     Jack Turner (Procare) | Wednesday, January 17, 2001 - 08:50 pm 
I have read that having a loan financed through a finance company can effect my scores.
I currently have an auto financed through Household Auto, and have paid perfectly for over 2 years. I guess I do not understand why this account could possibly have a negative impact on my credit scores. Can anyone explain this to me? |
| Erik (Erik) | Thursday, January 18, 2001 - 05:07 am
Fair, Isaac must have found that consumers who use finance companies are statistically more likely to default than consumers who don't. |
| Shylock (Shylock) | Thursday, January 18, 2001 - 05:03 am
When you first finance a vehicle you should expect a solid drop in your score. However as you continue to pay on time your score will improve until it reaches or surpasses your original score. Exactly how long this takes is hard to predict.
The inquiry(ies) will lower your score all by itself. Inquiries only count for 12 months.
The presence of the new loan may lower the average age of your accounts. For example if you have one credit card you got 4 years ago and one credit card you got 2 years ago your average age of accounts is 3 years. Once you get the car your average age of accounts will drop to 2 years. However, 2 years later your average age of accounts will have increased by 2 to 4 years.
Finally the higher the amount you owe vs. the original amount of the loan the more your score will be penalized. If the original loan was for $10,000 and you now owe $6,000 you are in better shape than if you owed $8,000 but not as good a shape as if you owed $4,000.
I wouldn't worry that much about it. |
