July 8th, 2009 at 12:00am
Under Bad Credit General
Question:
Like many, my college years proved brutal to my credit rating but I’m
finally able to make a concerted effort at rebuilding it.
What is more detrimental to credit scoring, a credit card account that
has been suspended (with consistent payments since), or an active
account with a balance close to the limit? I have been aggressively
paying down the suspended account, and am wondering whether it would
be best to go ahead and pay off the remaining balance of approx. $600
in one fell swoop, or continue with smaller payments and instead make
a large payment on the active account, so that my balance vs. limit is
more favorable. I am currently carrying about $2700 on a $3000 limit.
Also, the creditor for the suspended account (MBNA) has indicated that
it can be reactivated, though the interest rate would be an insane
27%. Would it be best to leave it suspended, or request reactivation?
In either case I have no desire to use credit cards much anymore, but
I would like to work towards improving my score for future auto or
home loans.
Answer:
You could sign up for a student loan for bad credit, but I’d pay off the suspended
account, and close it (or use it by paying off the balance in full
each month and NEVER pay interest).
Getting your balance below $1500 on the $3000 limit card will have the
most impact I believe, but even getting it down 70% would be good.
The other thing to consider is the interest rate on these cards. Your
credit scores will be improved most in the long term if you just get
control of your CC spending (which means you only charge what you can
afford to pay off every month). So it makes sense to follow a strategy
that would eliminate your debt, rather than focus on credit score.
By admin
July 7th, 2009 at 12:00am
Under Bad Credit Mortgages
Question:
I’m considering getting a car loan for a car I already own. I paid in
full when I bought it a few years ago, because I had a lot more money
then than I do now.
So I’ve been looking at websites where car loans are offered. But
they all seem to require that you buy a car from a dealer to qualify
for a loan, or that the loan be to pay off an existing higher-rate
loan. What loan company would be best to get a loan on a car you
already own?
Answer:
Most banks do not offer collatoral loans on one’s own car (which is what you’re
seeking). But some larger pawn shops do. And you can continue to drive it. But
the downside is that you’ll only get about 50% of wholesale value with a high
interest rate.
Or, you can apply for a used car loan. Then sell your car, pocketing the cash. If you take the title to your local bank (any bank), you could ask for a
personal loan. If they won’t give you a personal loan, you could offer the
car as collateral. Note I don’t think it would be smart to do this, but it
is one way that you might accomplish what you are trying to do. I don’t
think you can get a car loan, but a personal loan should be possible.About 6 years ago, my local credit union was having a big auto finance
special. I was able to take my title and vehicle there and receive an
auto loan. If I remember correctly, they would only loan 80% of the
value since I wasn’t purchasing. Try going to a couple of bans or
credit unions, and see what they have to offer.
Note that in my case, I was getting a loan on a typical family sedan
(2-yr old Camry). If you are trying to get a loan on that $100k Benz
to hold you over since being laid off from a high paying silicon
valley job, you will likely get different results.
Also, if you have good credit, keep in mind that you are doing the
lender a favor by giving him business. He is not doing you a favor by
giving you a loan. I have had this attitude every time I have applied
for a loan at a bank, and always been able to negotiate down the rate,
fees, etc.
By admin
July 7th, 2009 at 12:00am
Under Credit Score Information
Question:
The thread on scanning photos got me thinking…
I have a substantial amount of old financial documents, on the
original paper. Bank statements, tax returns, etc, going back
about fifteen years.
So I am wondering about the best ways to archive this onto CDs,
and throw away the paper.
Is there a FAQ, or some established procedures and standards for
this? I am interested in things like appropriate resolution, and
how many documents I could get onto each CD?
This is different from preserving photos, or anything of
sentimental value. I need to keep the information, and,
importantly, I am concerned about the legal weight of the scanned
archives. Like if the taxman says, “We lost your tax return from
1993, and we think you owe us money.” Would a scanned version of
the cancelled cheque be good enough to fend them off? There are
similar scenarios, like old credit cards and parking or traffic
tickets.
Does anyone have experience with using a CD archived printout to
settle such a glitch? I recall someone on this newsgroup
mentioning an incident where her student loan payments had been
lost, and she was billed years later. She prevailed by having
paper documentation.
That is the paranoia that has lead to me hauling around plastic
bins full of these paper files.
I don’t currently own a scanner, so I would be selecting one for
this project. Plus, I will hopefully be able to buy a newer
computer by that time.
Any advice or experience?
Answer:
I doubt a credit report is adequate proof of anything (even that
you exist), especially if the loan company claims they made a mistake
when they reported it paid. It doesn’t say how much you paid
(including interest) or when you paid it. And even good items on
your credit report age off your credit report eventually. A statement
from the loan company and cancelled checks should do it.
The IRS is sometimes unwilling to take even the BEST evidence you
can get for some deductions (e.g. losing bet tickets at a race
track, since you can probably find several million dollars of them
on the ground at any given time).
By admin
July 7th, 2009 at 12:00am
Under Credit Repair Companies
Question:
If you have a credit card that was cancelled because your credit score
went down, and you still owe money on it, and get monthly statements,
and each statement shows the original credit limit but zero available
credit, and then, some months later, the statements start showing the
available credit it would have if not cancelled, does that mean they
uncancelled it?
Shouuld they have notified the card holder that they were uncancelling
it? Was it likely a mistake? If the card holder calls them about it,
would that likely cause them to recancel it? If the card holder
attempts to use the card, is he likely to get in trouble or have it
declined?
Answer:
I have never in my life heard of a credit card company cancelling
someone’s card because their credit score went down. Never. They
typically may raise your interest rate, but will not close the account
unless you haven’t been paying. Your scenario is very odd.
I would certainly call and see if the available credit is an error
before trying to use the card. I am not sure what “trouble” you could
get into but it sure is embarassing to be declined in a store. Not
worth the hastle, call first.If it WAS a mistake, you’re likely to get in trouble (have card declined)
eventually when they fix the mistake (and they already notified you it
was cancelled, and never notified you it was UNcancelled, so why would
they notify you again?).
Call and ask. Maybe they are intentionally letting you use the card
again (so you can dig yourself in even deeper and owe them more $$$$
in interest), and it’s OK to use it. Any possibility your credit score
went up again? Maybe you paid off enough debt so your debt-to-income
ratio is better. Or some bad items expired off your report.
Get in trouble, no. Have it declined, quite possibly, but
hey, there’s one way to find out!
Beware that if you had good terms on the card before it was
canceled, those terms might have evaporated, especially if
it’s one of those cards whose agreement has clauses of the
kind that are so popular nowadays allowing the issuing bank to
change the terms if you miss a payment on their card, you miss
a payment on any other card, your credit score goes down,
your dog dies, they don’t like you, etc.
By admin
July 7th, 2009 at 12:00am
Under Credit Repair
Question:
I’ve had a Visa for 4 years now (I’m 22) and have kept it in good
standing. I tend to fly home several times a year, so I was
considering switching to a AeroPlan card. I know that it’s good for
your credit to maintain a long history and not open new credit, but I
was wondering what the damage would actually be. It’s with the same
bank, so would/could they treat it as an unbroken line since I’m just
switching (even if it is a cancellation of one and an opening of
another)? I’m in Canada, if that helps.
Answer:
If you are worried about your credit score, and your system is
like our system, opening a new account is not bad unless you
have a lot of cards that are maxed out or you have credit that
is well over your income. Simply open the 2nd account, and
keep the first account open. Just don’t use the 1st account
unless you have a future need to use it.
I would question you wanting an airline card like this in the
first place. You say you fly 4 times a year. Aeroplan website
says that they give you 1 mile per $1 spent. I have flown all
over the past few years for about $200 a leg, so say $400 a
round trip. I checked how many miles Aeroplan needs to fly
the shuttle from Minneapolis to Chicago. They need 25,000
miles. At 4 trips a year, you would get a free ticket after
16 years. And if there is any fee for the card, it might
turn out that this free ticket costs most than if you were
to simply forget the card and pay cash.
If you flew every week for your job, then it might be a different
story. Or if you want to give the miles to charity, it might
be an option. I didn’t actually say how often I fly. This year, since moving away
from home, I’ve made three trips (including the upcoming one at
christmas). A round trip from here to home (which is a smaller
airport, so it’s a two leg trip) is 20K miles/points at a cost of
around $500 CAD per trip. In the class I fly on Air Canada (Tango -
cheapest), you get 1 point per $3, which works out to 500 miles/year.
These are just bonus though. The whole point of the aeroplan credit
card is to earn points just on everyday purchases (1p:$1 for gold, 1p:
$2 for classic). So on a classic card, air trips alone are 1,250
points (2000 on gold). If it were just points earned for flights
taken, I wouldn’t even consider it.
I’d have to run the numbers to see if it’s worth it to get the gold,
but the classic at least seems to make sense. Its $29/year for the
classic and $120/year for the gold. The classic, based solely on
flights, is definitely better than cash over an extremely long term.
1250 points per year = 16 years. $29/year over 16 years is $464 where
i already pay $50 more than that in cash. Add in additional points for
everyday transactions and it becomes a better and better deal. If I
spend just $500 on the card in normal purchases per year (a very low
estimate), the redeeming rate drops to just over 13 years. At $29/
year, that’s $377 versus the $500 flight.
I don’t think I can make the gold numbers work, but the classic works
well. I know this all just sounds like I’m trying to justify a bad
decision I’ve already made (which I won’t debate), but I’m just don’t
want you to think I’m just being distracted by the shiny free points.
By admin
July 6th, 2009 at 12:00am
Under Bad Credit Mortgages
Question:
I have a friend who’s 21 and bought a new 2006 BMW last week for $36,000
even though she barely makes $10/hour. I know, *crazy* move, but …
I asked her about the financing. Apparently, she went through BMW and
got 10.16% for a 72-month loan. Her monthly is $695. So she pays almost
$13,000 in interest after 6 years.
This does not sound good to me. Granted, this is her first big purchase.
Her credit is also not stellar, but not terrible either. Not many (or
perhaps none at all) late payments, but she does carry a balance on two
cards, going on a few months now. I think her FICO (which she checked
the day before purchase) was 650 or thereabouts.
I guess my questions would be:
* is this a reasonable loan given her credit status?
* if not, is it possible to refinance immediately?
* if so, would it be a wise move?
http://www.capitaloneautofinance.com/ shows some better interest rates,
though of course it’s no guarantee that she’d get those rates.
Mainly, I guess I’m trying to help her figure out what her best move is
(short of selling the car!). Keep the loan as-is and just make the
payments? Refinance now? Refinance later?
For her, the main goal is to keep the monthly below $700. I’m thinking
she could still do this, but with a lower interest rate.
Answer:
Crazy? How about stupid? Her take home pay is roughly $1100 a month and she’s
paying $700 of it on a car payment? In the last year, I spent a little over
$1300 just for gas on my 2000 Taurus, and I drive about 12,000 miles a year. So
she’s down to $290/month to pay for insurance and living expenses. Oh yeah,
does she live in a rent free cardboard box? I assume she doesn’t plan on eating
either… because frankly, there’s no money for that.
I’d say she’s screwed. I’d say she’s terminally stupid, and the car will be repossessed,
and she will have a totally crap credit rating by the time she’s
25.
I see this all the time. I go to serve late rent notices on
tenants who can’t come up with rent for their trailer space in
the mobile home park, but have a brand new $40k pickup in the
driveway. I always wonder how long it will be before the repo
man comes and they’re back to driving an old beater. I agree with you except that I bet she doesn’t have much in her
savings account to pay off the loan when she sells her car for less
than the loan balance. Unfortunately if she waits a year or two, the
difference will probably get greater so your advice is good to follow
asap.
By admin
July 6th, 2009 at 12:00am
Under Bad Credit General
Question:
I received notification today that I was rejected for a credit card application
because of
“A garnishment, attachment, foreclosure, collection action or judgment was
recorded on your credit bureau report.”
I am 44. My “misdeeds” (that I know of) consist of one late payment last April.
It was late 30 days. It was an honest mistake. I called the credit card company
as soon as I realized it and paid what I owed and then some, to be ahead for the
coming month. I did ask them to remove the $10 late charge, in the name of good
customer relations, and they did. But of course I paid the financing charges for
the roughly 30 days I was late.
I had a loan on a car from 1983-1985 but paid it off on time and never was late
for a payment. I paid cash for my next two cars. In 1996 I applied for a
mortgage on a coop townhouse but was turned down, because my graduate student
income was too low. So I paid cash for a coop townhouse (though as a coop
member, I had a blanket mortgage with several hundred residents of the coop). I
sold the coop townhouse in 2002. In 2003, I paid cash for a house. I can’t think
of any other late payments or anything that I’ve done wrong other than be an
upstanding citizen with regard to debt. (Is that what they don’t like? That I
don’t carry much debt?)
Answer:
Also, make sure the CC co got your SSN correct. Last year when we
applied for a mortgage over the phone there were all kinds of conditions
placed on the mortgage approval: payoff this student loan (it’s been 30+
years since we had a student loan), that credit union balance, etc.
After we got a print out of the application we realized that my wife’s
SSN was entered incorrectly. No. Never married. Never co-signed a loan for anyone. Never been involved in a
lawsuit. Never had a student loan. I am at a loss.
I’ll consider posting an update when this becomes resolved. From what I’m
reading it may take a month or more altogether. In any event, right now I am
planning on cashing in some investments, paying off the $3000+, and keeping any
future contact with credit card and similar companies to an absolute minimum.
Let them deal with people who truly never pay off their debts.
By admin
July 6th, 2009 at 12:00am
Under Credit Card For Bad Credit
Question:
Debit card question
In the US.
Do to the lawsuit filled by wal-mart and others.
Check Cards with a Master card or Visa symbol must be identified as a
debit card. The money comes from your checking or savings account.
In the U.S. Merchants have the following choices
Pin purchases only
Signature debit purchases only
Signature credit card purchases only
or all of the above.
My question
Are they doing this worldwide or just in the US?
Answer:
Certainly doesnt happen world wide. My Visa debit card
has no way for anyone to work out its a debit card, and
another one is a weird hybrid debit/credit card. While you
have funds in the account, it acts like a debit card. Once
the funds are gone, it acts like a credit card. No need to
transfer funds between accounts, there is just one account.
Had that for decades now.
Canada had greater market penetration of ATMs than the US in the early
80s and for all Canadian Banks, the ATM card is a debit card. Whether
you use it at an ATM or at a card machine at a retailer, you use a PIN.
Debit cards can access either a chequing or savings account - you get a
prompt. Debit cards in Canada do not have VISA or MC symbols - only the
bank’s logo.
At a retailler they use the same machine for credit card purchases which
require a signature - the difference is in the form of the receipt.
There have been experiments with smart cards with chips but nothing
caught on.
I don’t know what happens at Walmart in the US - in Canada they were the
last major retailler to go debit, and they offer cashback which can be
handy. Canadian debit cards use the “Interac” network, so your run of the mill
American Plus / Cirrus / Maestro ATM card will not work. However Canadian
debit cards usually have a cirrus or plus logo, so they can be used in
foreign ATMs, but I don’t know if they will work at American POS terminals.
An American debit card with a Visa / MC logo will be rung through like a
credit card transaction (signature, not Pin, no cash back available)
By admin
July 6th, 2009 at 12:00am
Under Credit Score Information
Question:
Well, I didn’t think not pursuing into Calculus would hurt my
home budget skills. Was I wrong…? 
Please forgive if the
x-post to sci.math seems inappropriate.
Here’s the deal. My wife and I, between us, have a few debts.
Nothing we can’t handle - a couple student loans and a car
loan. The problem is, I want to figure out the “optimum” way
to disperse our “loan-paying-back” budget category across
our loans. This way, we get the most “bang” for the bucks
we can afford to spend. (i.e., when the loans are all paid,
we’ve spent - in total - the minimum possible for some given
outlay per-month.)
This SHOULD be easy.
Perhaps I’m just being silly, but it doesn’t seem very easy to
find the general rules to follow. I’ve beat Excel nearly
senseless trying to elicit them, though. (I have been using
a somewhat brute-force method of trying to “discover” the
relationships, whereas it’s clear that a “more mathematical”
approach would be to do the symbolic math out. Unfortunately,
I don’t seem up for this at all, at all.)
For any given two (let’s keep it simple) loans, I’ve proven
(to myself, not to a mathematician 
) that IF they have the
same interest rate, the optimal division of the $ to spend
on them is in the same proportion as the amounts on the loans
themselves. Interestingly, this also makes it so that they
will be paid off at the same time (within a month, keeping
in mind that any extra at all after the payments goes into the
next month.).
Ok, so I tried to find the next rule for the “other” simple
case. If I’ve got two loans with DIFFERING interest rates,
but the same principle. This I’m finding remarkably
difficult to do. I’ve used Excel to generate several test
cases. For instance: for a loan of 4% and another loan of
8%, it seems that 60% of the available funds should go
to the 8% loan, the rest to the other. (actually 60% -
61%, it’s not quite clear due to some choppiness in my
calculations, since they are fairly accurate in modeling
the “monthly payment” scenario)
My approach was to try to find out the above “general principle”,
then go about trying to join the “interest-rate-different”
and “principle-different” cases into one easy-to-use
model that I can apply to any two loans.
So far, I’m stuck on finding this equation. I can make
big, ugly spreadsheets that basically try out a bunch of
cases, look for a trend (using a graph), and narrow down
to find the best case for any given scenario, but this
really really takes longer than it should.
Can anyone help? Given the commonplace nature of having
more than one debt, this must have been done before countless
times before, right?
Answer:
I have not done any proof or run any number, but in general I would pay the
minimum on all of the loans. Then put any “extra money” in to the loan with
the highest rate. You will eliminate the most costly loans first. Also the
book keeping gets easier as they drop off. The effect is cumulative.
for example:
If you pay off your short term but high rate personal loan early you can then
take the savings in interest AND the minimum payment for that loan and apply
them to your mortgage.
This, of course, indicates that all credit cards should be payed of quickly
since most of them have ridiculous rates above 13%.
By admin
July 5th, 2009 at 12:00am
Under Financing With Bad Credit
Question:
Wow; an article with actual tips. Nothing earth-shaking but an easy read
just the same. The one “shock” in the article [for me] referred to keeping
paid-off accounts open to help an overall credit score.
Answer:
Good article. I was suprised by this as well. My first assumption with
respect to the credit bureaus would be how long you’ve had accounts (of any
kind) not how long you’ve had a specific account open. We just bought our
first house and are now concentrating on paying off our credit cards. From the
sounds of it though, this will leave us in the crapper credit-wise. it’s
definitely a damned if you do-damned if you don’t situation. I think you read it wrong. What they are saying is, if you pay
down the balance of a (for example) credit card account that you’ve had open
for a while, it’s better NOT to close that account. That is, leave the
account open with a zero balance, as closing it will hurt your FICO score.
But it’s still a great idea to pay off your credit cards (without closing
the accounts), as a lower revolving credit balance in relation to available
credit will help your FICO score.
By admin
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