How will "closed by creditor" to get a 0% APR on 5 yr pmt plan affect my score?

[Anonymous]

LONG story short ...

I have 22k in unsecured debt, and 5k in medical debt.  No lates in 6 years.  Biggest balance is USAA MC w/ 16.99% (they just hiked my rate last year from 7%) and $8,500 balance and limit.  I want to do the "clean slate" of CH 7 BK (I would qualify I have researched and taken the "means test"), but I don't want my 6 year history of good payments in the toilet ... and I want to buy a bigger house in the next few years with a good rate.  

USAA has agreed to put me ona 5 year plan to close my MC with 0% interest.  I have been putting this off for a while, because when they do, not only will I have a high balance with no limit, but my account will show "closed by creditor."  I am realizing that the last year of paying my CC's only to charge them t obuy basics means I am in trouble and need to do something ... but it's just so hard!!  This is my oldest account (almost 10 years).  How will all this affect my fico?  Any advice/support would be greatly appreciated!!

Thanks,

Lisa

[haulingthescoreup]

This notation does not affect your score in the least.

Many worry about it being questioned by a future lender, but I don't think that happens that often in this day and age. And it will be the BK that they look at, not this.

Did USAA indicate that they would be willing to extend you credit in the future after you recover?

[Anonymous]

That's good  to know ... thanks for the info. 

They said that if I paid the balance in full, yes, they are willing to extend me credit in the future, but I have to reapply, blah blah blah ....  They said that if I filed BK or missed more than 3 payments (over the entire 5 years, not necessarily in a row), all my ties w/ USAA will be severed, I will lose insurance products and have very very limited banking products.  

[haulingthescoreup]

When you have to cut your losses, it's great to have the option to hang on to some things that you want to be able to use in the future. Good to know that they're willing to do this.

You've probably already planned this out, but I would recommend getting 4 - 6 months' worth of monthly payments in a savings account and never, ever touching it for anything, unless some disaster arises where you can't make your scheduled payment. Then, and only then, hit the savings to make sure that you don't miss a payment.

I'd recommend this for anyone trying to salvage a couple of good creditor relationships for the future, whether USAA or any other bank or credit union. Whatever your terms are with them, make sure that you've got that amount squirreled away so that you can keep them happy, even if everything else blows up on you.