Credit Card Raised Interest Rate Due to Credit Report
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Posted: Fri Sep 10, 2004 1:58 pm
Post subject: Credit Card Raised Interest Rate Due to Credit Report
Joe
Date: 3/29/2001 11:46 am CDT
About a year ago, I bought and read your book. It has helped me greatly so I value your opinion. Here is my problem:
I recently recieved a letter from my Peoples Bank Platinum Visa card. Even though I have a 0 balance on this particular card and have never once been late, it seems that they have obtained my credit report anyway. Their letter states that they "used a scoring system that assigns a numerical value to various items of credit bureau information we consider. Our experience has shown that this score is an indicator of an individual's likelihood to make payments on time." it goes on to give 3 reasons that I did not score well: "1. The total balances on your bank credit cards and lines of credit are high when compared to the total amount of credit available to you on those accounts. 2. The total balances on your installment loans are relatively high compared to the original amount borrowed. 3. You have a large number of credit card accounts, including bank and retail accounts, and other credit lines, with balances exceeding 50% of their credit limits." Because of this, they raised my interest rate 2 more points up to 19.99%.
Anyway, I remember reading in your book that it is not a good idea to close accounts that you are not using because it will hurt your flexibility rating. Right now my CC debt is $13,055 (about $1200 is not mine because I allowed my brother-in-law to purchase a riding lawn mower last summer with one of my CCs, so my actual total debt right now is $11,855). My total credit limits are $39,400. I have 10 CCs and one retail card. This particular Peoples Bank card has a limit of $6000.
My question to you is this: should I just go ahead and close this card, even though it will lower my flexibility rating? It really infuriates me that they did this. The only reason I am keeping it was to see if they would send any B.T. offers anyway. I wouldn't have even used it at 17%! Where do they get the nerve to say I am risk to not pay them? Why can't they use the criteria that I have never had one late payment with any card, let alone theirs! I also have a Fleet card with a $5800 limit which has a rate of 27.92%!!!! I'm thinking of axing it too, because it seems like they aren't going to send me any offers either. Maybe if I get rid of these two cards, I can improve on these 3 reasons they have given in this letter. What do you think? I value your opinion no matter what, you have helped me a lot in the past year. Thanks.
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
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Posted: Fri Sep 10, 2004 2:00 pm
Post subject: Credit Card Raised Interest Rate Due to Credit Report
Eugene
Date: 3/30/2001 0:13 am CDT
I am not Alex but I hope you will accept my opinion as well.
Even though I have a 0 balance on this particular card and have never once been late, it seems that they have obtained my credit report anyway.
They can (and do) obtain your credit report whenever and as often as they want if you have an account with them. It's in the credit card agreement.
Because of this, they raised my interest rate 2 more points up to 19.99%.
First, if your balance is zero and remains zero, you are not affected by their decision.
Second, you should order your credit report from at least the credit bureau THEY ordered it from (it's free, and the name and number is in that letter from the creditor). See if everything is correct in there. All accounts reported? All credit limits? Correct balances? No open credit lines that are in fact closed? No accounts that are not yours? (All of these can affect the reasons you got).
Anyway, I remember reading in your book that it is not a good idea to close accounts that you are not using because it will hurt your flexibility rating.
That's right in most people's cases, to some extent including yours ("too much available credit" issues aside, details bellow).
Right now my CC debt is $13,055 (about $1200 is not mine because...
Sorry, it's irrelevant. To creditors, it is yours.
Ask your brother-in-law if he can pay for the lawn mower and then apply this to debt.
My total credit limits are $39,400. I have 10 CCs and one retail card.
So, you have pretty high flexibility. Even though the balance to limit ratio on some cards may be more than 50%, generally you are fine. I guess some balances need to be re-arranged in order to raise the score.
This particular Peoples Bank card has a limit of $6000.
Definitely, do not close it. If the balance there is zero, you do not care about the interest rate. The limit is pretty high, though, so it is greatly thanks to this card that your balance to limit ratio is not even higher.
It really infuriates me that they did this.
If you think straight, you will see that this is probably the only reason you want to close the card. Are you willing to close the card just "to get even" for what they did (even though it doesn't cost you a penny), even if it hurts your credit?
I also have a Fleet card with a $5800 limit which has a rate of 27.92%!!!! I'm thinking of axing it too, because it seems like they aren't going to send me any offers either.
It's not only about B.T. offers. If you close these two cards, your total limit will lower to $27,600, raising the balance to limit ratio to a dangerous 47%. (I am assuming you do not have a balance on the Fleet card). It will be even more difficult to maintain less than 50% ratio on most cards as it is now.
Maybe if I get rid of these two cards, I can improve on these 3 reasons they have given in this letter.
You will make the reason #1 even worse, not improving the others.
You can improve #3, for example (too many credit cards with more than 50% balance to limit ratio) by closing some maxed out cards with LOW limits (so that you do not lower your total limit too much and do not affect #1). Do not forget to reach zero balance before you close the account. If you cannot pay that balance in full, transfer the balance, preferably to a card with high limit (to improve the score) and with low APR (to save money).
Low APR is probably an issue for you but here comes an interesting part. Call several issuers of your cards with the highest limits (yes, including 19.99% People's and 27% Fleet) and ask them what best deal they can offer you if you transfer a balance to them. Alex describes this process in great detail in his book. You might be pleasantly surprised, especially by Fleet because their rate is already sky-high and because they did not raise it recently, as far as I understand.
If you want, you can post how credit lines and balances are split among your cards, along with APRs and your comments, so that we can identify which cards can be closed to improve the number of cards, and which ones need to be left open to maintain high total limits.
As for reason #2 (balances on installment loans are too high compared to the original amount), it can mean only two things if I get it right - that the loan is relatively new, or that you are paying less than minimum, and then you would have had delinquencies among the reasons (which you don't). Do you even have any installment loans?
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Posted: Fri Sep 10, 2004 1:58 pm
Post subject: Credit Card Raised Interest Rate Due to Credit Report
Joe
Date: 3/29/2001 11:46 am CDT
About a year ago, I bought and read your book. It has helped me greatly so I value your opinion. Here is my problem:
I recently recieved a letter from my Peoples Bank Platinum Visa card. Even though I have a 0 balance on this particular card and have never once been late, it seems that they have obtained my credit report anyway. Their letter states that they "used a scoring system that assigns a numerical value to various items of credit bureau information we consider. Our experience has shown that this score is an indicator of an individual's likelihood to make payments on time." it goes on to give 3 reasons that I did not score well: "1. The total balances on your bank credit cards and lines of credit are high when compared to the total amount of credit available to you on those accounts. 2. The total balances on your installment loans are relatively high compared to the original amount borrowed. 3. You have a large number of credit card accounts, including bank and retail accounts, and other credit lines, with balances exceeding 50% of their credit limits." Because of this, they raised my interest rate 2 more points up to 19.99%.
Anyway, I remember reading in your book that it is not a good idea to close accounts that you are not using because it will hurt your flexibility rating. Right now my CC debt is $13,055 (about $1200 is not mine because I allowed my brother-in-law to purchase a riding lawn mower last summer with one of my CCs, so my actual total debt right now is $11,855). My total credit limits are $39,400. I have 10 CCs and one retail card. This particular Peoples Bank card has a limit of $6000.
My question to you is this: should I just go ahead and close this card, even though it will lower my flexibility rating? It really infuriates me that they did this. The only reason I am keeping it was to see if they would send any B.T. offers anyway. I wouldn't have even used it at 17%! Where do they get the nerve to say I am risk to not pay them? Why can't they use the criteria that I have never had one late payment with any card, let alone theirs! I also have a Fleet card with a $5800 limit which has a rate of 27.92%!!!! I'm thinking of axing it too, because it seems like they aren't going to send me any offers either. Maybe if I get rid of these two cards, I can improve on these 3 reasons they have given in this letter. What do you think? I value your opinion no matter what, you have helped me a lot in the past year. Thanks.
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
archive
Posted: Fri Sep 10, 2004 2:00 pm
Post subject: Credit Card Raised Interest Rate Due to Credit Report
Eugene
Date: 3/30/2001 0:13 am CDT
I am not Alex but I hope you will accept my opinion as well.
Even though I have a 0 balance on this particular card and have never once been late, it seems that they have obtained my credit report anyway.
They can (and do) obtain your credit report whenever and as often as they want if you have an account with them. It's in the credit card agreement.
Because of this, they raised my interest rate 2 more points up to 19.99%.
First, if your balance is zero and remains zero, you are not affected by their decision.
Second, you should order your credit report from at least the credit bureau THEY ordered it from (it's free, and the name and number is in that letter from the creditor). See if everything is correct in there. All accounts reported? All credit limits? Correct balances? No open credit lines that are in fact closed? No accounts that are not yours? (All of these can affect the reasons you got).
Anyway, I remember reading in your book that it is not a good idea to close accounts that you are not using because it will hurt your flexibility rating.
That's right in most people's cases, to some extent including yours ("too much available credit" issues aside, details bellow).
Right now my CC debt is $13,055 (about $1200 is not mine because...
Sorry, it's irrelevant. To creditors, it is yours.
Ask your brother-in-law if he can pay for the lawn mower and then apply this to debt.
My total credit limits are $39,400. I have 10 CCs and one retail card.
So, you have pretty high flexibility. Even though the balance to limit ratio on some cards may be more than 50%, generally you are fine. I guess some balances need to be re-arranged in order to raise the score.
This particular Peoples Bank card has a limit of $6000.
Definitely, do not close it. If the balance there is zero, you do not care about the interest rate. The limit is pretty high, though, so it is greatly thanks to this card that your balance to limit ratio is not even higher.
It really infuriates me that they did this.
If you think straight, you will see that this is probably the only reason you want to close the card. Are you willing to close the card just "to get even" for what they did (even though it doesn't cost you a penny), even if it hurts your credit?
I also have a Fleet card with a $5800 limit which has a rate of 27.92%!!!! I'm thinking of axing it too, because it seems like they aren't going to send me any offers either.
It's not only about B.T. offers. If you close these two cards, your total limit will lower to $27,600, raising the balance to limit ratio to a dangerous 47%. (I am assuming you do not have a balance on the Fleet card). It will be even more difficult to maintain less than 50% ratio on most cards as it is now.
Maybe if I get rid of these two cards, I can improve on these 3 reasons they have given in this letter.
You will make the reason #1 even worse, not improving the others.
You can improve #3, for example (too many credit cards with more than 50% balance to limit ratio) by closing some maxed out cards with LOW limits (so that you do not lower your total limit too much and do not affect #1). Do not forget to reach zero balance before you close the account. If you cannot pay that balance in full, transfer the balance, preferably to a card with high limit (to improve the score) and with low APR (to save money).
Low APR is probably an issue for you but here comes an interesting part. Call several issuers of your cards with the highest limits (yes, including 19.99% People's and 27% Fleet) and ask them what best deal they can offer you if you transfer a balance to them. Alex describes this process in great detail in his book. You might be pleasantly surprised, especially by Fleet because their rate is already sky-high and because they did not raise it recently, as far as I understand.
If you want, you can post how credit lines and balances are split among your cards, along with APRs and your comments, so that we can identify which cards can be closed to improve the number of cards, and which ones need to be left open to maintain high total limits.
As for reason #2 (balances on installment loans are too high compared to the original amount), it can mean only two things if I get it right - that the loan is relatively new, or that you are paying less than minimum, and then you would have had delinquencies among the reasons (which you don't). Do you even have any installment loans?
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
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