Did I mess up?

[Anonymous]

Ok, I admit that I was uninformed when this happened, but here's my story:

In 2001 I went through a divorce from a cheating wife. I was lucky to be able to get a finalized divorce in just 2 months, but she had a previous bankruptcy (so everything was pretty much in my name) and when she left she refused to pay her share of anything.  I was forced into bankruptcy and I have been working on cleaning on my credit for 6 years as of this summer.  I had never pulled my FICO scores until I bought the Suze Orman FICO kit last week.  I have only pulled my Transunion score so far, and it is a 700.  Just recently got an Orchard Bank Mastercard with a $1500 credit limit and 14.90% rate.  Have some balances that I am paying down very rapidly so I hope to get my score higher.

Anyway, awhile back I was looking at my card statements and saw that my Circuit City (very high rate store card) and my Walmart (another very high store card) had pretty high credit limits.  Circuit City was $2000 and I think Walmart was as well. It made me nervous, so I called each company and had them lower my credit limits.  Did I screw up by doing that?  Am I better off having the credit available or making sure that it is at a managable level?

One last question.  After my bankruptcy, Capital One was one of the first card companies to give me a non-secured card. I have used it ALOT and always paid it off and paid on time including paying over the minimum. I have to pay a yearly fee of $59 which that have cut in half once when I called and requested it.  I forget my starting interet rate, but a couple years ago they gave me a 14.90% rate when I asked for a lower rate but they have always been terrible about raising my credit limit.  It is $900 now and I just recently was advised that my rate (and everyone elses) was going up to 19.90%.  I am just about paid off, and have a better card in Orchard Bank but I don't have much history with them.  My question is, should I continue to pay a yearly fee and keep my Capital One card with VERY minimal use so that I can keep the longer history, or dump them?

[Anonymous]

You should have not decreased the credit limits on Circuit City and Walmart cards. The higher the limit..the more available credit you have as long as you keep a balance below around 35% of the limit and make your payments on time.

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[Anonymous]

Thanks for the feedback.

That's what my GF told me after I did it. Like a dummy, I acted on my gut reaction with no education.  I have since asked for a cli from Circuit City and got it back up to $1500.  Once I transfer the balances over to my Orchard card, I will not likely use my CC card again. Their interest rate is murder.  I started using Suze Orman FICO kit, and it gave me a script to use to ask for a reduction in interest rate. That was a no go.  They wouldn't drop it at all.  I hope CC enjoyed my business, because I am alot less likely to shop there.  

Still need to figure out what I should do about this Capital One card. Guess i will end up holding on to it.

[Anonymous]

Kev - Sorry to hear about the divorce and the BK. But sounds like you are on the right track.  A score of 700 is great after going through all that!

The answers to your questions ... all depend.  If you are focussing on rebuilding credit and you lowered the limits on WalMart etc, just make sure you keep your balances correspondingly lower (under 35% of the credit limits).  If you charge up to the new low limit, it will hurt.

Too much available credit (i.e., lots of credit cards with sky-high limits) has no impact on your FICO score (as far as we know).  HOWEVER, if you apply for a mortgage, the lender will take into consideration how much potential credit you have.  Lenders can be scared off if you have the ability to charge up high balances.  In that case, you didn't shoot yourself in the foot by lowering the limits.

Why did CapOne raise the rate? I'd call and tell them you've been a model customer for 6 years, paid on time, etc., etc., and ask for a rate reduction.  You've done this before so you know it's possible.  Because you are in rebuilding mode, I'd keep the CapOne card for the length-of-credit-history factor.

Beware of Orchard Bank cards.  Many of their cards have an annual fee, a monthly fee, an application fee, a credit limit increase fee, etc. etc.  If you haven't received your first statement, you may be in for a rude shock.

[Anonymous]

Thanks to you as well for your thoughts.

That divorce did really mess me up in many ways. EVERYTHING except for the house and her car were in mostly my name only. I never thought I would get anywhere near where I was before the BK.  I used cash ALOT.  I called about the Capital One card, but they said it was an "across the board rate hike".  Not sure I buy that one.  I guess once I pay it off all the way, I will try for a rate reduction. I think I have $300 left on that one so I will probably pay it off on the next statement. That card has been able to tick me off a bit each year, either by not raising my cl, or refusing to take away the yearly charge. They just act like they have you over a barrel and there is nothing you can do about it. In a way they are correct, but for anyone else in the same sort of situation, it does get beter. I never dreamed I would be a 700 at this point. 

So far, my Orchard card has been a total blessing (for me at least). I have had a couple of statements so far and there have been no extra charges.  I guess I could call them to be sure that there is no yearly fee but I haven't seen any mention of one. The rate of 14.90%, while not the 12% Suze Orman seems to think I should be paying, is still pretty good. My Circuit City card has a pretty high balance (under 1K) and a high interest rate, but the main bulk of my balance is on a 0% interest until Jan 08.  That was a computer purchase, and I expect to triple my normal payment of $100 starting in June.

I like to think of myself as a bit of a success story, but I sure wish I had known about this site and some others back when everything fell apart.  I went from "Grade A" credit and getting by nicely to being swallowed up in debt. I tried to avoid BK at all costs, but my lawyer said that I didn't have much hope.  I was trying to maintain the payments of a dual income family on a single income.  That along with child support (which I have never had a problem with paying) just did me in.  It was quite a blow to my self-esteem.  I wasn't homeless or anything, but I really felt worthless, dirty and ashamed.  Over time, I realized that sometimes really bad things happen to good people and my only crime was that I allowed it to get worse before it got better.  I make a pretty good salary, so I am fortunate. Alot of folks on this site and others are in way worse situations, and I really feel for them.  I think what I am trying to say those people is that they can't give up. You gotta fight through it. I know some will think "he probably wasn't in my situation" and "what's he know".  They are correct, but I do know what its like to feel like you are hiding from creditors (even if they aren't really looking for you), and I know what it's like to lay awake at night wondering how your going to pay the bills.  I feel like I am finally taking the steps of responsibility that I should have taken many years ago.  Anyone who needs a great inspiration, check of the Will Smith movie Pursuit of Happiness.  I think that sort of sparked my recent craving to save money and tie up loose ends.

[Anonymous]

KevKaos

It's really good to read you turned it all around. I was in a similar prediciment about 9 years ago and know exactly what you went through.  Good luck to you man!