closure snowball - when does it end?

[Anonymous]

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!

[Remedios]

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 

[Anonymous]

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. 

[K-in-Boston]

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.

[Anonymous]

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. 

[Yankee2]

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.

[Anonymous]

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. 

[lgtwriter]

@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.

[Anonymous]

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?

[CreditCrusader]

---

@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.