Credit score: How to bite it in one stroke

My credit score was rising steadily. It inched into the 700s and was looking good. Then I got a call. I had not paid a credit card for over 90 days. It was a card that I thought was paid off and for which I did not receive paper bills. Apparently I had signed up for online bills only but I forgot that and did not even know I had registered that account. It did not show up when I went to that bank site and logged on.

The reason it did not show up is that it is a business account and my other account was personal and the two automatically are on different pages. But I did not know that.

The upshot is that I was not paying this card, which had a low balance, because I didn't know I owed anything. As soon as I learned that I was behind I got caught up. Nothing overdue. But the damage was done. My credit score plunged about 300 points!

There was one other contributor: my high debt level. But that wasn't particularly new. The overdue bill was the biggie. So now my credit grade is "HR" - high risk!

Here's what's irritating about that: If you look at my credit history you will see nothing but green for miles. Bills paid on time, usually ahead, and more than the minimum, for many many months. Then this one bill is overdue. One out of fifteen cards. Anyone looking at that might ask me what happened and I have a reasonable explanation. But what happens is that the lenders look only at the score and they have no idea why it is so low. They think I must be a high risk. But I am not.

It's a dirty business, to be sure. Ugly. Fortunately, I don't need any more credit right now.

Big money

I will be receiving an unexpected windfall in December. A nice sum of money. Ever since I learned of it I have been trying to work out how to make good use of it, how to stretch it yet have fun with it. My main goal is to reduce the payments I make every month, and I will be able to pay off all of my credit cards and set aside the money for my car loan (the interest rate on the car loan is so low it actually makes sense to put that money into a savings account and pay the loan off from there rather than pay the car loan off immediately), which will cut my expenses by about $800 per month.

I am relieved, of course, to have this piece of luck on my side. I didn't do anything to earn it. At the same time I fear myself. My daughter suggested that I set aside a specific amount to blow on fun stuff, and I love that idea. I can put that amount in a separate account and keep track that way and then I am less likely to go through the money without realizing it.

In addition to the fun money, I will take out some for putting down a chunk on my house loan, giving a bunch to various charities, and finding some ways to keep the rest earning money. I will also purchase items I want: energy-efficient, more effective appliances and some camera lenses and other equipment. Items that will make my life more pleasant and that will save some energy, too.

What has been funny is that knowing about this money has not made me deliriously happy. It has given me headaches.

Calling the credit card companies

It's no secret that the way to get the interest on a credit card reduced is to ask. The companies won't do it out of their sense of good will or from any sense of right and wrong. Would they be in the business of charging over 30% per year if they were?

So I finally got up the stuff to start making calls.

First I called the Bank of America. This card, incidentally, started out as a Wachovia card and had excellent interest rates. Then it was sold to another bank, and then to Bank of America. Now the interest is somewhere around 27%. My payments are always on time and always more than the minimum. I did nothing to "deserve" this ridiculous interest rate.

I tried one customer service line and got voice mail options that did not include any for changing interest rate and did not include ever speaking to a real person. I tried several of the options and just went endlessly into voice mail options, none useful for my purposes. So I hung up. I found another number for them and called that. Got exactly the same thing. So I went online and sent them a message through their message form. The information on the website said they would respond within 12 hours. That was two days ago. And of course I have gotten no response. So I am nowhere with that card, yet.

Then I called citiCards. I spoke to a real person. He talked fast and with an accent I did not recognize (not Indian). He reduced my rate by ten percent, from 23.74 to 13.74%. That's a victory. At the same time I somehow signed up for credit protection that I do not want. I can't cancel it until I actually see it on a bill, and you can be sure I will cancel it then. I wish that I had a tape of that phone call because I had so much trouble understanding what was happening that I kept asking him to repeat and repeat. Ultimately I couldn't take it any more so I did not try to cancel that credit protection thing on the phone. A victory, nonetheless. A reduced rate.

I called Chase. I have two cards, one personal, one business, with Chase - both Amazon cards. For some reason I have not been getting my business statements and I had charged something a while back on it and thought that I had paid it off. Just a few days ago I learned, from a phone call, that in fact I still owed something and that it had not been paid in over 90 days. Well, that sucks. I made a payment then but of course that 90 days is bad. I also made one late payment on the personal card, a few days late, this month. My head was just not on straight and I got it done late. Because of the 90 day thing I understood that the interest rate on that card could not be reduced. But I was really irritated to learn that the personal one could not be changed either because of one payment a few days late. After years of paying on time and more than the minimum. The guy said I could try again in a couple of months. I said "sure" in a sarcastic tone and hung up. So no victory there.

I will call about my paypal card today. I forget what bank has it now - like the others, it has changed several times. I have a couple of cards that I have not used at all - Ikea and Dillards - and maybe I can get those rates reduced, but I suspect not. They probably like to see some activity first.

So far, then, one for three. I have an idea about Bank of America. These systems all seem to work the same, and most of them say you can talk to a real person by pressing zero. Even though the BofA operator does not say this I suspect it's true. So I am going to try that.

EDIT: October 28, 2007

I called the BofA number again. This time I pressed 0, even though this was not an option offered to me. And it worked. I got a real person. I told him what I wanted to do, to lower the interest rate. He said that the people to call for that are not working today, and he gave me the number to call tomorrow. In the meantime he tried to talk me into opening a line of credit at a lower interest rate so I could move all of my credit card debt there. I wasn't going to apply for that without thinking about it, so I said no thank you.

EDIT: October 30, 2007

I called the new number for BofA. I spoke to a person who was actually personable, like a real person. For those of your with B of A cards who want to try this, call 1-800-718-6135.

She reduced my percentage rate to just under 25% from just under 29%. Not much of a drop. She also suggested that I apply for a "Gold Option Line of Credit", which I did (she transferred me to someone else). The line of credit was denied. It sounds like a better option than a credit card for those who qualify: unsecured, up to $50,000, no annual fees, no prepayment penalty. It is for a set term, like a mortgage.

Up again

What's a story without a little drama? We get to ask ourselves, will she make it? At this point the answer is still out there.

My debt has increased in the last month or so. I was on the road from June 10 until about July 20, which created quite a strain on my financial resources. Then I moved into my new place, assumed a huge debt, and went out to buy new stuff.

Oddly, I don't feel awful about it. I don't expect to be buying stuff for the house constantly. I still am going out there to fill in some gaps (yesterday a new hose and hand-held vacuum) but the spending has slowed and I expect it to get down to a trickle. More importantly, I am okay.

I was determined, when I moved to my new house, to make a fresh start. This meant not taking old furniture with me, not even taking old plates and glasses. I did bring a lot of stuff with me (there is still a storage building waiting to be emptied) but most of the furniture is new.

My vision was that I would accumulate enough savings to be able to furnish the house without taking on further debt. That didn't happen. But neither have I been recklessly extravagant. At this point I have enough to live. I am no longer feeling pressure to run out for sheets or towels or cleaning supplies. So I can take breaths and look for what I want in a more leisurely fashion and even buy some things from thrift shops. I'm looking for mirrors.

down more

My credit card debt is now about $8100, down from over $11,000 in January. At times I feel like I'm getting nowhere so it is good that I'm keeping these records. I can see the progress, even though from time to time I have an expense for which I do not have cash and I put it on a card. I try to get that paid off as soon as possible, that extra expense, so I can be back on track.

Even better, with some of the cards paid off there are fewer payments so it is easier to deal with what's left and to continue to make bigger payments on the higher-interest cards.

I am still worried about how I will pay for everything when I have my new home but I suspect that with some judicious cutting here and there I will do all right, although I will certainly notice.

worries

I do not have a good handle on my money yet. This week I have had to shell out several hundred dollars for veterinary care and I didn't have the reserves. I need to have the reserves.

I worry about my new house and how much it will cost every month. I think I may become a serious recluse, only leaving the house once or twice a week, once I have that house, so I can cook all my meals and not pay much for vehicle use.

New credit card

Over the past year my credit score has gone from about 590 to 690. So now I get many offers for cards in the mail. After checking bankrate.com (I love that site) for what's available, I settled on one that had come in the mail, and yesterday I went online to accept the offer. I got the 8.99% interest rate that the letter had offered (with an asterisk - depends on credit) and I noticed that they charge a fee of 3% for balance transfers. I figure that still is going to put me way ahead if I transfer a balance from an account with an interest rate of almost 33%. Which, I might add, should be illegal.

I therefore also requested a transfer from that high-interest account. I will find out in about three weeks if that has gone through. I don't see that there will be any problem. And I am proud of myself for doing this. I have other high balances on other high-interest cards that I need to deal with too, but I will be happy for this moment.

The tax money

I got my refunds and I have spent almost all of them. I put $1000 into an account for future new furnishings (I am trying to replace my home with another home). I paid a lot on several credit card accounts. I have made several small purchases as well. I am sure some of them, maybe all, were unnecessary, but I am getting pleasure from them so I don't regret it.

My credit card debt is now under $9,000. That's a lot but I'm encouraged.

Credit card work

Well, here's the deal. I have been paying more than the minimum on all of my credit cards. But Pay It Down! (see book list, right side of this page) says put all that extra money on the card with the highest interest. It makes sense if you think about it.

The first step in reducing credit card debt is to see if you can get the card company to lower the interest. The book includes a script I can use when talking to the representative. It says, though, to have another card offer in front of me (because the script starts by saying X company is offering me Y interest...). If I get an offer for a card in the mail I check out the terms and if they are favorable (in comparison to the high-interest card) I can use that as the alternative card. If not, I can go to BankRate.com (one of my fave places) to hunt down another card that's good for balance transfers.

I don't have an offer in front of me. I've been too quick to shred those. So I went to BankRate.com and used their program for finding the best card for a balance transfer. I got three results. My next step is to apply for one of these three. That's today's goal, folks.

A Way Out?

Like most of the middle class in the U.S., I am in debt. I have a credit card debt of over $11,000, and a car loan that is about the same. And yet I am in the midst of trying to get a loan to replace my mobile home (with another one on the same space), and when I get that loan (I feel fairly sure I will) I will have a huge new payment to make each month. Can I do it? I am sure the lender wonders the same thing, and is perusing how I spend my money and pay my bills.

I created this blog to track my progress, and offer suggestions to others in the same boat, in getting off that debt horse. My first plan is to follow Jean Chatzky's Pay it Down! program (see link at right). It is likely that this little book is really all I will need to get on track, because it not only offers a detailed program for getting out of debt but also offers a lot of help for those times when we face really bad financial times. But I expect to draw upon a ton of other resources along the way. Many of these are in the book. Others I will no doubt discover.