12-19-2008 02:50 AM - edited 12-19-2008 04:34 AM
As a former cerdit zero who worked very hard to rebuild his credit, I think the new lawas will wind up hrting people like me. What will happen is that it will be harder or impossible for Marty v1.0 to get a credit card and they will do things like annual fees and such to poeple like Marty v2.0 to make up the loss in interest.
Does anyone here want to pay $95 a year for their Visa/MC card when they are PIF'ers.
If you pay your bills on time and dont revolve balances (which these days is good anyway) the new laws dont do anything for you.
Besides, if you dont like your CCC's terms and practices, dont use the card. You can always find an other one.
12-19-2008 04:27 AM
I really think this is much ado about very little.
Yes it will have an effect on those at the lower end of the credit spectrum. There probably should be an effect on them. Nonetheless, I still believe that anyone that needs a CC will be able to obtain one. And it won't cost them much more than it does currently. It couldn't, Just look at the startup costs for a sub-prime Orchard or worse yet First Premier card!
For those at the higher end of the credit spectrum things won't change a great deal. CC issuers are in business and they are in the business of extending unsecured credit to those who are credit worthy. They make plenty of revenue off the fees imposed on merchants processing charges and the interest imposed on those who elect to carry balances. If the end product is fewer defaulted balances and those defaulted are in lower amounts it is far better for everybody.
What is going to change is the granting of excessively high CL's. If you have a $45K CL of which you have only touched $5K it is highly likely that you are going to get a CLD. 1) Issuers have to reduce the total amount of CL's they have on their books. 2) If they reduce your $45K CL to $15K it is still 3x the max you have ever touched. They could take $15K off their books and still extend three new accounts to others at $5K per account ($15K). This is far better business for the issuer.
If I had average or above credit (720+ FICO), fair UTL (<25%) and no excessively high CL's I would not expect major changes. There may be some initial fiddling with APR's, but with interest rates in general diving into the cellar this will be hard to mainain/justify. Completiton among issuers for those with better credit profiles will keep a lid on the rates. As far as APRI's are concerned call and complain every time you get one. There are a lot of different reasons for APRI's and I can't cover them all here. What I can say is that the squeaky wheel get's the grease. (I did get a 4% APRD this week on a card because I made the effort to pick up the phone and ask for it.)
12-19-2008 05:34 AM
Just so everybody is referring to the facts, here they are:
12-19-2008 08:13 AM
"Many people are missing the point. A credit card is a revolving loan. It is not an installment loan. If a person wants guaranteed interest rates he should take out an installment loan. If I charge a hundred dollar widget on my credit and carry the balance at 6% sooner or later I could pay it off with minimum payments. If interest rates rise during that time period shouldn't the bank be able to raise the interest rates? Under the current system if the bank wanted to raise my rates I can say no thank you I want to pay off the card under the old rate "
I don't begrude creditors the right to do adjustable rates on loans you already took. It might even make sense to offer adjustable and fixed-rate cards. However I do objec to being able to adjust rates based on credit scores which themselves are based on rules which the creditors themselves can easily use to downgrade your score and raise your interest rate on an existing loan. And that doesn't refer just to the obvious and gross manipulations creditors like Cap1 used (using high balance instead of CL to get utilazation up, score down, interest rate up).
All in all the laws make sense to me, and I am decidely pro free market. I have just been appaled to find out how the credit and credit-reporting markets work as to me they are decidedly rigged.
After repairing my credit, and even though I am in need of a substantial amount of business credit this year, I do have to ask myself if it makes sense to have access to $20k - $50k lines of credit from multiple creditors. I think part of this problem is we as a nation got so used to having everything we wanted even if we couldn't afford it. No offense to the poster who was upset about his access to credit, but that epitomizes the attitude; why do *I* have to wait for high credit lines? Somehow paid/unpaid collections were a trivial matter and access to a $50k card was a right. I had another poster in another thread support the auto execs who wanted to lower credit standards for auto loans. My point was that they couldn't care less if the loans aren't paid back and it was the height of irresponsibility to try to boost their sales at the expense of the nation.
He pointed out that with scores in the 500s (!!!) and a salary of $50k, he got TWO auto loans totalling $47k. If that isn't the definition of what is wrong with this economy I don't know what is. All we ever hear about is our rights; rights to homes, to jobs, to medical care, to education, to cars, to having as many children we want all the while telling 'the government' to stay out of our lives.
Personally, I think it is a great thing if credit tightens up, as much as that will put a huge obstacle in my way of launching a business I've spent 4 years on 7 days a week to get ready for launch. I'll just have to be creative about it. But if lines for people making $75 a year start dropping from $50k to $15 that isn't a bad thing; if people with low scores/bad history can't get lines of more then $500 or need to do secured cards and use them responsbily for 2 years, that isn't a bad thing. If people who are risky have to pay 25% interest so the banks have funds to cover their defaulted loans that isn't a bad thing. Heck maybe AF's should be tied into credit-score as well. If people who can't afford homes can't buy homes, that isn't discrimination, that is the way it should work. it certainly doesn't work the other way as we see now.
Again, I am not sitting on a high-horse; ruined my personal credit with bad habits and lack of education/example, that in turn has made my attempts to launch this business ridiculously hard. Rebuilding my credit has taken not only a 180 degree change in the way I approach my life/credit, I have put in easily 5-8 hours a week for over a year on just that; repairing credit file, paying off debts, building new credit, reading everything I could get my hands on, setting up payments/reminders, you name it. With scores that should be closing in on 800 by late January, I have access to a ton of credit if I need it, even in this market. I won't be using it for vacations, a luxury car, cool clothes, trendy restaurants (all of which I love). I'll be using it, wisely, to build a business which in turn will create tax revenues, jobs and maybe even provide medical care for myself and a few people. I'd think that is where the credit should be concentrated; building, not consuming.
12-19-2008 09:30 AM
You car loan is an example of your credit worthiness... Why would someone making nearly 100k a year take a loan for a LUXURY vehicle at 25 percent. Only someone living beyond their means would do something like that. You do know that is 52832.40 for a vehicle that is 30k in "today's value"? (assuming 5 yr and 0 down).
Bottom of the line... you are a risky consumer.
For the record, I can afford the payments on my car very easily. My loan is only 36 months not 60 months, I did put down over 40 percent, in cash, and in the end I am only going to pay a little over $3,000 more for the car than it is worth. The reason I financed the car is because I wanted to start a good credit file/history. They gave me that loan percentage because I had no credit history, it had nothing to do with the two collections.
Some of us, like myself, can afford to pay our bills, and don't "buy beyond our means", that car is not beyond my means, if I went out and bought a Ferrari or an Aston Martin, those would be beyond my means.
My RANT about the auto industry has nothing to do with my BMW. I think you missed the point by "half reading" my post... I was treated almost criminal like at Ford and Chevy (even though I bought a car from that Ford dealership back in the 90's). They would not finance me, even though I had a large down payment. In fact I almost could have PIF'd the Mustang if I would have settled for the regular version and not the GT.
I am not complaining about the price of my car, nor am I complaining about my monthly payments, I am complaining about the fact that I can't get a good credit card because of this BS we are in.
To even suggest that I, or as you put it "people like me", are the reason for the "S#!t" we are in, is a pathetic attempt at an insult. Know your facts before you mouth off. Since you pretend to be so intelligent, answer me one simple question to prove you know what you are talking about.... Why do people who have had a bankruptcy deserve better credit cards than I do? I have never burned any CC company EVER!
Since some of you have mentioned this, my savings are in a very nice account earning a heck of a lot more interest than the money would if I put it up for a secured card, and as soon as it gets close to the 1 year mark on my secured cards I plan on putting up to 5k on them so they will graduate at 5k. I am not stupid, I am going to use the system to beat the system. What really frustrates me, are with these new laws people like me will find it harder to get credit, and it is already hard enough.
US Bank and Orchard are my secured cards for the record. I choose Orchard because the Mercedes dealership said HSBC finances Mercedes Benz, which will be my next car in three years, so I wanted to get in good with them. When that unsecures I plan on trying to "trade" the card for a regular HSBC MC not Orchard.
Sorry this is so long, just felt I needed to defend my honor.
12-19-2008 10:01 AM
.....I have only had two PIF utility collections on my reports. WTF!!!!
...I did and BMW approved me (granted at 25 percent interest) but I drove away in a CPO 5 series. So the US automakers can ki$$ my a$$.
You have 2 collections & will pay close to $50k (when you include your ridiculous finance charges) on a used BMW 5 series that's worth $30k. And you expect creditors to consider you a good risk? Amazing.
Why not save up for a couple of years to pay for that CPO 5 series and pay for it cash, or with a large(>50%) downpayment so that you don't have to pay that ridiculous rate. Let me guess, you can't wait 2 years till you save up for it and in the meantime rebuild your credit slowly.
This isn't basic transportation that you purchased, so you have no excuse for your impulsive behavior. If you told me that you just bought a used Chevy Malibu for $8k @ 25% interest because you needed it to commute to work, I would be more understanding. But you went and purchased a luxury car you have no business owning yet.
I own a CPO 5 series...it's a great car and I paid cash for it. It's an amazing car and I deserve it & my 815 FICO credit score because I actually was patient enough not to buy it on credit since it's a luxury, not a necessity.
I can't even imagine what the rest of your finances look like with these kind of decisions you're making.
The best predictor of future behavior is past behavior. You've had collections in the past, so it's extremely likely that you'll have collections in the future. Creditors and anyone with common sense know this, so your credit availability and rate is priced accordingly...until you prove them wrong by rebuilding your credit slowly over time.Message Edited by Mark_in_Pasadena on 12-19-2008 12:50 AM
Very good Pappy, we are all in this together and should not belittle others without knowing the entire situation. Please lets support each other. We have enough of outside sharks that try to decrease our morale. There are many ways in giving constructive critism, however personal attacks are not one of them. Thanks
12-19-2008 10:21 AM
Speaking for myself, I don't mean any of my replies as personal attacks or even judgments on Pappy, sorry Pappy if that is how it comes across. *However*, I am replying to the general profile in your case, and in the case of the poster who said he got $50k in two auto loans with $50k salary and scores in the 500s. You two might in fact be responsible, pay back the loans, have the finances/situation to make it work. Naturally given individual stories, the $50k Loan/500 Fico guy might be a better risk then some $250k 800 Fico guy. But, in the scheme of things, it is the aggregate of the former profile that will cause the collapse of the system and increased rates and AFs and CLDs, not the latter.
So while I don't blame you personally Pappy since I don't know all of the details, I do indeed consider people with bad credit who borrow irresponsibly the problem. 'Greedy' bankers who lent to them (cards and mortgages across the board) did so because they were a) pressured to and b) had financial vehicles to allow them to remove the risk and pass it along. Unconciounable behaviour from the bankers and lawmakers alike. It doesn't change the fact that the process falls apart ONLY when borrowers don't pay it back. And the profile of those people are not $250k/800 Fico'ers.
On your personal note, I think you are right to 'game the system' which to me means understanding what they are looking for and using every means at your disposal to present that. IF your intention is to borrow and pay responsibly. My rebuilding startred with getting an AU on my parents card which gave me a foot in the door to get cards, use them responsbily, and get more cards, etc.
12-19-2008 10:35 AM
Thanks Oracles, we need to all stick together in these bad economic times...
And to Mark in Pasadena ... my "Finances" are fine. What I think you fail to take into consideration is something that apparently nobody (including FICO) takes into consideration anymore, a little thing called "DEBT TO INCOME".
My DTI ratio is very good. My car payments do not hurt me. My rent is very good and always paid, my utility bills very affordable, my DW and I travel the world. We have always paid for everything in cash, but in what is becoming a global economy, we decided it is time to get credit. Partially because it will be easier when we travel than using Travellers Checks. Mainly because she wants us to buy a house.
My bills are not significant when it comes to my income Mark. By the way this was not an impulse buy. I did a lot of research on BMW, and Mercedes before I went to look at the cars. I loved both. Mercedes told me to build up my credit score, and even gave me a game plan on how. BMW gave me a car. Now I am using the game plan from one dealer and the car from another dealer to build a very nice credit report for myself.
The frustration I am having, and was addressing to the OP, is that with these new laws CCC's might tighten their belts even further which will cause people (like myslef in my current situation) to not be extended credit. I was addressing another person about the pathetic US Auto Industry that he mentioned. I was agreeing with him. I gave a personal story about how I was treated by the US Auto Industry to make my point at how screwed up they are.
For you and others to attack me for buying a BMW is quite frankly disturbing.
Know your facts! I am not asking for a high limit unsecured card so I can go out like a loser and buy a crapload of luxury items and then file a BK a few years down the road. I need it for score and score alone. My DW wants a house, and I want at least a 750 or higher FICO before I finance one.
12-19-2008 10:51 AM
Speaking for myself, I don't mean any of my replies as personal attacks or even judgments on Pappy, sorry Pappy if that is how it comes across.
No, your posts are fine. I understand finances very well. I am not an idiot. But some people either misinterpreted my first post or they work for US Auto makers and took serious offense to me calling their employers names. Either way for them to jump on me for buying a BMW is ridiculous. I have never complained about my payments, I complain about my interest rate, but I can still make my payments. I am not a deadbeat living beyond my means.
I bought this car before I knew what the heck a FICO score was, and well before I knew about these Forums. Since then I have educated myself. Now that I know how the game is played I can play it. You see, my mistake was always paying for things in cash, which caused me to actually have a blank credit score. If I had known about FICO before this summer I would have got my secured cards, waitted the six months for a real score to report, and then this Christmas I would have gone to the dealership with what is supposed to be a 650-690, according to the score estimator.
Of course there is this AUTO Enhaced FICO score which nobody seems to know except auto dealerships so technically they could have still given me a super high interest rate.