How bad are consumer finance accounts really?

[FinStar]

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@sarge12 wrote:

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@Brian_Earl_Spilner wrote:

Nobody knows. Sometimes it's really difficult to pin down what account is a CFA. Then you have lenders like Honda and Toyota whose financing shows up as a CFA. From what I've seen, it doesn't appear to drag down your score much. Issue is more with lenders on a manual review who see them. Even then, it seems to be a non-issue for most.

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From personal experience, it affects mortgage scores mainly. American Honda Finance showed as a negative on my mortgage scores for 10 years, in spite of the fact I only actually had the loan for 1 day. I re-financed the day after buying my Goldwing to get a better rate from my credit union. I can't attribute all the lower scores to that alone, but my fico scores used in mortgages were about 50 points lower than fico 08 scores. They are still lower, even after falling off the report, but are closer now than they were then FWIW.

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My outcome was definitely different than yours regarding AHF.  Many, many moons ago, I had leases and loans with AHF and I never saw any [CFA] negative reason codes display on any of the scoring versions 🤷‍♂️

[AzCreditGuy]

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@REDBOYYY56 wrote:

This is one topic that no one has a definite answer for. With all things being equal, my Experian fico 8 score has been my lowest score at 756. There are currently 3 CFA showing paid that go back since 2018. Since I'm not looking for a mortgage anytime soon I've never really dug into it.

Currently, it's listed as the second negative item on my Experian, so it has some impact but it's hard to quantify how much! 

The fact that it's my lowest score across the board tells me that it has some impact.

I wished I was warned of those CFA, but that's another story for another day!!

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With the newer modern lenders out there, that go against the old traditional banks routes, you would think the Bureaus would update the criteria on what is a CFA loan.  I got a SOFI back in 2019 not thinking it would not be a CFA ding. 2 years later and Ficos above 800s and a balance of $27 on a $12,500 loan, I decided to pay off the loan and get rid of the very small balance. 10 years here we come to get rid of it and who cares, I think I have proved my credit worthiness ….

[Phana24]

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@sarge12 wrote:

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Even though that might seem unfair, and it does, I can vouch for that fact. The fact that it is on the report is seen as a negative for as long as it remains on the report, so it being paid off does not even keep it from being a negative. It is only the amount it might be harmful that is in doubt. I do not think it affects fico 08 scores any more than any loan does, but showed on my mortgage scores as a negative for the full 10 years. Don't mis-interpret that, it is not a negative that will be as harmful as delinquincies, BK, or public records, but as far as I could tell, it is worse than an inquiry.

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It appears that some companies and lenders are getting the message.  My wife wanted to purchase a new treadmill from Pro-Form that featured 0% financing for three years.  Since I learned about CFAs here, I told her no, we'd just pay for it.  She insisted that "she" would pay for it and she had spoken to someone at Pro-Form that assured her there was no CFA involved.  I assumed they were scamming her, but when I called Pro-Form for details, she was right.  They actually issued a credit card from TD Bank in her name with the limit about 25% over the cost of the unit.  The card can be used for additional Pro-Form products, but (surprise, we also got a ton of "offers" from TD) we're not going down that road.  I hated to give up the cashback, but it was an opportunity to demonstrate to her, what happens when you have even one cc reporting at 70%+ usage.  Whether by design or coincidence, none of the CRAs reported an inquiry.  

[EaglesFan2006]

So it sounds like even if I paid off my personal loans as planned in the next 2-3 years I'm basically screwed for 10 years after that in terms of mortgage scores?

awesome.   

[dragontears]

For me, a CFA is a molehill that everyone tries to make a mountain out of. I have a CFA and these are my current mortgage scores 

[REDBOYYY56]

After hearing from many on this subject, and that includes data as well. I submit that CFA's are like scorable inquiries that never falls of until they actually falls off! 
The 2-3 point per should not be a deal breaker if you're able to Maximize in all other categories!!

[jeliop]

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@EaglesFan2006 wrote:

I got two personal loans last year to consolidate debt.   It's going well for me and I'm sticking to my plan.  So much so that I don't obsess about every day.  Score is up and I'm happy about that. 

that said I saw on my Barclays score alert that one of the negatives is "too many consumer finance accounts".  I didn't realize they were reporting as such.  Now I don't plan on seeking any credit for a few years, and these two loans would be paid off well before then.  However, how bad is the impact that they're on there?  Will they sting me down the road for ever even having one?

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It depends.  In my case, it hasn't been a real factor.  EQ=807, TU=800, EXP=795.  It is probably worse if you have very many of them and already low credit, or have defaulted on them.

[sarge12]

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@EaglesFan2006 wrote:

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@Anonymous wrote:

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@sarge12 wrote:

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I can't attribute all the lower scores to that alone, but my fico scores used in mortgages were about 50 points lower than fico 08 scores. 

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I don't think you can blame the CFA for that, or even a portion of that based on that fact alone.  My mortgage scores for a large portion of time ran 40-50 points lower than my Fico8s and I never had any CFAs.  That's just the way it is on some profiles.

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So it sounds like these ding you after they're paid off.   

Curious if these can really hurt your mortgage chances.   I'm not looking again for another few years at least.   But I have a few CFAs on my reports now.  My regular scores are low 700s.  Assuming when these are paid off and I have good DTI and all will they really make more mortgage scores that much lower?

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Very doubtful it would result in a denial on a mortgage. Your mortgage credit scores are not the most important thing in mortgage approvals, though many think it is. Mortgages are approved or denied based on the totality of the 3B credit reports and all the data they contain...not scores. Where the infamous middle mortgage scores come into play is in setting the interest rates after a manual review results in an approval. Anything that dings your mortgage scores, might result in higher interest rates for 30 years, or until re-finance. This is mainly a concern if your scores are on the borderline of getting a better rate. A quarter of a point in added interest on a mortgage can cost thousands of dollars in additional interest, and higher monthly payments. The primary concern is more the cost of the mortgage...not the approval. I highly doubt that a CFA being on the report would turn an otherwise approved loan into a denial, unless the manner of repayment of the CFA was an issue. Prior to approval they will go over the 3B pull with a fine tooth comb, and usually could care less about scores until setting the interest rate.

[Anonymous]

Are all auto finance companies considered a CFA? What about Capital One auto financing? 

[Hex]

@Anonymous 

Caputal One auto financing is not coded as a CFA. It's considered a regular bank auto loan.