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DansDeals Forum => Credit Cards => Topic started by: Hyshai on January 08, 2020, 02:16:34 PM

Title: PSA: Totalled auto lease can affect your credit score
Post by: Hyshai on January 08, 2020, 02:16:34 PM
TL;DR: An auto lease (possibly applies to financed autos too?) that was "totalled" and reported to the credit agencies as an "Insurance Loss" will negatively impact FICO 8 scores; it will be categorized as a serious (>60 day) delinquency.

This has been reported on other forums (e.g. https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Re-Early-termination-amp-insurance-loss/td-p/3988572 ); the below is my own experience.

In 2017, I had a leased auto which was involved in an accident that resulted in the totalling of the car. The insurance company paid off the lease; and the leasing bank reported it to the credit agencies as a Positive Account in good standing which was fully paid off and closed. The bank also added a comment stating that this was an "Early termination/Insurance loss".

All was fine until mid-2019 when suddenly my Transunion and Experian FICO 8 credit scores plummeted ~100 points (from 820s to 730s).  (Only FICO 8, all other scores didn't change.)  MyFICO reported that there was a serious delinquency on my account. After much time and effort (and a subscription to MyFICO), I was able to determine that the comment of "Insurance loss" was triggering the FICO 8 algorithm to consider this a "delinquency". I spoke to a CSR at MyFICO and they said that this is by design because "our high scorers don't have this on their reports", i.e. having an insurance loss was somehow some sort of negative flag :o .

Here's what the comments on my credit report looked like for this account:
Equifax: "Early Termination" - score remained in 820 range (apparently "Early Termination" by itself isn't an issue)
Transunion: "Early Termination/Insurance loss" - score dropped to 730 range
Experian: "Early Termination/Insurance loss" - score dropped to 730 range

I called Transunion and after HUCA a few times I was able to get them to fully remove that comment from this account. The next day my score went back up to 820 range.

I haven't been as lucky with Experian, and even after disputing it they are leaving the comment there because it is factually correct.

The leasing bank (Chrysler Capital, now owned by Santander), also has declined to remove the comment since it's factually correct.

In my opinion, this is a bug in the factors of the FICO 8 algorithm (FICO 9, VantageScore weren't affected); why would an insurance loss have any determination on the credit risk of a consumer?? (CS rep confirmed that this negative "flag" applies no matter which driver was at fault for the insurance loss).
Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: Dan on January 08, 2020, 02:21:31 PM
Ouch, wow.
Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: Malachi on January 08, 2020, 04:58:39 PM
This is crazy!
Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: noturbizniss on January 08, 2020, 05:17:05 PM
Unless the insurance company doesn't pay in full, im not sure why this has an impact. I can understand on an insurance score, but the loan was paid in full, so who cares how it was paid.
Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: Joel2 on January 08, 2020, 05:31:23 PM
Can we guess it has to do with the bank and not assume it's the same situation with every other bank.
Can anyone ask someone whose car was totaled and see if this is a isolated incident.
Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: Hyshai on January 08, 2020, 06:28:18 PM
Can we guess it has to do with the bank and not assume it's the same situation with every other bank.
Can anyone ask someone whose car was totaled and see if this is a isolated incident.
Google it. This isn't an isolated case and it has nothing to do with the bank. I included another instance in my post; there are other reports online as well.
Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: Joel2 on January 08, 2020, 06:29:28 PM
Google it. This isn't an isolated case and it has nothing to do with the bank; I included another instance in my post. There are other reports online as well.
Wow! So what is the solution?
Owning the car or paying out of pocket for the car...
Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: db23 on January 09, 2020, 09:11:33 AM
i have a new auto lease and it seems to be reporting the total amount due on the 3 year lease as if i pu that whole amount on my cc.
and its bringing down my score.

is this norm as to hoe car leases are reported?
Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: Joel2 on January 09, 2020, 09:12:54 AM
i have a new auto lease and it seems to be reporting the total amount due on the 3 year lease as if i pu that whole amount on my cc.
and its bringing down my score.

is this norm as to hoe car leases are reported?
I have this as well. Every month it goes down when you pay the monthly bill.
Look at the bright side it will help your score in the long run
Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: db23 on January 09, 2020, 09:23:18 AM
its stupid that this is the way they report a car lease.

imagine if when you buy a house and have a $500k mortgage show up as reg spending on your credit report. wont be pretty.

shouldnt it be that just the actual monthly payment be reported? and have as a separate category the full loan amount.

this for sure effected my score but i think its hurting more now bec i was doing a large amount of spending recently (pay bills on time, some after closing of statement) plus i opened a few cards recently. my score a few months ago was around 810 now its at 717. think fico 755
Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: Meno on January 09, 2020, 01:49:46 PM
its stupid that this is the way they report a car lease.

imagine if when you buy a house and have a $500k mortgage show up as reg spending on your credit report. wont be pretty.

shouldnt it be that just the actual monthly payment be reported? and have as a separate category the full loan amount.

this for sure effected my score but i think its hurting more now bec i was doing a large amount of spending recently (pay bills on time, some after closing of statement) plus i opened a few cards recently. my score a few months ago was around 810 now its at 717. think fico 755

I'm pretty sure you have something else going on.

My credit score has never gone down more than a few points due to a new lease.

I just checked my credit report through Chase Credit Journey. My mortgage, car lease, loans, and credit cards are all listed the same way - they all show the outstanding balance as well as the minimum monthly payment.

Also, it is definitely not the same as putting the total amount of the lease on your credit card, because then it would count toward your credit utilization.




Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: db23 on January 09, 2020, 05:04:23 PM
its showing my overall credit being mixed in with my cc spend and my new loan. so lets say my reg spend is $10k its showing $20k.
Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: shapsam on January 09, 2020, 05:51:38 PM
I just checked an EX credit report with a lease that was totaled, it comes up as: EARLY TERMINATION/BALANCE OWING; AUTO LEASE  ....  PAID
Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: Meno on January 09, 2020, 07:20:37 PM
its showing my overall credit being mixed in with my cc spend and my new loan. so lets say my reg spend is $10k its showing $20k.

Ok but they still don't count them the same. There's no way they count it in your credit utilization.
Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: Hyshai on January 09, 2020, 09:57:16 PM
I just checked an EX credit report with a lease that was totaled, it comes up as: EARLY TERMINATION/BALANCE OWING; AUTO LEASE  ....  PAID
You got lucky :) - didn't include the (apparently) magic words, "Insurance Loss".
Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: abe2np on January 19, 2020, 12:27:57 PM
Maybe
I just checked an EX credit report with a lease that was totaled, it comes up as: EARLY TERMINATION/BALANCE OWING; AUTO LEASE  ....  PAID
@Hyshai Maybe you can convince Experian to change the wording to what @shapsam has on his?
Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: dz164 on January 19, 2020, 09:18:54 PM
I had a (honda finance) lease totalled 2 years ago with no CR impact or designation other than "closed"

Don't understand the rationale for a negative on a CR - the loan was fully paid by the insurance.

Insurance claims / losses are in another set of databases

Live and learn i guess.
Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: Hyshai on January 19, 2020, 09:37:38 PM
Maybe @Hyshai Maybe you can convince Experian to change the wording to what @shapsam has on his?
It's a blame game at this point - FICO says if it's on the credit report then I should speak to Experian; Experian says that since the bank reported this comment - the bank has to change it; and the bank says that they have no control over the credit report and should talk to Experian. Triangle of frustration.
Title: Re: PSA: Totalled auto lease can affect your credit score
Post by: grodnoking on January 19, 2020, 10:16:30 PM
It's a blame game at this point - FICO says if it's on the credit report then I should speak to Experian; Experian says that since the bank reported this comment - the bank has to change it; and the bank says that they have no control over the credit report and should talk to Experian. Triangle of frustration.
Get them all on the phone at once