Finance companies may not all be direct lenders

One of the lesser-known credit facts is that using finance company accounts can hurt your credit scores. It’s not a huge “point killer” but it can still hurt, especially if you are trying to improve your credit scores and you need every point you can get.

Avoiding finance company credit should be very easy. All you have to do is not apply, right? I mean, if I see a building on the corner with a “Joe’s Finance Company” sign then I’m going to keep driving. Seems simple.
Ah, but it’s not. In fact, thousands of people are opening up new finance company accounts each day and they don’t even know they’re doing it. They’re doing it by taking advantage of “in-store credit” offers. The technical term for this is Indirect Lending. You are applying for credit at a store but a completely different company is extending the credit.

Indirect lending is most common in the automotive industry. When you ask a car dealer to help you find financing for a new or used car they shop your credit out to several of their lending partners. You may be at a Ford dealership but you’re actually applying for credit with several lenders, not necessarily just with Ford Credit.

In the case of in-store credit the biggest culprits are the big box electronics retailers and furniture showrooms. When you apply for their credit to take advantage of “same as cash” offers then you are actually applying for credit with a completely different company. And, in many cases that company is a finance company.
If your application is approved you’ll drive away with a new TV, a dining room table and a brand new finance company account. In about 30 days that account will show up on your credit reports and your credit scores could suffer because of it.

This is all completely legal and, in fact, you agreed to it when you signed the credit application. Most people don’t read the fine print but it most likely identifies the indirect lender by name.
So what can you do about it if you’ve been a victim? Well, there’s not much you can do about it. Even if you have an old finance company account that has been paid in full for years the mere fact that you have one (or more than one) can still hurt your scores.

The better question is, now that you know this, how can I avoid it? There’s good news. It’s actually very easy to avoid this from happening to you. Before you fill out any application read who the lender will be. If the lender has the words “Finance” or “Financial” in the name then don’t go any further.

And, just to be safe, even if it’s with a lender that doesn’t have the dreaded “F” word in the name, it’s still a
good idea to ask the credit manager “WHAT TYPE OF ACCOUNT WILL SHOW UP ON MY CREDIT REPORTS?” If he or she doesn’t know then don’t go any further. If they assure you that it will show up as a “bank” account then you’re probably going to be fine. But, just to be sure, get it in writing.
If it will show up as a “finance company” account then don’t go any further. It’s simply not worth it.

February, 2019 Finances remain in the spotlight, especially with many people receiving smaller tax refunds or no tax refunds in 2019. The Personal loans can bridge the gap between their financial hardship or cash emergencies. These consumers are often facing bills they can not afford or high-interest debts that they are not able to pay back quickly. The good thing is more online lenders in 2018 can help borrowers with fair to poor credit profiles. If you have been struggling to get approved for a new loan, follow these 5 ,tips to get your credit scores from the poor range (below 620) to the good to excellent range (680 to 740) and you will find that many more loan options at better terms are likely to become available.

1. Avoid applying for unnecessary credit cards or additional credit items, new inquiries can bring down your credit scores.

2. Pay down the balance of any revolving credit lines you may have, getting below 50% of your available credit limit is ideal.

3. Review a free copy of your credit report to dispute any inaccurate collection, late notices or charge-offs.

4. Continue to make all of your payments on time.

5. Consider a request to your credit card company to increase your existing credit limit, this may help bring up your credit score if they can do this without first pulling your credit report.


Our editorial team will continue working hard to find good news stories, articles and tips for consumer loans, debt reduction and savings tips for 2019. This year we are working to improve our content and set the standard for the short-term lending discussion.