Is Affirm considered Sub Prime?

[Journeyjeans]

I see a fantastic way to finance a new computer on Amazon for a ridiculously low rate, but I am worried that Affirm would make my credit profile look bad. I have scores around 760 on all 3 major bureaus. I have 3 cards, Cap One Quicksilver $4800 (Rebuilder, started at $500), Navy Federal Cash Rewards $25,000, and Navy Federal More Rewards $25,000.  I also have a new mortgage $144,000 from a few months ago plus $7900 in Student Loans. I just don't want to hurt my credit long term trying to get a great short term deal.  Thank you for your insight!

[centex]

Any of the BNPL things are suspect, and the stock markets seem to agree.  The more the economy tanks, the more those unpaid chickens come home to roost. 

 

And the worst part...no rewards.

 

Re: stock market, they had a brief dead-cat bounce but are down almost 20% today.  In the past year, their chart looks like a bad roller coaster

Edited August 26, 2022 by centex
added chart

[hegemony]

yes

[TheVig]

Yes. Stay away.

 

Looking at the BNPL industry thru my lens. It's an industry that is trying to turn every store, into a type of FingerHut scheme.

[hdporter]

You're not going to "hurt your credit rating" over taking on an Affirm account. 

 

It appears that there may be a modest credit score "taint" associated with an Affirm account.  If so, the impact is less than 10 points and gets lost in the noise of typical FICO 8 variations.

 

As a data point, I have a paid Affirm account that was paid in 2019.  I have updated FICO 8's dated Apr 29 for my Equifax and Experian.  The Affirm account is reported only on Experian. 

 

My respective FICO 8's are EQ:  824, EX:  839.

 

I'll suggest that from a personal credit score perspective, reporting an Affirm account is a relative non-event.

 

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I'm of the perspective that a strong credit score is a terrible thing to waste.  If a decent credit opportunity is on the table, a good credit score puts you in the position where you can take advantage of it, even if a modest score hit accompanies it.

 

Having an Affirm account on one's report is in no respect an "albatross".

 

FWIW, BNPL has it's place in the marketplace.  A firm offering independent sellers some of the advantages of a captive finance card is a viable business model.  The sticking point is merely how that credit is managed.  In the case of Affirm, there are significant indicators that they employ relatively sophisticated statistical tools in management of their portfolio.  But in an environment in which fintechs have seen 50%+ stock price hits, some investors are running shy of Affirm as well.

[hegemony]

32 minutes ago, hdporter said:

You're not going to "hurt your credit rating" over taking on an Affirm account. 

 

It appears that there may be a modest credit score "taint" associated with an Affirm account.  If so, the impact is less than 10 points and gets lost in the noise of typical FICO 8 variations.

 

As a data point, I have a paid Affirm account that was paid in 2019.  I have updated FICO 8's dated Apr 29 for my Equifax and Experian.  The Affirm account is reported only on Experian. 

 

My respective FICO 8's are EQ:  824, EX:  839.

 

I'll suggest that from a personal credit score perspective, reporting an Affirm account is a relative non-event.

 

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From that perspective first premier isn't going to harm one's credit score. That said, if there is a financial advantage to using affirm or other fintech instead of a rewards credit card then by all means use one's credit score to one's advantage.

 

but affirm is not amex, chase, or discovery. Many of the people who use affirm do so as they have no alternative other than lay-away.

[hdporter]

11 minutes ago, hegemony said:

From that perspective first premier isn't going to harm one's credit score. That said, if there is a financial advantage to using affirm or other fintech instead of a rewards credit card then by all means use one's credit score to one's advantage.

 

but affirm is not amex, chase, or discovery. Many of the people who use affirm do so as they have no alternative other than lay-away.

 

No arguments here; sounds like you grasp my perspective.  And if opening a First Premier card extended a desirable financial advantage to me, I'd likely stand in line for it.  (However, FP isn't marketing to good credits and offers no advantages to those with better credit opportunities.

 

Affirm predictably is sought out largely by a <720 FICO score crowd.  However, the accounts backing the paper it sells are quoted as having a weighted average FICO of 686.  All things considered, that fairly strong paper.  Affirm has suffered from a disproportionate "flight to quality" in the current environment.

 

If I didn't already have $400k invested in underwater stocks (value below cost), I'd consider Affirm a viable investment at this time.

[centex]

51 minutes ago, hdporter said:

 

 

If I didn't already have $400k invested in underwater stocks (value below cost), I'd consider Affirm a viable investment at this time.

What's one more dead cat?  Today's decrease of $6.66 should be an omen...as if the 21.33% decrease on the day was not enough of a scream to stay away. 

[brainchasm]

I have an Affirm account, and it was great for financing an engagement ring.

 

Buuut, then she died.

 

Anyway!  I've looked at them for a few things I would splurge on, but I won't accept any of their offers with an APR.  If I got 0% on that ring, they can give me 0% anywhere else too.

 

[hdporter]

28 minutes ago, brainchasm said:

Anyway!  I've looked at them for a few things I would splurge on, but I won't accept any of their offers with an APR.  If I got 0% on that ring, they can give me 0% anywhere else too.

 

 

Not touching the fiancée anecdote (other to extend appropriate condolences).

 

Affirm's 0% offers involve seller inducements paid to Affirm.  Some sellers are content to offer Affirm financing, without subsidy, as an option.  You won't see 0% extended in those cases.

[hdporter]

1 hour ago, centex said:

What's one more dead cat?  Today's decrease of $6.66 should be an omen...as if the 21.33% decrease on the day was not enough of a scream to stay away. 

 

I see the Affirm decline as reflecting a flight from perceived recession risk than an assessment of failed strategy. 

 

Affirm's key weakness right now is that as it ramps up financing volume is its dependence upon external capital to fund that loan growth.  Amidst tightening markets, that's a critical factor.

 

Having said I have no plans to invest, I'll restrain myself to the observation.

 

 

[centex]

14 minutes ago, hdporter said:

 

I see the Affirm decline as reflecting a flight from perceived recession risk than an assessment of failed strategy. 

 

Affirm's key weakness right now is that as it ramps up financing volume is its dependence upon external capital to fund that loan growth.  Amidst tightening markets, that's a critical factor.

 

Having said I have no plans to invest, I'll restrain myself to the observation.

 

 

Remember that AFRM was north of $150 a share as recently as nine months or so ago...it is toxic, especially with yet another earnings miss and reduced guidance for 23Q1.

[hdporter]

3 minutes ago, centex said:

Remember that AFRM was north of $150 a share as recently as nine months or so ago...it is toxic, especially with yet another earnings miss and reduced guidance for 23Q1.

 

By your logic, DOCU and FVRR are dead in the water as well.  (The list of high flyers last year which are selling at 30% or less of their peak is an impressive one.)

 

As far as AFRM, what part of "recession" don't you understand.  I believe Affirm is poised to go the distance (as I posture for DOCU and FVRR, which I am holding).  But there are a lot of investors who were content to hold AFRM but want nothing to do with it in the shadow of an extended recession.

 

I'll admit that the risk is there that AFRM may end up in the toilet at the end of the day.  But overall market economics will have more to do with that than AFRM's strategy.

[Journeyjeans]

Wow....thank you EVERYONE for your insight.  I will definitely pass for now.  Appreciate you!  Sidebar, as an investment, I think Affirm was the company that was being promoted last year as the "credit card killer" by The Motley Fool investment advisor people.

[centex]

On 8/26/2022 at 5:56 PM, hdporter said:

 

By your logic, DOCU and FVRR are dead in the water as well.  (The list of high flyers last year which are selling at 30% or less of their peak is an impressive one.)

 

As far as AFRM, what part of "recession" don't you understand.  I believe Affirm is poised to go the distance (as I posture for DOCU and FVRR, which I am holding).  But there are a lot of investors who were content to hold AFRM but want nothing to do with it in the shadow of an extended recession.

 

I'll admit that the risk is there that AFRM may end up in the toilet at the end of the day.  But overall market economics will have more to do with that than AFRM's strategy.

I won't speak to DOCU or FVRR since I have no time spent with either of those.  But I guess all those 'underperform' and 'sell' recommendations must be from brokers who hate money...and an article today pointed out that "One main takeaway: Costs have been growing faster than revenue, even when excluding expenses related to loans that soured." Those losses will continue to escalate as interest rates rise...

 

I cannot speak to the recession comment without running afoul of the 'no politics' edict.  But I believe you ignore how many States have been fully open for business for more than a year and a half...

[centex]

I think $AFRM had its dead-cat bounce...from a claw back to $40 in mid-August and now back down to $20. 

[hdporter]

Confession:  I have a penchant of rooting for "underdog" stocks which, in hindsight, were doomed to fail.  (About 20 years ago,, I was confident DJT was a "steal" at $5 ... fortunately my wallet was thin.)

 

AFRM operates in a niche in which I have little interest assuming risk.  However, were it not for the general business climate, I think they have the strategy and acumen that it takes to succeed. 

 

But we're likely starring a classical recession in the face.  I haven't browsed their capitalization, but I would have grave doubts that they have the liquidity to survive the coming year.

[Goku4]

I have an Affirm account I'm paying monthly installments on, I had to use it in a pinch but once it's paid off I believe it will strengthen my credit profile. It was offered to me on an Amazon purchase.

[hdporter]

1 hour ago, Goku4 said:

I have an Affirm account I'm paying monthly installments on, I had to use it in a pinch but once it's paid off I believe it will strengthen my credit profile. It was offered to me on an Amazon purchase.

 

I won't argue with you.

 

The argument that an Affirm account carries a definite stench when your credit report is evaluated, at this point, is something I consider a little suspect. 

 

Where are the red flags surrounding an Affirm account that arise when, say, a 30-day delinquency is incurred.  And, I don't see any authority on the matter pointing out just how much an Affirm account tanks your FICO scores.  Further, I don't buy that, on manual review, the presence of an Affirm account, in itself, carries a derogatory connotation. 

 

Still, in fairness, the presence of carbon monoxide in a room doesn't raise any immediate alarm (short of a CO monitor).  It's "taint", if not remedied, manifests very strongly, nonetheless.

 

 

[Goku4]

On 9/24/2022 at 2:43 PM, hdporter said:

 

I won't argue with you.

 

The argument that an Affirm account carries a definite stench when your credit report is evaluated, at this point, is something I consider a little suspect. 

 

Where are the red flags surrounding an Affirm account that arise when, say, a 30-day delinquency is incurred.  And, I don't see any authority on the matter pointing out just how much an Affirm account tanks your FICO scores.  Further, I don't buy that, on manual review, the presence of an Affirm account, in itself, carries a derogatory connotation. 

 

Still, in fairness, the presence of carbon monoxide in a room doesn't raise any immediate alarm (short of a CO monitor).  It's "taint", if not remedied, manifests very strongly, nonetheless.

 

 

I don't understand your response in the sense that I was in esisence agreeing with what you said, that it probably isn't that bad. So why you put "I won't argue with you" is beyond me.

 

Still though, 2 accounts both $100 or less will be paid off by end of December and I'm done with them.

 

Just as long as PRA doesn't sue me with the score rise...

 

[shifter]

1 hour ago, Goku4 said:

I don't understand your response in the sense that I was in esisence agreeing with what you said, that it probably isn't that bad. So why you put "I won't argue with you" is beyond me.

What he meant was, "I really want to argue with you, but I won't." If he were to have chosen to argue with you, I would imagine he might have said that an Affirm account will be a stench on your reports for 10 years and having it there will not "strengthen your credit profile" in any way. 

[MarvBear]

A well paid Affirm account will not reflect unfavorably on a credit file.

[hdporter]

1 hour ago, MarvBear said:

A well paid Affirm account will not reflect unfavorably on a credit file.

 

Technically we are in agreement, @MarvBear.  However, after I added a paid Affirm account, I started seeing a related negative credit factor in my scoring report.  (I forget, in this moment, what the descriptor was.)

 

However, any impact on my actual FICO credit score was minimal.  And, after having aged for awhile, it was no longer flagged.

[Goku4]

On 11/26/2022 at 4:11 PM, MarvBear said:

A well paid Affirm account will not reflect unfavorably on a credit file.

I paid mine off just last week.