Trying to help my daughter.. regarding Consumer Finance Tradelines

[2b2rich]

She tells me that her score is going down and one of her cards has a CLD last month so we look at a new FICO 3b.

She has no lates, collections, etc ever.

Her AAoA is about 3 years (she's in her 30s but had been rebuilding after bad credit when she was younger).

Of the things I see that is hurting her report (or what is stated):

-Heavy use of available credit (most of her cards are almost 90% uti.  I know this is a factor but the uti has actually been going down over the past few months).

-Short credit history (oldest account is 4  years, 3 months)

-You have a Consumer Finance account on your credit report (see my questions below)

-You have too many credit accounts with balances (Yes she does)

-You've recently been looking for credit (3 inuiries over the past year: Sprint, Discover, auto loan)

I've preached to her about the other things that I had learned about a few months ago, but I would like to know more about these Consumer Finance dings.  Googled information on them and apparently the score model looks at the person as having to use subprime lenders because they can't get approved somewhere else. 

I see that she has actually had 3 back to back 'loans' with them and when I asked her about it she said she believed it was only one. I found that they had sent her a check for about $1K with the claim that it would help her credit so she cashed it and was paying it back.  Then she said they called her and told her that, because she was a valued customer and had paid her loan down, that she had money available if she wanted to come and get it.  TWICE she did this, but what happen is that each time became a NEW LOAN and so she has 3 paid loans from Security Finance on her credit report.  All were paid in full with no late fees, etc.  This all happen in this past year.

My question is this:  Just how bad are these paid Consumer Finance loans hurting her credit?   Do you think a GW letter to them would get the tradelines removed from reporting?  There were no other changes (except small decreases in her revolving account's debt) and her score's dropped about 10-15 pts each time the initial and then 'new' Security Finance loans hit.

I've given her the 'hard lesson learned' talk and hopefully it will stick with her, but I think it would help if she could at least see the light at the end of the tunnel start to appear soon.

[Anonymous]

I like your idea of the Goodwill Letter strategy.  It can sometimes take a long time if trying over and over before a person has a GW success.  Here is a good link and your daughter would also be well served by working with someone in the Rebuilding forum on how to craft the letters.

BTW, there no doubt that the overwhelming cause of her low score is her high CC utilization.  GW letters are most effective when they are issued by a person with a record of very responsible behavior outside the thing for which they are hoping to get a GW adjustment.  That's not your daughter's situation right now.  Therefore I would if I were her I would delay my GW campaign until much of my CC debt was paid off.

[2b2rich]

I agree with all of the above, but I feel they (Security Finance) was so misleading.  They stated that it would help her credit, yet the very existence of it on a person's credit report seems adverse, even if it was always in good standing and paid on time.  I will tell her what you suggested, thank you!

[Anonymous]

They were terribly misleading.

[MakingProgress]

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@Anonymous wrote:

They were terribly misleading.

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And that is an understatment.    GW is worth a shot, but I wouldn't be to hopeful about it.   In my experience Finance Companies want to keep your credit poor so that they keep you as a customer.   If your credit improves they are worried you will go with a better creditor. 

[2b2rich]

One more question please?

The one card she received a CLD on is her Lowes card.

She did receive a letter from Synchrony that stated:

'Based on a recent review of your account SYNCRHONY BANK has lowered your credit line to $xxxx.  Your account remains open and available for use, subject to the new credit line'.

When she told me that they did a CLD, and I knew her uti, I've been wondering if they're going to balance chase/close her account.  Is this a computer generated letter that doesn't mean much or are they just giving her a slap on the hand for the time being?

(Y'all I've worked so hard with this child and I know she's trying (now), but I would hate to see her oldest account get closed.

[Anonymous]

It's quite possible that this is the beginning of being balance chased, and that other of her CC issuers could begin BCing her as well.

The BC has little to do with the CFAs (consumer finance accounts) and everything to do with the fact that, as you say, most of her cards are almost 90% uti. 

To reduce the chance of balance chasing, she should do the following, in order of priority:

(1)  Make all payments on time -- never be late on any account.

(2)  Pay at least $2 more than the minimum payment on every account.  Keep doing this until all CC debt is paid off.  For any card on which a CLD has already occurred, take the minimum payment, double it, add $2 to that, and make at LEAST that much every month.

(3)  Get every card to under 87% utilization (individual utilization).

(4)  Get every card to under 67% utilization.

(5)  Get every card to under 47% utilization.

(6)  Pay off all CC debt using whatever method is easiest.

It is crucial that she get #3 done as fast as possible.  She should also place all her cards in a shoebox and stop using them. 

[2b2rich]

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@Anonymous wrote:

It's quite possible that this is the beginning of being balance chased, and that other of her CC issuers could begin BCing her as well.

The BC has little to do with the CFAs (consumer finance accounts) and everything to do with the fact that, as you say, most of her cards are almost 90% uti. 

To reduce the chance of balance chasing, she should do the following, in order of priority:

(1)  Make all payments on time -- never be late on any account.

(2)  Pay at least $2 more than the minimum payment on every account.  Keep doing this until all CC debt is paid off.  For any card on which a CLD has already occurred, take the minimum payment, double it, add $2 to that, and make at LEAST that much every month.

(3)  Get every card to under 87% utilization (individual utilization).

(4)  Get every card to under 67% utilization.

(5)  Get every card to under 47% utilization.

(6)  Pay off all CC debt using whatever method is easiest.

It is crucial that she get #3 done as fast as possible.  She should also place all her cards in a shoebox and stop using them. 

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Thank you!
If I had known what is going on, I certainly would have told her to pay more each month on the revolving and to just make the regular payments on the SF Loan.  

[bondsandloan]

What Security Finance did was very misleading, You can try fixing through GW letter but would it work? Other members can advise better.

One question I had was how did Security Finance have the personal details to send marketing letters - the check- to your daughter? Maybe she inquired about credit in an unscrupulous place?
Maybe you should also advise your daughter not to seek credit in such places in future too.

[2b2rich]

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@bondsandloan wrote:
What Security Finance did was very misleading, You can try fixing through GW letter but would it work? Other members can advise better.

One question I had was how did Security Finance have the personal details to send marketing letters (They subscribe to the credit bureaus just like any other company and receive a list of consumers who meet certain criteria.  The only way to stop it is to opt out) - the check- to your daughter? Maybe she inquired about credit in an unscrupulous place?
Maybe you should also advise your daughter not to seek credit in such places in future too. (Maybe you shouldn't be so presumptious).

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