Hello everyone, I have been doing a lot of internet research on handling credit card debt and I was quite excited to find a forum like this where people are sharing their experiences and helping others work their way through some treacherous territory. About two months ago, Citibank changed my type of card and account number on a MasterCard. I completely forgot about the fact that this would require me to set up a new "pay to" in my online banking, so I ended up getting 30 days past due. This really gave me the kick in the butt I needed to evaluate my budget and figure out how to handle my debt. This accidentally missed payment is probably going to get a chance to negotiate a payment plan or hardship on at least one CC (of five). I'm hoping I can work something out with others as well, since my current minimum payments equal just over 70% of my take-home pay from my regular job. I've avoided some near-misses in the past six months with freelance income, but I can see something else going unpaid soon at the current minimums. So my first step, as I see it, is to call Citibank about the past due account. I saw some discussions about this type of situation, but none that answered all my questions. I have two accounts with Citi, the past due carrying a $7500 balance and another with a $11,600 balance. Even though I was never late, both accounts were jacked up to 29.99% interest, and I never opted out because I had available credit I wanted to keep - now taken away as well. Combined minimum payments for these two cards are about $645, and my budget needs this to be closer to $300-$350. I'm thinking of trying to negotiate a payment/interest reduction on both Citi CCs at the same time, even though the one with the higher balance is current. Does anyone have any thoughts on that? One concern with making any payment arrangements with Citibank is how it will be reported to the CRAs. I'm pretty sure anything they'll give me comes with the suspension or closing of my accounts. I'm not sure how this looks reported on a CR, or what I can negotiate as far as how it will be reported. On a related tangent, since the past due CC had an old balance but a fresh card and account number, is that going to cause more problems than usual for my CR and FICO score? I'm going to get a FICO score this week, but using online tools, I'm estimating it's in the mid-to-low 600s, and in the short term I'm pretty sure I'll take some kind of hit, I'm just not sure how much. Does anyone have any specific tips or suggestions for calling the CC companies to ask for these kind of arrangements? (other than getting it in writing, obviously!) Thanks!
Call me surprised - I purchased a report through myFICO.com, and it gives me a 716, about 80-100 points more than I expected. On their scale (literally a graphic of a scale), I am right in the middle. Negatives being high credit usage (94%), too many CCs with balances, and high balances. Positives being no missed payments, 16 year + history and 4 accounts in good standing. One plus to the credit score but not to my financials is an account I have that does not appear to be reported to Equifax or Experian - that's $20,000 more I owe. Does this score open up some further options for me?
Your FICO score is still fairly good because you don't have any lates showing up on your credit reports yet. Of course, the high percentage of utilization is what's keeping you out of the upper 700s. And as soon as you start getting 60 days behind on any of these cards you can expect your FICO scores to take a major hit and head south. Unfortunately, what you'll likely find is that most credit issuers won't be willing to work with you or get you on any type of reduced payment plan until you're more than 60 days late. And Citi will probably look at both of your accounts with them as separate debts. Of course, it still won't hurt to ask and see what the response is. If I were you, I would be focusing on doing everything possible to increase my income so I could stay current and start paying these debts down. The last thing you want is to start getting charge offs and dealing with CAs. If there's any way to stay current, do it. Oh, and an important thing to remember throughout the process is that "paid" collections or "charge offs" are just as damaging to your credit scores as "unpaid" collections/charge offs. The best result is to always negotiate a deletion of the tradeline in return for payment or a "Paid in Full" status. Hopefully you don't get to the point where you have to deal with these negotiations.
Thanks for the reply, Joshua. After posting here and doing further reading, I reached pretty much the same conclusion. I started thinking about some part-time work to supplement my main job. I was raised by parents with bad financial habits (who filed bankruptcy in the 80s) and I fell into a lot of the same traps assuming my income would go up later. I'm trying to remind myself constantly to be more responsible with money. Knowing that I'm avoiding some close calls with major credit disaster is giving me some renewed determination to fix problems. Something I noticed about Citi was as soon as my account went 30 days past due, their website had a link offering to make a payment arrangement. It asked some questions about income and the length of relief that I needed, then offered some settlement options. One was an in-full payment in three installments, one was a 60 month installment plan at about 10% interest and the last was a full settlement at once. It offered a phone number that mentioned that further options may be available. I didn't take any of these, but it was looking like the cost of taking any offers was that Citi got to be in control of the payments and I would have to give them permission to withdraw from my bank account monthly (Thankfully, I know this is a BAD IDEA). Nothing mentioned about how this would be reported to CRAs. Yes, this is definitely something I'm learning reading others' experiences here. I'm trying to remind myself over and over that I should be doing everything I can to avoid collections at all costs. At least I can have the peace of mind that - should I end up there due to job loss or major medical issues - I have learned something now about how to handle those situations.
You're welcome, and we're glad to have you as part of the forum. Best of luck as you're working to get things back on track, and please feel free to drop by and ask questions whenever something comes up.
