The never ending battle

I have been on a long rebuilding spree. I takes a lot of discipline and patience.

About 8 years ago, I had a financial disaster, and all my credit accounts were charged off. This includes Amex ($15K), Discover ($3K), and a pile of collection agencies.

I waited out the charge-offs, and opened a capitol one secured account in 1994. I got in trouble with this account in 1996, including some very late payments, and they closed the account. There was still a balance of $1,500 on it. I left the balance there figuring that stretching the reported payments out would at least show something good.

In 1999 I cleaned off what was left on my report from the earlier disaster, and lucked out with Capitol One.

The first dispute with all three bureaus re-affirmed the late payment info that was on my report before, but the second time I disputed it, it came back perfect.
The account was now listed as Open with the previous delinquencies deleted.

In the meantime I had opened up accounts with every card issuer that sent me a pre-approved application. I was basically buying credit cards, and keeping a balance on them to show a payment history. All were un-secured.

I currently have the following accounts on my report:
(Limit, High, Balance) Date Opened
Capitol One - (NA/$2150/$300) 4/94
Providian Gold - ($2650/$2400/$2300) 6/98
Capitol One Gold ($500/$400/$400) 1/00
Cross Country VS($1250/$1150/$750) 6/98
Orchard Bank MC ($900/$750/$650) 6/99
United Trust MC($350/$300/$0) 4/99
United Trust VS ($350/$300/$200) 5/99
Car Loan ($17900/$17900/$0) 12/99
Car Loan ($20500/$20500/$19500) 2/00

One comment: I opened a car loan in 9/99 with Superior Bank at a high interest rate just to get the card hawked, and then refinanced with a small local bank in 12/99. Superior Bank does NOT report ANYTHING to the credit bureaus. I suppose they would if you were late, but the account never even shows up.

I make $80K/year. All accounts show perfect payments. There is not a single negative item in any of the three bureaus.

I am refused for any card I apply for. That includes most recently Nextcard, Aria, Wingspan, and AMEX. I have a Discover "pre-selected" that I am considering sending in. Every pre-approved offer I've received (all sub-prime except Capitol One Gold) has been issued, usually with a low ($500) limit.

Question 1:
Even though my original Capitol 1 card shows an N/A limit on my report, does the high credit get used as a factor in figuring my credit score?

Question 2:
I am planning to pay off most of these accounts over the next month. Am I better off closing them or leaving them open for the better available credit percentage?

Question 3:
At what point should I expect a prime lender pre-approved offer? What are their typical score requirements? I'm assuming my lack of real-estate on my report is the main reason I don't get them.

Question 4:
How much does the new car loan count against me?

Question 5:
What does pre-selected mean? Is that the same as pre-qualified?

Ideally, I'd like get one $20K Platinum card and close the rest of these. Even though these show high balances, I can easily pay them off within 60 days if I wanted to. The money simply makes more when I use it to finance my business concerns.

Any ideas on how to proceed? I'm planning to pay off and close the United Trust and CCB accounts over the next few months (as soon as they send a bill for the new membership fee).

What will give me the best score in this scenario?

 

though i'm not an expert on the subject of scoring eric, i have done a little research and there are a couple of ideas that leap to mind about your situation. however, please take them with the same grain of salt with which you would take any other "opinion"

it's my understanding that credit card lenders are most interested in the ratio of *unsecured* debt to income... and if you're making $80K, you don't have a lot of that. but what you do have are:
1) a lot of open accounts
2) a lot of recent trades
3) some fairly high utilization (the ratio of line:balance)
4) a lot of recent inquiries (nextcard, aria, wingspan, AMEX ) *and*
5) no trades to correspond to those inquiries, which tells the trained eye that you've been declined.

all of these things will bring you down, particularly if the lender does their own scoring. in my opinion, your auto loan probably isn't counting against you for the purposes of getting the credit card you want, but your lack of real estate probably is.

therefore, my suggestions (and remember that grain of salt) are these:
1) pay off all your cards,
2) close all but one (okay... two, if you absolutely insist) and don't use them unless you can pay the balance in full within the cycle,
3) for the next six months, use the money saved to reduce the principal on the auto loan,
4) for the six months after that, save every single disposable dime and buy a small house (the taxes on $80K have to be killing you without the write-offs), and finally
4) don't even think about applying for another card until your most recent inquiry is at least twelve months old.

the thing about the house is a little tongue in cheek, but only a little. if it's even remotely do-able, try to make it happen. as far as the rest of my suggestions are concerned, others may disagree, and if they're in a position to know more about scoring than i, i'd be the first to defer. that's the value of a place like this.

Diogenes

 

Cloase all accounts you have open with zero balances except for one for ers. The more cards you have open the higher your available credit is, all this does is show the card co's how deep into debt you can get, even with out their card. They often don't like this amount to be high. I recently closed 7 or 12 accounts and lowered my available credit by about 6k. My credit score went from 676 to 712 by doing this.

 

Eric

First off, congrats on rebuilding your credit. From the information you posted it appears you major obstacles are:

1. Debt ratio on your open accounts. Anything above 35% may throw up the red flag.
2. Number of inquiries may be hurting you. Creditors don't like to see lots of inquiries.
3. I would suggest paying off and closing all of them except the Providian Gold because of its reasonable limit (high rate, but you might need the limit).
4. After the others are paid off, get the Providian balance down to about $1000 and be sure to pay at least 10% of the balance every month.
5. Wait 6 months and apply for a prime rate low interest card.
6. If you don't want to do all the above, pay off most of the cards and walk into your credit union (if you have one) and talk to a loan officer about opening an credit card account. There is nothing like a face to face, it worked for me.

Regards,
JP

 

Thanks for all the useful information, everyone.

Question:

If I drop down to two unsecured lines with a total of let's say $5K by then vs. keep 4 open with a total of say $8K, will that give me a lower limit on a newly issued card?

How do they figure the limits? I assume the existing credit lines figure into it somewhere.

Also, does the 12 mos. on inquiries really make a difference? I know 6 mos. does.

 

I don't understand why you need all these credit cards, and why you want to have a 20K line on a new platinum?

Why not have 20k in your checking account? Is it your intention to spend every dime of your income and go into debt for 20k as well?

You ought to cancel all the cards but one, and don't carry a balance on it.

 

Because I charge about $5K/month in business expenses and my current lines have to be paid twice a month to cover that, and heaven forbid I might want to use some myself.

Having that cash sitting around waiting to be used on a debit card is a waste of money. I'd rather have it earning 10-20% per month.

Most of my friends that make comparable incomes that haven't had problems in the past have $50K or so in lines. I don't really need that much.

The flip side is that you need credit to get credit, and when I start moving on real estate when the market drops, I'll need the platinum plated credit report.

I would much prefer to have one 6K card instead of the 6K in cards I have currently, but I'm taking what is made available to me, and building history in the meantime.

In the short term, this sucks, but as soon as I close all these and let it sit for 6 months, I'll have 12-15 satisfied accounts, and perfect history dating back 7 years.

I'm leaving the car note with minimum payments because the rate beats the hell out of any business lines I have. It's cheap money.

Ever think maybe I have 20K sitting in a checking account? This isn't about 20K, it's about power-building credit to make real money.


John Debtor wrote:
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I don't understand why you need all these credit cards, and why you want to have a 20K line on a new platinum?

Why not have 20k in your checking account? Is it your intention to spend every dime of your income and go into debt for 20k as well?

You ought to cancel all the cards but one, and don't carry a balance on it.