Dear Credit Union - a letter for you

[ebaycj]

Originally posted by: MichaelD

Originally posted by: Viper GTS

Originally posted by: MichaelD

Originally posted by: Viper GTS

Originally posted by: woowoo
Don't close those credit cards.
Pay them off but do not close them.

Yes, definitely.

I know the temptation to close ratejacked accounts but don't give in. Keep them open, don't use them at all, & eventually the rates will return to sanity. Buy small items occasionally to keep the accounts active but do keep them open.

Having lots of credit open protects you from ratejacking, companies aren't likely to try it if they see you have lots of credit available. Ratejacking only works if the victim can't avoid it, no sane person will pay 20%.

The open credit lines also keep your utilization low and average age high which is always important.

I got ratejacked by Chase (they're notorious for it) a year ago, thankfully I had relatives that could bail me out. Perfectly clean credit, never a single derog & they jacked me to the default rate. :| Paid them off and threatened to close the account if they didn't drop the rate. Then I closed the account when they wouldn't cooperate. That last part was a mistake, I should have kept it open and developed a pack a month bubblegum habit. I lost an old account and $12K in tradeline. Whoops.

Viper GTS

Hi there. Good news! I got approved. I'll edit my original post for that.

BUT...I've already been ratejacked (I like that word, BTW) so it's too late for me. THAT'S why I want to close them. I was a good little consumer for so many years. I carried a balance most of the time, never paid late. What did I get in return? A DOUBLING of my interest rate, that's what! :| They can *smoochie* my @zz.

I know you already got ratejacked, this is how you avoid it in the future. Keep utilization so low that at any time you could BT any of your balances completely. Having a bunch of maxed out cards is an invitation to ratejack because they know you can't go anywhere.

Glad to hear you've got it handled, hopefully in a few months you'll have options to get out of the 9.whatever% they're charging you on the personal loan.

Viper GTS

OK, now I understand what you're saying. One problem w/your line of thinking though. That leaves me a LOT of available/open credit, something lenders HATE to see.

The end-game for this is me getting a mortgage, hopefully a year or so from now. With..a lot of available credit, they may not be so inclined to give me a mortgage.

Does that change your advice any? One thing for sure; I have learned my lesson.

I had ~70000 out of 80000 worth of credit available to me (i.e. 10k in CC debt) when I bought my house. (on an income of 40k ish) Having that much unused (or used for that matter), was not an issue at all.

Also, the length of your accounts makes a big difference in your credit score. Since you've had these for multiple years, you would be starting over from 0 if you closed these accounts and opened new ones.

 

[Viper GTS]

Originally posted by: MichaelD

OK, now I understand what you're saying. One problem w/your line of thinking though. That leaves me a LOT of available/open credit, something lenders HATE to see.

The end-game for this is me getting a mortgage, hopefully a year or so from now. With..a lot of available credit, they may not be so inclined to give me a mortgage.

Does that change your advice any? One thing for sure; I have learned my lesson.

It shouldn't be an issue, and if it is you can close them then. Re-opening accounts is much more difficult.

Viper GTS

 

[woowoo]

Listen to viper.
At least do not close the oldest accounts.

This is how the game is played.

 

[MichaelD]

Thank you, ViperGTS and ebaycj; I get it. Clearly. "Average age" = "credit history" in my credit vocabulary.

I see how closing them all would be a bad thing. Should I close ANY? High interest ones? Lowest line of credit ones? Help some more, please.

 

[MichaelD]

Originally posted by: woowoo
Listen to viper.
At least do not close the oldest accounts.

This is how the game is played.

Ironically, the oldest account is the one that screwed me the most. :| I was such a good little Borg Drone too. They should pay ME interest to keep my card open.

 

[MercenaryForHire]

Originally posted by: MichaelD
Thank you, ViperGTS and ebaycj; I get it. Clearly. "Average age" = "credit history" in my credit vocabulary.

I see how closing them all would be a bad thing. Should I close ANY? High interest ones? Lowest line of credit ones? Help some more, please.

I know that having too many cards open can hurt your rating, but at the same time having lots of available but unused credit helps it.

Not sure on the actual numbers though.

BTW, congrats.

- M4H

 

[b0mbrman]

Originally posted by: MichaelD
Thank you, ViperGTS and ebaycj; I get it. Clearly. "Average age" = "credit history" in my credit vocabulary.

I see how closing them all would be a bad thing. Should I close ANY? High interest ones? Lowest line of credit ones? Help some more, please.

Congrats on the loan.

No, you should never close a line of credit (you're getting hit with fees, of course)

Keeping old credit = less utilization and higher average age--both things that are good for your credit score. At times, you may want to realign your credit so as to take advantage of a card or promo with more favorable rates (0% BT or rewards), but that's a realign, not a closing...

 

[MichaelD]

Originally posted by: b0mbrman

Originally posted by: MichaelD
Thank you, ViperGTS and ebaycj; I get it. Clearly. "Average age" = "credit history" in my credit vocabulary.

I see how closing them all would be a bad thing. Should I close ANY? High interest ones? Lowest line of credit ones? Help some more, please.

Congrats on the loan.

No, you should never close a line of credit (you're getting hit with fees, of course)

Keeping old credit = less utilization and higher average age--both things that are good for your credit score. At times, you may want to realign your credit so as to take advantage of a card or promo with more favorable rates (0% BT or rewards), but that's a realign, not a closing...

/bows to the credit gods

Thanks very much for the help.

 

[Viper GTS]

If you have extremely low limit cards (perhaps a store card or the like) that you haven't had very long it probably wouldn't kill you to close them. Most definitely keep the high limit, old cards. The interest rate doesn't matter if you aren't carrying balances.

Go read up on creditboards before you do anything too drastic.

http://www.creditboards.com/forums

Look for general info, specific cards to apply for, etc. I'd be looking for balance transfer deals so you can get as much of your debt at 0% as possible.

Prioritize your accounts based on the interest rate you're paying. Use your lump sum to pay off the highest interest segments of your debt. Once the lump sum is depleted then start looking for balance transfer cards to get your remaining debt consolidated and at or near 0%. 0% no fee balance transfers are becoming a little rare, but there may still be some out there. You certainly should be able to do better than the 9% you're paying on the personal loan.

Ideally when that is done you should be left with two accounts to pay off. Your CU loan at 9.whatever and a BT at something lower (hopefully). Pay nothing but the minimum on the BT account until your CU loan is paid off. Move the BT balance to another card if you need to go beyond the BT period (thus losing the promo rate).

Viper GTS