The statement “too many consumer finance company accounts” that appears on your credit report means you have accounts creditors see as high-risk, overly expensive, or otherwise detrimental.
Having as little as one consumer finance account can hurt your score, even if the account has been closed and you have made all payments on time.
To remove them, deal with debt collectors if necessary, pay them off, and close the accounts. Once closed, you can offer to pay them to delete it, request goodwill removal, or ask the credit bureaus for early exclusion.
If everything fails, you can expect accounts closed in good standing to fall off your report in 10 years. If the account was delinquent, charged-off, or otherwise in bad standing, it usually falls off after 7 years.
What is a consumer finance account?
A consumer finance company account is a credit account typically related to financing specific retail purchases.
Creditors view these as high-risk lending, often accompanied by unfavorable terms like high-interest rates and stiff late payment penalties.
Specific examples include:
- Payday or personal loans: Unsecured loans that typically have high-interest rates and fees.
- Retailer credit accounts: Spread the cost of high-price items like furniture, electronics, and home improvement items over months or years. These can be installment loans or revolving credit cards, sometimes with attractive rates.
- Car loans: Some dealership financing prone to abuse might also be classified as one.
Lenders view these consumer finance accounts as unfavorable because they typically indicate a lack of restraint on the consumer’s part.
Purchasing high ticket items through a consumer loan sends the message that you are probably not equipped in servicing other loans.
They may also indicate a failure to identify unfavorable lending terms, such as a 0% introductory rate that quickly skyrockets to extreme levels not long after the loan is opened.
How many consumer finance accounts will hurt my credit?
As little as one consumer finance account can damage your credit. The more you have, the greater the damage is likely to be.
For those with lower credit, a reliance on consumer financing can drop scores by as much as 10 to 15 points per account.
On the other hand, those with better credit history and limited consumer finance accounts see much smaller hits of 2 to 6 points per account.
Credit utilization, late payment history, and your overall credit also play a role in determining the consequences of a new consumer account.
In other words, people showing signs of higher risk will be penalized more by opening consumer finance accounts.
It’s best to avoid opening them if possible, especially if they have unfavorable lending terms.
If your goal is to achieve a perfect 850 credit score, having even one consumer finance account can be detrimental.
Alternative options include:
- Home equity loans: Often an excellent secured lending option for many purchases, if you have the necessary equity.
- Car loans: Use national banks or credit unions instead of dealership financing. There’s some evidence that even official Honda and Toyota dealership financing accounts have been classified as credit-harming consumer finance accounts in certain cases.
- Revolving credit cards: Use national bank cards instead of retailer accounts. Avoid keeping a balance on any credit card because they are usually expensive due to high-interest rates. Carrying a balance can also harm your credit, especially if over 30% utilization (Tip: considering the AZEO method if taking this approach).
People aiming for a very high credit score may discover that the key factor adversely affecting their score is the presence of such consumer finance accounts.
Sometimes it’s even possible that such accounts may not have been intentionally opened.
For example, it is common to find that a retailer’s credit card (such as Home Depot or Macy’s) or dealership financing is the culprit.
Does one consumer finance account in good standing damage credit?
Just one consumer finance loan in good standing can still damage your credit.
When a lender is flagged as potentially high-risk, opening a single account with them harms your credit no matter how you pay it off.
The damage might be minimal, as little as 2 points, so in some cases, it can be worthwhile to use consumer financing options with attractive terms.
But you may receive the statement, “too many consumer finance company accounts” appear and cause an adverse credit impact, especially if you have no other credit issues.
How long does an account stay on your credit report?
Well-maintained credit accounts closed in good standing will usually stay on credit reports for up to 10 years before automatically falling off.
Usually, having accounts in good standing on your report is beneficial, but this also applies to consumer finance accounts, despite their negative impact.
Accounts closed in bad standing, such as charge-offs, bankruptcies, and late payments, typically stay on reports for 7 years due to a legal limitation.
Liquidation-bankruptcies, like Chapter 7, are an exception that stays on for 10 years because creditors usually recover less money and the penalties are more severe.
How do I get consumer finance accounts removed from my credit report?
To remove consumer finance accounts off of your credit report, start by paying off the debt and closing the account.
If a collection agency is involved, you’ll need to work with them or the original creditor to close the account.
Once closed, you can try other techniques to get it removed quickly, such as paying to take it off, asking for a goodwill removal, or requesting early exclusion.
If everything fails, you’ll have to wait the full 7 to 10 years for the account to fall off your credit report automatically.
Dealing with debt collectors
If your consumer finance account has been sent to a collection agency due to missed payments or delinquency, it’s best to resolve this as soon as possible to minimize the credit damage and get them off your report quickly.
It is worth knowing that despite the fact that you owe money, you are protected from illegal debt collection practices under the Fair Debt Collection Practices Act.
Here is a quick breakdown of your rights and steps you can take:
- Communication: Call the original creditor to see if they still own the debt and if so, work with them to pay it off and close it. If they sold it to the debt collector, you can send the agency a written request to not contact you at work. Many collectors will also abide by requests to use a preferred contact method.
- Request validation: Send a written request for validation. Ask for all pertinent details such as the original creditor, a copy of the original contract and the last billing statement, the date of the last payment, and the amount of the debt they purchased. You can also ask for verification of their license to collect debt in your state and if the statute of limitations (further expanded below) has passed.
- Verify the details: Check that the information they have is accurate. You have 30 days to notify them of anything incorrect.
- Check the statute of limitations: Creditors and collection agencies have limited time to recover debts, typically 3 to 6 years depending on state law and the debt type. If too much time has passed, you can inform the agency with a written letter or acquire the help of an attorney to argue this in your case.
- Negotiate repayment: Many times debt collectors will accept partial repayment or monthly payments to resolve the debt. Talking this over with a credit counselor or attorney might be worthwhile. Don’t agree to pay an amount you can’t afford as this will worsen your credit standing.
- Pay it off and close the account: Once closed, the 7 or 10-year countdown begins for the consumer finance account to automatically fall off your report.
How to remove consumer finance accounts
Here are techniques you can try to have consumer finance accounts taken off your credit report early:
- Pay-to-delete: Some debt collectors are willing to accept a payment to delete accounts, including consumer finance accounts, and remove them from your credit history. This is typically done with collection agencies, but you can try it with original creditors. Get any agreement in writing and verify that they have deleted it as agreed.
- Goodwill removal: By appealing to the goodwill of a creditor or debt collector, you might be able to have the account removed early. Some people have had success in sending a letter requesting the deletion, including information that describes your situation, what has changed, and how the removal can help you.
- Early exclusion: If you are nearing the 7 or 10-year fall-off mark, you can call the credit bureaus to request the account to be removed early. This is a voluntary action and individual results vary, but here are the general guidelines and numbers to call:
- TransUnion: Up to 6 months early (1-800-916-8800)
- Experian: Up to 3 months early (1-800-493-1058)
- Equifax: Up to 1-2 months early, if anything (1-877-784-2528)
- Wait it out: If everything else fails, you’ll have to wait the full 7 or 10 years for accounts to fall off. 7 years is for most accounts that closed in bad standing, such as charge-offs and many bankruptcies, while 10 years applies to accounts in good standing or liquidation bankruptcies like Chapter 7.
Dispute inaccuracies and statute of limitations
Always make sure the information on your credit report is accurate. If you find anything incorrect, file a dispute with the credit bureau and reach out to the creditor to correct the issue.
You’ll find that sometimes you may even disagree with the outcome, in which case you can then file another dispute, hopefully with more evidence supporting your case.
If a consumer finance account appears on your credit report that you knowingly did not open, this could be a sign of identity theft.
Start by asking each credit bureau to freeze your credit and put a fraud alert on your account.
Then visit identitytheft.gov to obtain an FTC ID Theft Affidavit, file a police report, and dispute the account with the credit bureaus and original creditor to have it removed.