I just posted this on another thread. It might be helpful in understanding FICO's response to Consumer Finance Companies.
This is from my own myfico.com/12 report. My score for this report was EQ 711.
This is my #3 "What's Hurting Your Score" - it fell down to my number three position after I closed my Consumer Finance Accounts. It was previously in the #2 "What's hurting your score" spot.
This reason code is invisible on my myfico.com reports; but shows up on my mortgage pull and consistently on myfico.com/12 reports. Ditto for DH.
You have a consumer finance account on your credit report.
Consumer finance companies typically grant loans to people with poor credit histories. Their customers often cannot get loans from traditional lending companies such as banks or credit unions. These are often high-interest loans because the consumer finance company is assuming more risk by lending to people with less than perfect credit.
The fact that you have a consumer finance company loan on your credit report means that you represent a higher risk to lenders than someone with no consumer finance loans. Even if this consumer finance account is closed, it will still lower your FICO score. However, its impact on your score will lessen as time passes.
What to do about this: You should try to stay current with all of your payments and avoid opening any new credit accounts that you don't need.
Only 12% of FICO High Achievers [?] have a consumer finance account.
Reason Code: 6
@ficonovice wrote:
I've learned to ignore some of those factors as listed here on myFICO.
Primarily because one of my "negative" factors listed by EQ is:
You have a short credit history.
Your oldest account was opened
20 Years, 9 Months ago
FICO High Achievers [?] opened their oldest account 19 years ago, on average.
Average age of your accounts
7 years
Most FICO High Achievers [?] have an average age of accounts between 6 and 12 years.
Your FICO score measures the age of your oldest account and the average age of your accounts. In your case, either your oldest account was opened recently or the average age of your accounts is relatively low. People that do not frequently open new accounts and have longer credit histories generally pose less risk to lenders. Therefore, as your credit history lengthens and you pay your bills on time, this factor should have less of a negative impact on your score.
Doesn't make much sense, does it???
Mine is very similar. FICO's also tracking other factors in your credit history - but only gives you the data on those two points. Kind of like having a berry pie - it may tell you how many raspberries and blackberries are in the pie, but if you look at the ingredients there may be blueberries, marionberries and gooseberries in the mix. The formula is far more complex than these two factors. But it's confusing as heck if you just read those two factors (out of the many they're actually tracking) and try to make sense of it all. That's one of the problems with taking a complex formula and editing it down to a few simple statements for John Q. Public. Imperfect as it is, I'm still glad we have access to at least part of the information.