topic Re: closure snowball - when does it end? in Credit Cards

closure snowball - when does it end?

Anonymous — Sat, 09 Apr 2022 02:12:09 GMT

Two years ago, in March of 2020, I missed paying off a $9 Target card charge. I thought a gift card covered the entire purchase, and didn't have auto pay set up yet. Target never sent any sort of electronic or mail communication until it was 90 days--at which point I obviously paid off the $9, when I realized my error.

A snowball of account closures ensued, and is STILL happening. I just lost a $6k account with B&H Photo --while I still carried a balance--. Up until this point, it has only been stray accounts that I let become inactive. Now I've lost I think 5 total accounts.

When on Earth will this end? My score has dropped because of the closures, causing more closures, and we're now 2 years past that 90 day ding with no other late payments. It feels rather like a noose tightening!

Re: closure snowball - when does it end?

Remedios — Sat, 09 Apr 2022 02:29:37 GMT

Most of the time, a single late doesn't carry a ripple effect for two years. Some twitchy lenders might CLD when late happens, but not all, and it certainly doesn't cause multiple account closures unless other factors are present.

It appears you carried balances two years ago, you got a late, that's increasing risk exponentially in the eyes of lenders, and you continued carrying balances after the late, so risk never decreased.

If you get a late but there are no other signs of financial distress, it's bad but not horrible.

If you look like you're struggling, you get late, and it continues to look like you're struggling, process continues.

If you want it to stop, you need to find a way to pay down all your cards, some still might get CLDs if you carried balances for extended period of time, but with paydown and reasonable utilization, scoring loss (rested to utilization) will stop.

I do not think there is any other way

Re: closure snowball - when does it end?

Anonymous — Sat, 09 Apr 2022 02:41:46 GMT

Actual utilization did go up marginally--we had a baby in August of 2020. However, utilization *appears* to have gone through the roof, due to the closures.

And yes, flexibility went down as a result. No balance transfers were able to be done, so we're paying a good bit in interest currently. Which means less ability to pay down. Still managing typical autopays on all accounts, though.

Re: closure snowball - when does it end?

K-in-Boston — Sat, 09 Apr 2022 03:39:31 GMT

Unfortunately that is a real issue with utilization when accounts get closed. Where are your scores currently, how high is your current overall utilization as a percent after these closures, and what's the ballpark amount of your total revolving balances? If you're stuck with large high interest balances, but are capable of paying them it may be worth considering looking at a credit union that that might be more forgiving of the late payment and higher utilization, and may have a credit card with a low interest balance transfer offer or at least a moderate APR personal loan that might offer some relief on the interest.

Re: closure snowball - when does it end?

Anonymous — Sat, 09 Apr 2022 05:10:20 GMT

Great questions. Current scores are 667-667-685. It's been a few years since I last checked scores, but they're down from 720-750 before the 90 day ding. No deliquencies apart from the $9 Target 90 day.

As of tonight's stats, util is 27-27-25, up roughly 5% from 3 years ago pre-baby. Quickly looking, I don't see a total revolving, but my personal accounting has it around $27,000, with $90,000 annual income, up $7k/yr.

While this has required budgeting, we haven't struggled to pay bills. But this seems a big, rather elongated snowball, especially given the previous commenter's assessment. Is there a struggle? Maybe. I can understand fidgety creditors initially dropping me. At this point, I'm just trying to guess where I'm going to land before it actually stops and I can rebuild.

Re: closure snowball - when does it end?

Yankee2 — Sat, 09 Apr 2022 13:48:25 GMT

DTI could be the issue here. While the cc utilization isn't terrible, it's a big balance compared to your income. (this added to the 90day late ding)

Not sure if you also have a mortgage and car loan.

As others have mentioned, best thing to do lower your balances best you can.

Re: closure snowball - when does it end?

Anonymous — Sat, 09 Apr 2022 15:37:15 GMT

Yes we do have a mortgage. My husband has a small car payment, mine is paid off.

Is debt consolidation something I should consider? I had hoped to ride this out, but now I'm concerned that if some of our larger cards start canceling us while we carry balances, we could be in real trouble.

Re: closure snowball - when does it end?

lgtwriter — Sat, 09 Apr 2022 16:48:51 GMT

@Anonymous B & H Photo recently closed ALL their Synchrony cards. They now have a new card with Comenity. The old cards didn't transfer. My guess is that that card closing has nothing to do with your other cards. It does affect your utilization though.

As for the other cards, the credit card companies will see $27k of debt against a shrinking total amount of credit as a problem. The only way to stop the snowballing adverse actions is to get the balance on each card below 25% utilization ideally. This will still keep your scores repressed but it won't trigger adverse reactions hopefully, all other things remaining equal. Do not apply for more credit to try to pad your utilization. With your situation right now that would be another big red flag that could backfire.

Re: closure snowball - when does it end?

Anonymous — Sat, 09 Apr 2022 17:38:22 GMT

Oh wow, I did not know that about B&H. I'd seen something about their new card, but didn't understand they would be closing current accounts. That makes me feel slightly better.

The loss of 6k credit will definitely still hurt, and possibly trigger more losses.

What does debt consolidation look like credit-wise, to future creditors? Is it sort of a red flag if we later wanted to buy a new home, for example, or is it just another credit account?

Re: closure snowball - when does it end?

CreditCrusader — Sat, 09 Apr 2022 23:27:46 GMT

@Anonymous wrote:
utilization *appears* to have gone through the roof, due to the closures.

I hate to sound like a broken record, but it bears repeating for those new to the board:

This is the potential danger of masking TRUE credit card usage with large, superfluous, and/or unused lines.

When creditors providing those lines get twitchy and CLD/close the lines, true usage is exposed, UTIL skyrockets, scores drop, and often the house of cards collapses shortly thereafter. In my own family, I've seen mid-700 FICO scores drop into the mid 600s when mass Synch lines were closed without notice.

Disclosure: Your situation is obviously a bit more complicated, so please don't think I'm singling you out. I'm making a general comment designed as a cautionary reminder...and believe me, in my decades learning the credit game, I've been guilty of that which I speak.

Re: closure snowball - when does it end?

Anonymous — Sat, 09 Apr 2022 23:45:33 GMT

It's ok, you're not wrong. Obviously we were carrying too much and relying too much on zero percent balance transfers. I hate that such a small mistake has led me here, but it's my own fault. I can only learn and try to stop the bleeding.

Re: closure snowball - when does it end?

lgtwriter — Sat, 09 Apr 2022 23:57:40 GMT

@Anonymous Debt consolidation if it is done through as a program to lower interest, or lower monthly payments and is done through some sort of credit counseling or credit repair is definitely a red flag to your creditors.

Debt consolidation as a "self-done" move (ie refinancing and taking equity out of your mortgage to pay off credit card debt) works sometimes, but the problem is that you need to have good credit to refinance. You might be able to take a 401k loan to pay off some of the debt. The interest is paid back to your 401k balance, and it is a loan that does not report on credit reports. Most 401k plans offer 401k loans.

Re: closure snowball - when does it end?

Remedios — Sun, 10 Apr 2022 01:21:52 GMT

@Anonymous wrote:
It's ok, you're not wrong. Obviously we were carrying too much and relying too much on zero percent balance transfers. I hate that such a small mistake has led me here, but it's my own fault. I can only learn and try to stop the bleeding.

Look, you're getting some responses that are generalizations and also personal philosophies vs addressing your situation.

It's not about CLDs or whatever else was being said "superfluous", I think.

It's all about the time in your case, it's taking a bit longer than you expected to get where you need to be, and each set back is probably felt worse than previous one.

If I was in your position, I'd try paying off whatever I can as long as it doesn't interrupt cash flow too much, you have a little one, so cash flow is important.

Don't worry about cards you have right now, some will survive, some will not. At the end of the day as your situation improves and no additional negatives show up, those cards will be replaced.

Honestly, maybe not looking at scores for a few months would do you good. You can and will get those back, so focus on paying what you can, when in position see if you can get a loan from local CU or decent BT card, don't drive yourself up the wall, you have plenty on your plate.

There is life after unfortunate credit episodes, you just have to deal with them as best as you can.

I think it's commendable you didn't default with "this wasn't my fault, they are making it worse for me" as an excuse. I'm sure you're doing everything you can, so keep doing what you can, let the chips fall where they may, you will come out of this wiser now that you know how easily things can spiral out of the control when stars align all wrong.

Maybe when you feel inclined to do so, you can list your cards, balances, scores. Maybe there is a temporary solution to help you bridge this period.

Re: closure snowball - when does it end?

CreditCrusader — Sun, 10 Apr 2022 02:01:51 GMT

@Anonymous wrote:
It's ok, you're not wrong. Obviously we were carrying too much and relying too much on zero percent balance transfers. I hate that such a small mistake has led me here, but it's my own fault. I can only learn and try to stop the bleeding.

No worries! Credit is a long game, not a sprint. You'll land on your feet if you adjust from here.

Re: closure snowball - when does it end?

Anonymous — Sun, 10 Apr 2022 16:15:36 GMT

Ok, thank you for that information! I'll have to check DH's 401k and read up on how that might work for us.

@lgtwriter wrote:
@Anonymous Debt consolidation if it is done through as a program to lower interest, or lower monthly payments and is done through some sort of credit counseling or credit repair is definitely a red flag to your creditors.

Debt consolidation as a "self-done" move (ie refinancing and taking equity out of your mortgage to pay off credit card debt) works sometimes, but the problem is that you need to have good credit to refinance. You might be able to take a 401k loan to pay off some of the debt. The interest is paid back to your 401k balance, and it is a loan that does not report on credit reports. Most 401k plans offer 401k loans.

Re: closure snowball - when does it end?

lns1976 — Sun, 10 Apr 2022 16:23:53 GMT

@Anonymous Prior to the B&H closure how long had it been since your last negative effect from the Target mistake?

Consolidating it all into one loan with a lower payment isn't a bad thing, but I'm wondering if you're not overreacting.

You already have a mortgage, you both have cars with one paid off. From what you have said your current on all your current cards and loans.

Unless you need to lower your monthly expenses, or want to pay off that debt faster, your best option may be just to keep moving forward and let things fade to the past.

The B&H card closure may have had nothing to do with your credit or the late payment 2 years ago.

Re: closure snowball - when does it end?

Anonymous — Sun, 10 Apr 2022 17:02:24 GMT

Now that was real talk. Thank you so much.

Now that I've gotten back on the FICO wagon, I guess it's not quite so bad as I was thinking. It was a 30 day ding, not a 90 day. In a few months it will no longer be in my 2 year history, I think that might help. Overall debt is $22k, not $27k as I had in my mind, so we've paid off more than I thought.

There are a few balance transfers, and those cards are near max util. I'm not sure what to do, if anything, about that.

I do notice a few smaller accounts whose utils I can bring lower fairly quickly. Currently, overall util is listed at 27/27/25 across 15 active accounts, however this does not appear to reflect the loss of the B&H credit line yet.

Is it better to pay off smaller accounts, or focus on lowering util on a few specific accounts that currently have high util?

If I was in your position, I'd try paying off whatever I can as long as it doesn't interrupt cash flow too much, you have a little one, so cash flow is important.
Don't worry about cards you have right now, some will survive, some will not. At the end of the day as your situation improves and no additional negatives show up, those cards will be replaced.

Re: closure snowball - when does it end?

lns1976 — Sun, 10 Apr 2022 16:38:30 GMT

@Anonymous Look at it this way. You have low balances on certain cards, if you paid those off and sock drawered them it is one less bill each month.

That minimum payment for those little balances (say $25) you could apply to the bigger balances each month once they are paid off.

Each $0 on a balance means that much extra to put towards the larger balances.

Re: closure snowball - when does it end?

Anonymous — Sun, 10 Apr 2022 17:01:33 GMT

I think you're right and I was overreacting, at least a bit, and FWIW I appreciate that assessment and all the advice and input I've been given. The timing of the B&H closure doesn't indicate targeting me over my score; they stated they were closing the accounts in early April. I just hadn't realized that until a previous commenter informed me and I looked it up.

Prior to the Target ding, no negatives at all. So unless I start getting other account closures on balance bearing accounts, I think I should be ok.

@lns1976 wrote:
@Anonymous Prior to the B&H closure how long had it been since your last negative effect from the Target mistake?

Consolidating it all into one loan with a lower payment isn't a bad thing, but I'm wondering if you're not overreacting.

You already have a mortgage, you both have cars with one paid off. From what you have said your current on all your current cards and loans.

Unless you need to lower your monthly expenses, or want to pay off that debt faster, your best option may be just to keep moving forward and let things fade to the past.

The B&H card closure may have had nothing to do with your credit or the late payment 2 years ago.

Re: closure snowball - when does it end?

SoCalGardener — Sun, 10 Apr 2022 17:08:32 GMT

@Anonymous wrote:
Two years ago, in March of 2020, I missed paying off a $9 Target card charge. I thought a gift card covered the entire purchase, and didn't have auto pay set up yet. Target never sent any sort of electronic or mail communication until it was 90 days--at which point I obviously paid off the $9, when I realized my error.

A snowball of account closures ensued, and is STILL happening. I just lost a $6k account with B&H Photo --while I still carried a balance--. Up until this point, it has only been stray accounts that I let become inactive. Now I've lost I think 5 total accounts.

When on Earth will this end? My score has dropped because of the closures, causing more closures, and we're now 2 years past that 90 day ding with no other late payments. It feels rather like a noose tightening!

Sorry you're dealing with this unfortunate situation. I may have missed it in this thread, and I'm sure someone will correct me if I did, but did you try contacting Target about the $9? If they really didn't send you any communication until it was 90 days past due, that's a problem! You said that you paid it when you realized *your* error, but it was actually *their* error if they didn't tell you you had a payment/balance due.

At this late date I don't know how much, if any, good it would do to attempt sending a 'goodwill' request to have the negative info removed, but if I were you I'd give it a try. The worst that can happen is they say no. All the other bad stuff is already happening. A 'no' among all that won't be a big blow.

Even if you did contact them before, what about trying again? I'd attempt pointing out the ridiculous nature of having my credit destroyed by a *NINE* dollar payment you weren't aware of, and paid as soon as you were. This isn't like thousands of dollars; this is clearly an innocent oversight and I think any reasonable person would see it that way. I don't have any experience with the Target card, so I don't know how responsive or nice their CSRs are, but I think this is worth a try. You shouldn't have to suffer the way you are for such a paltry amount that was obviously an oversight.