another reason to hate amex

[Anonymous]

Ugh...

So, my wife and i were just pre-approved for a mortgage. Low middle score was hers, 726.

After our pre-approval, she's gotten a call from AmEx (maybe triggered by the credit pull?) letting her know that her limit was being reduced from 14K to 8,700.00 Surprise, her balance was 8,500.00. I think it's that **bleep**
blue" card.

I'm guessing this is going to crash her score a quite a bit, since now she is maxed out on that card.

Can't pay it off entirely because we need the cash for the downpayment and reserve on the house. So, what to do?

If I pay off 3K of it, to give a little cushion, I'm worried they'll just lower the limit again and crash it down.

We have another joint citi card with a balance. Should I pay down that one, which would actually increase both our overall cushions? Would it no matter since this amex card is now maxed out?

[Red1Blue]

Sorry to hear what happend to you. May be you can get another card from a different place and pay it off. Or you can try to get a loan social network loan club. They might be more sympathetic to your situation. Try www.lendingclub.com you might be able to get a quick loan with low interest rate and you can pay off Amex Card.

[haulingthescoreup]

It does sound like they're chasing her balance. They soft all the time, especially on those with high balances and util (61%), so it probably wasn't the mortgage pull. Are you heading toward a closing, with a set date, or was this a getting-ready-to-look-for-a-house pre-approval? In other words, when might you be getting ready to sit down at the table and sign papers? Because they'll pull your scores again then, and she'll need to have the util back under control.

If you're not coming up on the mortgage signing right away, and that's the game they're playing, I think I'd take care of all my other cards first. Keep paying the minimum or a bit more on the AmEx, and expect the limit to keep dropping until it hits $500. I don't think I've yet read about them ceasing to drop the limit, whether people pay off their bill or not.

Hope for the best, but prepare for the worst: I'm guessing that your wife is looking at a $500 CL card. I'd put some small recurring charge (Netflix, whatever) on it and toss it in the drawer. It will be interesting to see what happens in the next year or so, if they start trying to repair some of the damage.

[Anonymous]

thanks for the advice. Don't really want to apply for any new credit now with the mortgage.

We have not settled on a house yet (we were going to contract on one, but there as a problem with the C of O so we moved on).

We're pre-approved for a loan amount and were well within our margins - we were likely going with an FHA loan with 10 percent down.

DTI for the mortgage we are looking at put us at .38 DTI total... and minimum score needed for FHA was 620, so we've got lots of wiggle room considering she was at 726 lower middle before this. No derogs at all, never a missed payment - just some higher CC balances which we've been paying down while also putting money aside for a house. Only solution might be to pay down another card to raise her amount of free credit overall. 

Mortgage PITI will actually be 600 dollars a month less than our current Manhattan rent, not to mention the tax savings and we'll be leaving Manhattan and save 9K a year in city resident taxes, so we'll be able to knock out the CCs after we move.

just bad timing.  

[haulingthescoreup]

Well, as you say, it sounds like you have some wiggle room, so that's good. Annoying as hell, though, I'm sure.

[Cleanmachine]

Call Amex and request a re-evaluation of the credit limit decrease.

Explain that you are in the process of purchasing a mortgage and the decrease could cause some problems. In fact, I would carry it out one step further and request a credit limit increase so that the balance with be at 50% or below.

It will never hurt to try.

[score_building]

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@Cleanmachine wrote:

Call Amex and request a re-evaluation of the credit limit decrease.

Explain that you are in the process of purchasing a mortgage and the decrease could cause some problems. In fact, I would carry it out one step further and request a credit limit increase so that the balance with be at 50% or below.

It will never hurt to try.

---

with amex it can, it could accelerate their fears of default and conceivably lead them to a snap closure, i'd tread lightly. 

[Anonymous]

thanks again. I guess here's the big question - would paying down 3-5K on another card - say paying off a smaller balance entirely or bringing two small cards from 30% down to below 5% utilized help balance out this one maxed out amex... which will likely stay "maxed out" no matter how much we pay off? 

[score_building]

g20 wrote:
thanks again. I guess here's the big question - would paying down 3-5K on another card - say paying off a smaller balance entirely or bringing two small cards from 30% down to below 5% utilized help balance out this one maxed out amex... which will likely stay "maxed out" no matter how much we pay off? 

taken together- paying off 2 smaller balances and one entirely (if you could really squeeze it out) may negate or even outpace the amex related point loss.

depending on how it effects your number of accts reporting a balance threshold... if paying off a balance entirely then put you at less than 50% of your accts reporting a balance for eg. that would be another significant gain on top of the point gain from reducing the balance in general.  otherwise, yes taking two to under 9% would be another good shot to try to address this in short order while maintaining your best possible score outcome. 

it sounds like you are actually in really good shape overall and will soon be past this nuisance, deciding if you want to keep them or dump them.  GL!

[GregB]

Over the last 18 months I found Amex was likely to do a CLD after a score drop. They were doing soft inquiries every month. I'm thinking they did the CLD after the drop from the mortgage hard inquiry. My scores bounced back and forth from high 700s to low 700s over that period.

If the pattern matches mine, they won't do another CLD unless your score drops again. Bear in mind this was what they were doing last year. They might have a new plan now.

I found the biggest score change was getting number of accounts with a balance below 50%. Having one CC maxed out didn't seem to have much effect with my 22 open accounts (business and personal showing on my personal reports). I would get as much change from an additional account with a balance of $100 as doing a $15,000 BT on a $18,000 Limit account IF I crossed that 11 accounts with a balance out of 22 open accounts.