The curious collection of a slightly mad scientist
I went from an $8,400 credit limit to a $1,200 limit in one day on my Discover Card. I “Discovered” this when I tried to purchase something today for $1,209.90. Seriously. They wouldn’t raise my limit by $10 freaking dollars. They said this was because of negative reporting by Countrywide on my home mortgage payments.
I was so pissed that I almost canceled the card on the spot. That is not the right thing to do, however. See below.
The reason I am in this entire mess is that a loan “expert” at Countrywide lied to me when talking me out of the 30 year fixed loan I requested and into a 5-1 Pay option Adjustable Rate Mortgage. I asked what happens if my home’s value falls and I was told that I could refinance. Really? Even if the value falls? Yes, I was told, there are many different kinds of refinancing Countrywide will provide even then. That was a lie! There is no refinance when you are underwater. I know that now, but I did not know that then. I trusted the loan expert. I am, therefore, a victim of predatory lending and I will fight to restore my good credit… once I figure out how.
Eleven months ago, a Countrywide representative advised me to stop making payments as the only way to get them to refinance to a 30 year fixed loan. Otherwise, they wouldn’t talk to me. So, that is what I did. (After they rejected the one and only short sale offer I had.) Not paying almost worked, but the 30 year fixed they offered was only on the 1st and the payment was too high when combined with the 2nd. I went and rented an apartment expecting to get booted out after a few months of not paying. I’m still here. They won’t foreclose because I only owe about $34,000 after 11 months (that’s interest only, plus the $300,000 on the house) and it costs them $50,000 to foreclose. Latest sale of a comparable home in my area: $168,000.
Now they advise me to pay, but that is absurd because when the rate adjusts in 2010 I won’t be able to afford the monthly payments. Why throw more money into a bottomless pit? If they give me a fixed rate I can afford, NOW I’ll start paying NOW. Fooled me once already. If I get no fixed loan with reasonable monthly payments they can take the home back. They won’t get a red cent from me because they ripped me off.
Here are some tips if you find yourself in my situation with the credit card limits shrinking. I have no credit card debt and no other bad marks on my credit that I know of other than the mortgage. This house is the worst financial mistake of my life.
Credit card news says:
1 Lower your card debt. Carrying credit-card debt is never good, but it’s really not a good idea these days. Bigger balances make consumers prime targets for credit-card companies looking to reduce credit lines, since the banks worry that you may not be able to pay your tab.
2 Watch the mail. When credit-card issuers lower credit limits, they must notify you. Typically, that will be done by mail (unless you’ve agreed to online-only notification). You should also review your monthly statement for changes, including a lower credit limit, interest-rate spikes and new penalties.
3 Check your report. Credit-card issuers review consumers’ credit reports for red flags, like late payments to other credit cards, a sudden buildup of debt or high credit-utilization rates. Check your credit report for free online at AnnualCreditReport.com. If it includes any errors, report them to the three major credit bureaus, Equifax, Experian and TransUnion.
Side note: I confirmed this at the FTC web site:
The three nationwide consumer reporting companies have set up a central website, a toll-free telephone number, and a mailing address through which you can order your free annual report. To order, visit annualcreditreport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. The form is on the back of this brochure; or you can print it from ftc.gov/credit. Do not contact the three nationwide consumer reporting companies individually. They are providing free annual credit reports only through annualcreditreport.com, 1-877-322-8228, and Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
Previous info continued:
4 Get online alerts. Ask your credit-card issuers if they offer online alerts that notify cardholders when they’re nearing their limit.
5 Shop around. If your credit limit gets slashed, don’t cancel your credit card. That will decrease your credit score. Instead, shop around for more attractive credit-card offers.
The financial meltdown of America. Here’s more information from askmrcreditcard:
… how do the credit card companies decide who’s credit limit gets the axe and who’s doesn’t?
An article from the News Tribune.com shed some eerie light on the subject for me:
Lenders are now increasingly considering factors beyond late or missed payments. Some are looking at geography and shopping behavior as well. If you live in an area with a high foreclosure rate or shop at stores that risky borrowers frequent, don’t be surprised if your line is reduced or your rate goes up.
“Among other factors, we do look at mortgage information and geography where there has been a greater deterioration in home prices. Those are some other factors, but again, we’re looking at the entire credit profile,” Lisa Gonzales, manager of public affairs for American Express, said of credit line reductions.
“We have taken actions such as lowering credit limits, adjusting rates, tightening credit standards and closing inactive accounts, particularly in certain geographies and where we can use mortgage data to enhance our decision-making capabilities,” said Jeanette Volpi, vice president of public affairs for Citi.
So, it’s not enough to pay your bills on time, keep your balances low, and follow the rules. Nope. You’ve got to live in an area where house prices are stable (Someone point me to that neighborhood please…) and shop at high end department stores, apparently.
More tips from credit fyi:
While there’s nothing you can do to prevent your credit card companies from lowering your credit limit, you can put yourself in a better position if it happens to you:
- Avoid carrying a balance from month to month on your credit cards so that a lowered credit limit won’t increase your debt utilization as much.
- Reduce your credit card debt as quickly as possible to minimize the effects of a lowered credit score if your limits are lowered.
- Consider a balance-transfer offer to increase your available credit (and lower your debt utilization percentage) if your existing card limits are decreased.
More tips from msn:
Use your cards lightly. Racking up big balances can hurt your scores, regardless of whether you pay your bills in full each month.
What’s typically reported to the credit bureaus, and thus calculated into your scores, are the balances reported on your last statements. (That doesn’t mean paying off your balances each month isn’t financially smart — it is — just that the credit scores don’t care.)
You typically can increase your scores by limiting your charges to 30% or less of a card’s limit. If you’re having trouble keeping track, consider using a check register to track your spending, logging into your account frequently at the issuer’s Web site, or using personal finance software like Microsoft Money or Quicken, which can download your transactions and balances automatically.
…Dust off an old card. The older your credit history, the better. But if you stop using your oldest cards, the issuers may stop updating those accounts at the credit bureaus. The accounts will still appear, but they won’t be given as much weight in the credit-scoring formula as your active accounts, said Craig Watts, an executive at Fair Isaac, one of the leading credit scorers. That’s why Ferguson often recommends to her clients that they use their oldest cards every few months to charge a small amount, paying it off in full when the statement arrives.
… Get some goodwill. If you’ve been a good customer, a lender might agree to simply erase that one late payment from your credit history. You usually have to make the request in writing, and your chances for a “goodwill adjustment” improve the better your record with the company (and the better your credit in general). But it can’t hurt to ask.A longer-term solution for more-troubled accounts is to ask that they be “re-aged.” If the account is still open, the lender might erase previous delinquencies if you make a series of 12 or so on-time payments.
… Dispute old negatives. Say that fight with your phone company over an unfair bill a few years ago resulted in a collections account. You can continue protesting that the charge was unjust, or you can try disputing the account with the credit bureaus as “not mine.” The older and smaller a collection account, the more likely the collection agency won’t bother to verify it when the credit bureau investigates your dispute.Some consumers also have had luck disputing old items with a lender that has merged with another company, which can leave lender records a real mess.
… Blitz significant errors. Your credit scores are calculated based on the information in your credit reports, so certain errors there can really cost you. But not everything that’s reported in your files matters to your scores. Here’s the stuff that’s usually worth the effort of correcting with the bureaus:
- Late payments, charge-offs, collections or other negative items that aren’t yours.
- Credit limits reported as lower than they actually are.
- Accounts listed as “settled,” “paid derogatory,” “paid charge-off” or anything other than “current” or “paid as agreed” if you paid on time and in full.
- Accounts that are still listed as unpaid that were included in a bankruptcy.
- Negative items older than seven years (10 in the case of bankruptcy) that should have automatically fallen off your reports.
You actually have to be a bit careful with this last one, because sometimes scores actually go down when bad items fall off your reports. It’s a quirk in the FICO credit-scoring software, and the potential effect of eliminating old negative items is difficult to predict in advance.