely code as CFA, but 0% is 0%.  So I just live with it.  Though the Affirm ones threw me for a loop because they were from a couple of years ago, all positive etc. It's just that they reported them all at once, so I had all of these new accounts hit a once, whereas before they were not reporting at all.  Again, lesson learned.




Last app 09/21/2021. Gardening Goal Oct 2023
Message 10 of 10
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