Adverse Action triggers

[Anonymous]

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@hyprble wrote:

I've been receiving a lot of AA - all CLDs due to "high debt to credit".  As one card CLD's and my debt to credit ratio goes up, more cards CLD and use that as a reason.  I have a huge balance I've been paying down, no longer charge anything i can't PIF by end of the month and as balance goes down my credit's gotten worse as the CLD (chasing down balances) make me seem even more irresponsible.

All I want to do is pay down debt, but I'm still scared of getting even more AA.

I can only guess my cards CLD me for having high balances at low interest rates and not charging anymore and then AA/CLD me again for the high balances to low credit limits (which they caused in the first place!)  That's how I went from around 50% debt to credit to 90% even though my actual balance is lower now.

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you are unfortunately caught in the AA downward spiral. I am confused though when you say "All I want to do is pay down debt, but I'm still scared of getting even more AA".
Why would paying down debt cause AA? Has anybody had AA after paying down a substantial payment of their debt? For example, if you normally pay the min. and then you suddenly pay off a huge chunk, could this trigger a CLD?

[haulingthescoreup]

Some people have found that once they're able to start making significant payments on their balances, their CL's keep being lowered to $100 or so above their new balance. This is called "chasing the balance." I don't know that simply making a payment will do this. My belief is that it was getting ready to happen, due to having had significant balances for a while. But there's no telling.

If I made a payment and had my CL lowered, I would go back to paying minimum payments AND putting the amount that I was willing to pay into savings, until I had enough to pay in full, all at once. True, it will take longer to pay off the balance, and it will cost more in interest, but I have problems with letting banks get away with this. Up to the individual, though.

[scrambler]

I think it's rather silly to punish a customer that pay down their debt with CLD. It synonymous to punishing success. These CCC's are hard to understand this days. I don't understand why they do this as it impact consumers credit scores without notice.

Other  reasons for AA.

   - Low Income when applying for an Auto loan or other credit.

   -  Previous BK

   - Judgment or tax lien on CR 

[CreditAble]

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@haulingthescoreup wrote:

If I made a payment and had my CL lowered, I would go back to paying minimum payments AND putting the amount that I was willing to pay into savings, until I had enough to pay in full, all at once. True, it will take longer to pay off the balance, and it will cost more in interest, but I have problems with letting banks get away with this. Up to the individual, though.

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Hauling

I think you are on to something there.

Considering the current discussions about paying down balances verses building emergency savings funds. I think you have come up with my new "rule of thumb". If the balances are not being chased a person doesn't need as large of an emergency savings fund. He might still rely a little on his credit card in a pinch. The extra money paid towards principle will save some interest. If the balance gets chased however it would be time to make only minimum payments and build a huge emergency fund. When the fund exceeds the credit card balance, a person can  then choose to pay off the card as you suggest. On the other hand the consumer has the choice to just substantially pay down the balance first to see if the balance still gets chased. The consumer then has the choice to use part (most or all)) of the rest of the emergency fund to pay off the balance.

In any event the consumer can continue to build the emergency fund until it is sufficient to pay all balances with enough left over to be sufficient for paying emergency expenses.

The plan helps the consumer to get in the habit of saving first, then spending. At some point the emergency fund grows to include regular savings for investment and retirement. That would of course take place after a person is out of debt and firmly in the habit of PIFing all credit cards. 

The best part of the plan is that a beaten up consumer can have the assurance that he will eventually go from debtor to saver every month that he sticks to your plan. Balance chasing creates a trapped feeling where the consumer feels he has limited options. Your plan creates options if the consumer sticks to the plan. Save first, and then decide how much of the balance to pay when one has the flexibility of having the funds on hand.

If the balance is not being chased, I would still save as much as possible while still paying CC debt down as much as possible in order to reduce interest payments. 

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[Anonymous]

have there been any reports of BOA doing balance chasing?

[score_building]

+1

things now are just not as cut and dry as i would like to pretend they are i'm afraid.  now i think i am beginning to understand the relative merits of this 'tactic', thanks for your post HTSU!

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@CreditAble wrote:

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@haulingthescoreup wrote:

If I made a payment and had my CL lowered, I would go back to paying minimum payments AND putting the amount that I was willing to pay into savings, until I had enough to pay in full, all at once. True, it will take longer to pay off the balance, and it will cost more in interest, but I have problems with letting banks get away with this. Up to the individual, though.

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Hauling

I think you are on to something there.

Considering the current discussions about paying down balances verses building emergency savings funds. I think you have come up with my new "rule of thumb". If the balances are not being chased a person doesn't need as large of an emergency savings fund. He might still rely a little on his credit card in a pinch. The extra money paid towards principle will save some interest. If the balance gets chased however it would be time to make only minimum payments and build a huge emergency fund. When the fund exceeds the credit card balance, a person can  then choose to pay off the card as you suggest. On the other hand the consumer has the choice to just substantially pay down the balance first to see if the balance still gets chased. The consumer then has the choice to use part (most or all)) of the rest of the emergency fund to pay off the balance.

In any event the consumer can continue to build the emergency fund until it is sufficient to pay all balances with enough left over to be sufficient for paying emergency expenses.

The plan helps the consumer to get in the habit of saving first, then spending. At some point the emergency fund grows to include regular savings for investment and retirement. That would of course take place after a person is out of debt and firmly in the habit of PIFing all credit cards. 

The best part of the plan is that a beaten up consumer can have the assurance that he will eventually go from debtor to saver every month that he sticks to your plan. Balance chasing creates a trapped feeling where the consumer feels he has limited options. Your plan creates options if the consumer sticks to the plan. Save first, and then decide how much of the balance to pay when one has the flexibility of having the funds on hand.

If the balance is not being chased, I would still save as much as possible while still paying CC debt down as much as possible in order to reduce interest payments. 

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Message Edited by score_building on 03-25-2009 09:35 AM

[CreditAble]

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@scrambler wrote:

I think it's rather silly to punish a customer that pay down their debt with CLD. It synonymous to punishing success. These CCC's are hard to understand this days. I don't understand why they do this as it impact consumers credit scores without notice.

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Actually it is easy to understand IF you first consider that the creditor is in "collection mode". The creditor  only gets pennies on the dollar when it sells the account to a CA after default. Until the tradeline defaults the creditor has an opportunity to collect a substantial amount of money by chasing the balance and trashing the customer's credit score.

A credit card company that is in "collection mode" is no longer behaving like a credit card company. It does not care if the customer closes the account. It does not care if the customer's score is trashed.

When a credit card sells a defaulted account to a CA, it does not care that the customer's  account is closed. It does not care if the customer's score is trashed. the whole purpose of selling the account to a CA IS to trash the consumer's credit. It is the equivalent of the loan shark breaking a "defaulting clients" legs. Breaking the legs doesn't always get the loan repaid. It is meant as a warning to others to pay their loans or else they will get their legs broken.

The banks are sending us all a message. Pay up. Or else !!!!   

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[GomerPyle]

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@CreditAble wrote:

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Actually it is easy to understand IF you first consider that the creditor is in "collection mode". The creditor  only gets pennies on the dollar when it sells the account to a CA after default. Until the tradeline defaults the creditor has an opportunity to collect a substantial amount of money by chasing the balance and trashing the customer's credit score.

A credit card company that is in "collection mode" is no longer behaving like a credit card company. It does not care if the customer closes the account. It does not care if the customer's score is trashed.

When a credit card sells a defaulted account to a CA, it does not care that the customer's  account is closed. It does not care if the customer's score is trashed. the whole purpose of selling the account to a CA IS to trash the consumer's credit. It is the equivalent of the loan shark breaking a "defaulting clients" legs. Breaking the legs doesn't always get the loan repaid. It is meant as a warning to others to pay their loans or else they will get their legs broken.

The banks are sending us all a message. Pay up. Or else !!!!   

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I absolutely agree with this statement. This is exactly what is going on. I love the analogy of the Loan Shark and broken legs. I am going to keep my accounts paid up because crutches really suck.

[CreditAble]

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@GomerPyle wrote:

I am going to keep my accounts paid up

because crutches really suck.

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