topic Re: How much will it drop? in General Credit Topics

How much will it drop?

Anonymous — Tue, 16 Oct 2007 19:46:37 GMT

Hello all. First post...

I had lost my job a year ago, and my score went from over 700 to under 540 in about 4 months. I had some 30 and 60 days past due reported (car loan and cards), as well as some balances maxed out. I have since brought all accounts recent (June was my last "catch-up" payment), and have started slowly paying the balances down. With my FICO drop, my interest rates jumped to 30%. So, after seeing my Equifax score of 633 the other evening, I decided to apply for a 0% balance transfer card. I was declined. I was frustrated, but more worrysome is how will that affect my score? I will be trying to purchase a used car in the spring, so I am trying to prepare my credit for that.

Do you think it would be too soon to apply for credit limit increases to bring my available credit up? As it sits, I have $21k in limits, but only $7k used. Not too bad, except for 2 cards are pretty much maxed. Should I try getting those balances to <50% and then trying to get the increase?

Re: How much will it drop?

wrw0010 — Tue, 16 Oct 2007 20:27:11 GMT

If you are only using 33% of your total CL, you should be able to do balance transfers that will bring the maxed out cards under 50% (with some creativity you should be able to reduce them all under 35%). Reallocation will probably give you a real boost in scores.

Message Edited by wrw0010 on 10-16-2007 01:27 PM

Re: How much will it drop?

SmartCookie — Tue, 16 Oct 2007 20:32:37 GMT

It definitely does not hurt to call up your CC co's and ask how much of a CLI they can give you without doing a hard INQ. Some do an internal review, some will do a soft INQ. You might get lucky.

After you do that, complain about the interest rate and see what they can offer you, even if only temporary. Tell em you got a BT offer that you are considering but you would prefer to stay with them out of loyalty if they can make it easier for you to do so.

Re: How much will it drop?

Anonymous — Tue, 16 Oct 2007 21:14:02 GMT

So, do you think that even though I just applied for a card to do a balance transfer and got declined, that I should continue trying to apply for others?

How will this negatively affect my score? How will the 1 time I have done an application affect it?

After getting declined once, I am discouraged enough to just forget about anything that pulls my score until I go for a car loan in appx 6 months.

Re: How much will it drop?

SmartCookie — Tue, 16 Oct 2007 21:29:20 GMT

stress83 wrote:
So, do you think that even though I just applied for a card to do a balance transfer and got declined, that I should continue trying to apply for others?

How will this negatively affect my score? How will the 1 time I have done an application affect it?

After getting declined once, I am discouraged enough to just forget about anything that pulls my score until I go for a car loan in appx 6 months.

IMHO at this time, you are only going to take hard INQs for declines. Each hard INQ does impact your score for a total of 12 months, more important in the first 6 months. They drop after 2 years. As far as the actual point loss per hit? I don't think anyone has the exact formula so I don't want to approximate what your impact would be, but I would say that at this point for you each hit counts significantly enough.

If you did manage to get approved for something, I don't think you would get above a $200-300 at this particular time. I would not want the hard INQs for nothing if I were you,especially since you want a car so soon. Unfortunately there is no way to know for sure who will approve you.

If it were me, I would begin with seeing what sort of CLIs I could get with accounts you currently have, checking first to ensure that there will be no hard pull. If all goes well, you should be able to improve your UTI this way and then improve it by paying all you can each month. I would reassess after seeing what you can do now in all the lovely ways of credit cleanup before continuing to apply.

Would love to know if you do choose to try for CLIs, keep us posted.

Re: How much will it drop?

Anonymous — Tue, 16 Oct 2007 21:42:08 GMT

Armed with that info, I think I'll just continue on my path of trying to pay down the balances. I will also try some CLI's and negotiate rates.

The only other issue I have is being quite upside down on my current auto loan. I could probably only get about $5k selling it privately, but I owe $9k. So, do I pay the balances, or try to get rid of that negative equity? Very tough decisions.

Thanks for the replies!

edit: How would I ask the current CC's to do a "soft" pull as opposed to a "hard" pull?

Message Edited by stress83 on 10-16-2007 02:42 PM

Re: How much will it drop?

SmartCookie — Tue, 16 Oct 2007 21:49:08 GMT

stress83 wrote:
Armed with that info, I think I'll just continue on my path of trying to pay down the balances. I will also try some CLI's and negotiate rates.

The only other issue I have is being quite upside down on my current auto loan. I could probably only get about $5k selling it privately, but I owe $9k. So, do I pay the balances, or try to get rid of that negative equity? Very tough decisions.

Thanks for the replies!

edit: How would I ask the current CC's to do a "soft" pull as opposed to a "hard" pull?

Message Edited by stress83 on 10-16-2007 02:42 PM

That's a tough one regarding the car so I hope someone has some good advice on it. I have seen people selling cars to others who will 'take over monthly payments', if that is at all a possibility. I don't know enough about it.

When you call your current CC co's all you have to do is explain you would like a CLI but you don't want to do anything that would cause a hard INQ. Ask them if they can see how much of a CLI they could give you without one in their system or if they do a soft INQ account review. They are familiar with this. Just be clear to them that you are scouting what they can do for you, not applying. They may (or may not) say no, or they might say sure we can give you 500, 1000, 2000 etc. So, if they are able to do so, ask for the max they can do without the hard pull (INQ). And always write down names, times etc. G'luck!

Re: How much will it drop?

Anonymous — Wed, 17 Oct 2007 12:15:14 GMT

Forgive me if I should be in another section of the forums or doing a search before asking this last question...

2 of these cards were closed by the grantor. Is it possible to call them and ask them to reopen the account? Would that remove the closed by grantor from the reports?

Re: How much will it drop?

SmartCookie — Wed, 17 Oct 2007 13:15:13 GMT

stress83 wrote:
Forgive me if I should be in another section of the forums or doing a search before asking this last question...

2 of these cards were closed by the grantor. Is it possible to call them and ask them to reopen the account? Would that remove the closed by grantor from the reports?

No, here is good for that question! Always search as well though as you might also be able to find posts where someone had a similar situation and you can see others experiences. It's a goldmine here!

As far as I am aware, the only CC co that will re-open an account is AMEX. By re-opening I mean they will start you with the date you opened a previous card, but I think all history and account number is wiped. Never hurts to call and ask but it is not common for an old account to be reinstated. So, yes try but make sure you are not re-applying for a new card that is going to be tied into anything you had previously.

Now, if your only issue here was to remove the 'closed by grantor', you do have the option of writing a GW letter asking them to change that to 'closed by consumer'. They would be most likely to do this if the account had a 0 balance. if there are any other derogs on the cards, you can tie that in to the GW letter as well and hope for the best.

What companies were the cards with and when were they closed?

Re: How much will it drop?

Anonymous — Wed, 17 Oct 2007 13:20:24 GMT

Well, I've been speaking with the following...

GM Card/HSBC - (no late remarks from this card) Could not lower my interest unless I had an offer sent to me; Could not offer CLI without doing a hard pull

WaMu - (no late remarks from this card) Could not lower interest or offer CLI unless I had an offer sent to me.

Chase - (60 day past due marks; this account was closed by grantor) Could not lower interest or offer CLI due to the account being closed. Would not reinstate account.

Dell - (60 day past due marks; this account was closed by grantor) Could not CLI due to account being closed. They did a soft check for interest, but said no. Would not reinstate account.

It looks like I'm stuck for now! A bit of bad luck and it ruins all good I had. I'm only 24, so I'm hoping I have enough time to fix all the problems that had happened.

For the closed accounts... should I pay off the balances before working on the other cards since I'm at the 50% mark for both and they're both closed, or should I start working on the other 2 that I still have good standing with?

Re: How much will it drop?

Anonymous — Wed, 17 Oct 2007 13:34:53 GMT

Here is a breakdown of my derogatory marks...

Chase - 30 days past due twice:

11/06, 1/07

60 days past due 4 times:

12/06, 2/07, 3/07, 4/07

Chase was VERY rude and threatening when calling, so I told them I won't answer the phones and they'll be the last to get paid - and they were. They refused to help in my situation when I called them the day I lost my job.

Dell - 60 days past due twice:

12/06, 1/07

They wasted no time canceling the account and calling to bug me. They orginally said they'd help with the situation, but then went back on that promise.

Vehicle Loan - 30 days past due 4 times:

12/06, 1/07, 2/07, 3/07

Refused to help in my situation.

Wamu was very helpful. They set me up with a payment plan and were very understanding.

GM, though initially said they could do nothing to help, did call occasionally to let me know that if I could pay a minimal amount, they would not report to my credit. I did as they asked and am blemish-free with them.

Re: How much will it drop?

SmartCookie — Wed, 17 Oct 2007 13:53:29 GMT

At 24, time is most definitely on your side and taking charge of it now puts you in a very good minority!

Not sure if you have read the start here but please read and re-read till you turn blue: http://ficoforums.myfico.com/fico/board/message?board.id=ficoscoring&thread.id=2654 also read the Frequently requested threads and pay special attention to PFD and GW letters: http://ficoforums.myfico.com/fico/board/message?board.id=generalcredit&thread.id=6834

I stand by my original recommendation, do not apply for new credit yet. Repair and do clean up first. You might be able to apply and get approved for something that is a good choice in 2 months, 4 months, a year... depends on how fast you clean up and what luck you have.

Keep the majority of your money going into your GM and WaMu and continue not to be late. Consider calling them again soon threatening to close the cards (do NOT close them) if they don't lower your rate at least temporarily. Explain you have other offers coming in with better terms.

For the closed Dell and chase cards that still have balances, you can GW in order to preserve any positive information but most people (myself included) would call and see what they would settle the account for. Do not take the offer. Write up a PFD offer for that amount once you have that sum set aside and if they will take it (must get it back in writing), that entire TL and all derog will be wiped as if it never existed.

The reason you don't want to pay off the closeds now is that you will then lose all of your negotiating power for a PFD (they want their $) and will only be left with the chance of a GW. Once they have their money.... they really don't care about GWing you. Use the PFD while you have the chance!

As I said though keep most of the money going into the open accounts, but make sure you figure out what you can budget off to the side in anticipation of being 'ready to go' when you can PFD the closed ones. Don't write the PFDs until you have set aside what you are offering.

Re: How much will it drop?

Anonymous — Wed, 17 Oct 2007 14:55:16 GMT

Wow, thanks for that great reply.

Now, you mention trying to settle the debt with them. I only owe 975 on the Chase, and 1300 on the Dell. Is it even worth trying to settle with them for such a small amount?

Won't settling cause a potential problem in the future if they sell the debt to a collection agency and they try to collect in say 5 years?

Re: How much will it drop?

SmartCookie — Wed, 17 Oct 2007 15:33:45 GMT

stress83 wrote:
Wow, thanks for that great reply.

Now, you mention trying to settle the debt with them. I only owe 975 on the Chase, and 1300 on the Dell. Is it even worth trying to settle with them for such a small amount?

Won't settling cause a potential problem in the future if they sell the debt to a collection agency and they try to collect in say 5 years?

Sure it is worth a try. That's $2275 and I'd rather have it gone for $1000! Not saying they will settle or for how much... they will usually question you as to your income vs monthly expenses to determine what they think they can get from you. The time to do it is now before it gets into outside collections in any way shape or form. Remember, everything in writing even if you called them to negotiate, ask them to send an agreement or where you can send one (checkless) to. Please make sure to do your reading so you understand the finer points of the negotiation process.

Settling means they are agreeing to take a percentage as legal payment in full. Again this is why you get it in writing. You will no longer owe them anything, there is nothing to collect, it will not go to a CA.

So, let's take Dell. Ideally it would go like this:

You: hi I have a balance that I am having trouble paying. I'd like to see what you might accept so that I can try to get the money together and get this wrapped up.

Dell: What do you make per month/what is your rent/other bills etc etc. Ok we can settle this in full for X

You: Hmmm... I might be able to borrow money but I think I can only get X-100, could we do that?

Dell: yes or no

You: Ok thanks so much I will call you back.

Now, write a PFD for that amount to them. If they don't take it, increase the offer a bit. Make certain that they understand in more or less words that no PFD from them, no money from you.

But again, please do your reading and study up. Every situation has its own circumstances and you need to research how you can tailor everything to work for your situation.

Message Edited by SmartCookie on 10-17-2007 11:33 AM

Re: How much will it drop?

haulingthescoreup — Wed, 17 Oct 2007 16:36:16 GMT

SmartCookie, I think that is the BEST explanation of what a PFD is all about, and of how to go about it, that I've read yet! Kudos.

OP's situation is a perfect example of why everyone, especially young people, need to have that 4 - 6 months of expenses locked away. Suze Orman sort of blows this off in Young, Fabulous, and Broke, saying that it's unrealistic, but I completely disagree. It's so terrible to build up your credit, have an apartment lease, some cards, maybe a car loan, and then lose your job and have it all blown out of the water! Even if you have to move back home for a while, you still have to be able to cover your obligations. I remember reading another post where the poster lost his/ her job and lived off a HELOC for six months, and his/ her credit was unaffected. Those can be good rainy-day savings equivalents.

OP, please believe me when I say that I am not being critical of you--I think you're being very responsible about how you're handling this. If I had lost almost 170 points off my scores in 4 months, I think that I would still be curled in a fetal position! Good luck with your bounce back. That 633 is a nice indication of how well you're doing.

Re: How much will it drop?

SmartCookie — Wed, 17 Oct 2007 17:05:35 GMT

Thanks haulingthescoreup! I appreciate that and hope it was informative to those who it might help.

Oh and I love Suze... love her. That book is actually a good recommendation come to think of it. Stress83 you might want to get it if your library has it. And I totally agree, aiming towards putting away as much savings as possible for the emergency fund is good at any age.

Re: How much will it drop?

Anonymous — Wed, 17 Oct 2007 17:13:42 GMT

It was devastating to see the drop in my score. It was great being a young twentysomething and able to get whatever I needed when credit was involved - especially without a cosigner.

I attempted to go into business for myself (ie: real estate). When my employer at the time found out, they axed me. My savings kept me afloat for a couple months, but after that was gone, it was all down hill. Furthermore, my business venture didn't work out, so I finally hung my head in shame and went back to work for another company.

I have followed the examples in the PFD letters, but I am wondering how Dell and Chase will handle it. I included the "debts in dispute" and "no liability" in there, but I am not exactly disputing the debt, and I know I am liable for it. I'm just wondering if it's appropriate to write the letter when I've been making more than the requested payments for these accounts, even though they've been closed. I do want the accounts deleted from my report entirely, but I'm not exactly sure if settling is going to help (for instance, Dell has its own "inside" collections agency).

Re: How much will it drop?

SmartCookie — Wed, 17 Oct 2007 17:27:00 GMT

Slow down on the payments and tailor the PFD letter to your situation. You can keep it fairly simple, once you have the figures just write and focus on that you will accept their settlement offer provided that they state in writing that the account will be deleted from all CBRs. Tell them they have 10 days to respond to you in writing and if they accept the terms, you will issue a check immediately etc.

Make it work for your situation.... the examples are general.

Re: How much will it drop?

Anonymous — Wed, 17 Oct 2007 17:35:33 GMT

I'm going to offer Dell $500 and Chase $300. I know that's pretty low, but I figure it'd be a good start to bargaining.

What are these "green cards" people are referring to getting back after sending the PFD? Delivery confirmation from the Post Office?

Re: How much will it drop?

SmartCookie — Wed, 17 Oct 2007 18:03:36 GMT

stress83 wrote:
I'm going to offer Dell $500 and Chase $300. I know that's pretty low, but I figure it'd be a good start to bargaining.

What are these "green cards" people are referring to getting back after sending the PFD? Delivery confirmation from the Post Office?

If you are going to offer that low I would really consider calling them first to see what they might accept. If anything, you don't want this too drawn out. I don't disagree at all with your reasoning though and if you are comfy with that I say go for it.

Yep those green cards are just the return receipts from the CMRRRs.