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your credit score: what will you do? (1 Viewer)

Adam Gregorich

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This is what we did with ours today!! We were transferring balances back and forth to 0% cards for a few years. Started hitting them hard about a year ago when the economy was crashing. All paid off!!

Just got one left (that is paid off) but we need for internet purchases.
Thats an impressive picture. Congrats! I am a slave do my Delta Skymiles AMEX. We put all expenses (gas, proceries, phone/cable/internet), etc on it and pay it off every month to get the miles.
 

drobbins

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And something tells me that credit will never again flow quite as freely as it did the last couple decades.
That is probably a good thing. Before we cut up our cards, I ran a report. Totaling up all the cards, we were considering going on a $48,000 spending spree, and then bankruptcy to keep all the toys.
 

gene c

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When I was a senior in high school, I would get dozens of credit card offers in the mail each week.

When I was a senior (1977) I didn't get any cc offers at all. How things have changed. As I recall, It was difficult to get any credit at all when you were first starting out back then. Couldn't even get a gas card. My first credit was to a small chain of furniture stores (Furniture USA!) for a dresser I didn't really need. Just wanted to get my credit started. The interest rate was outrageous. The Prime Rate was well over 10% at the time. But I had to start somewhere. My first car payment was 60 months @ 20.2%!!.
 

DaveF

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Originally Posted by drobbins /forum/thread/294519/your-credit-score-what-will-you-do#post_3625733
Bankruptcy does not eliminate credit card debt. (rule change about two years ago)

Good summary, Adam L. Better put that I would have done. The sad irony is that as the CC companies protect themselves with usurious interest rates from defaulting customers, they will end up causing even more to default.
 

drobbins

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One of the things that I don't fully understand is why higher risk people get charged a higher rate. On the one hand I know that higher risk investments should provide higher returns. But if an investor decides that someone is a high risk with a $10,000 line of credit with a $500 per month payment, what makes them think the same person can afford the same $10,000 with a $575 per month payment? The higher rate causes them to be even a higher risk.
 

DaveF

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The higher premium is to cover those who default on the loans. If you want a 10% return on loans -- which is what the credit is -- and half the people loaned to will default, then you need to charge 20% so that on average you earn the 10% return. (And for 10% return where just a few percent of borrowers would default, the credit could be given closer to the 10%.)

A more advanced accounting would include any increasing rate of default with increasing interest rate and find the optimum value. This is not particularly difficult math for the statistician (which I am not; my great mathematical weakness).

The cynical observer would suggest that higher premiums can be extracted from those with poor-credit because they have fewer options for credit, creating a profit-rich business opportunity.

What tweaks me about the current situation is that we, the customers, are being made to pay for the credit card companies accounting incompetence. They failed to understand their risks. They made the bad loans. As banks they may have bad exposure to the sub-prime housing market and are using credit card fees to backfill losses from that. And due to their systemic failures, we're made to pay for it.

Put in practical terms:
You've got two family members, one responsible and with a good job; the other chronically irresponsible and been through bankruptcy in the past. They both want to borrow $1000 from you. What conditions do you ask of them? For the responsible one, you might simply make the loan and ask for timely re-payment. For the other, you might actually create a binding, legal agreement perhaps even with some interest. Because you perceive the risks of getting your $1000 back from them as different.
 

gene c

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The bottom line is consumers and taxpers eventually wind up paying for everything, including mistakes made by others. I don't like it either but that's the way our economy is set up. You can either play along and take your lumps every now and again or go without.

My main cc company, CitiBank, recently made major changes to it's pricing structure but gave me an opportunity to opt-out without penalty. Any current balance would be paid off by the old rules. Since I don't carry a balance the new rules shouldn't affect me so I'm keeping the card.

It's un-fortunate that we have to pay for the mistakes of others but that's the way it's always been and the way it always will be.
 

Micah Cohen

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My main cc company, CitiBank, recently made major changes to it's pricing structure but gave me an opportunity to opt-out without penalty. Any current balance would be paid off by the old rules. Since I don't carry a balance the new rules shouldn't affect me so I'm keeping the card.

Tada! Saturday morning mail reveals a letter from Citibank, who are administering a card I have. I got the card in the 90s, a charter member. Original APR was 1% (for years! not intro!), and my credit limit was (and is) in the double-digits. At the moment, I have a zero balance. This is because they recently upped the APR to 9.9%.

Now this letter: "These changes include an increase in the variable APR for purchases to 18.99%, etc."
I too can "opt out without penalty." Except... how does canceling this card (or, allowing Citibank to cancel it for me) affect my "credit score"?
I plan to DO NOTHING. I will use the card once a year, buying something small, and repaying it immediately to not carry a balance, and see what they do to me.

Nuts!

MC
 

DaveF

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Originally Posted by Micah Cohen

I plan to DO NOTHING. I will use the card once a year, buying something small, and repaying it immediately to not carry a balance, and see what they do to me.
That sounds like a nuisance for a card you don't want to keep. I'd certainly forget to make the "something small" purchase, too.
 

Randy Tennison

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I've not carried a credit card for the past 2 years. Closed out everything (and man, that's not as easy as it sounds. They don't want you to close out your account) We got out of revolving debt, and plan to keep it that way. We only have our house to pay off and one vehicle,

FYI, I got my credit score recently, and it was still over 800, so don't worry so much about keeping cards open, charging once a year, etc. Close them out.

Debt is normal, let's all be weird (thanks, Dave)
 

Ron-P

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The only thing I owe is a HELOC and an intrest free car loan. Other then that, no debt. No CC debt...ever!
 

Paul D G

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Originally Posted by drobbins

Just got one left (that is paid off) but we need for internet purchases.
Good on you, Dave!

I've got a question and I don't mean to put anyone on defense here. CC debt is a bad thing and I've known people to owe tens of thousands. I was never that bad, I've only ever owed a couple thousand, but it was way more than I could handle at the time and I worked at paying it off and eventually did.

My question is, why do people completely shun the card? Realistically, unless you feel you can't control yourself why not have one? Everything I buy goes on the card and at the end of every month we pay it off in full and as soon as the bill comes in. Groceries - the card. Gas - the card. DVD at Target - the card. The way I see it I could write out fifty checks a month, or just one. I keep a running tab in my head estimating how much is on it and if something comes up, like when my car stereo died, I check the balance and if it's too close to my self imposed cut off limit, I wait a week or two for it to roll over.

They help build your credit and some offer useful services. When my video camera died two months out of warranty Amex refunded me 90% of the purchase and I went out and bought a much better one. And their rewards program allows me to cash in for gift cards. Each spring we cash in points for a couple hundred dollars worth of Home Depot gift cards and use that for our home improvements.
 

Adam Lenhardt

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Tonight I got my free annual credit reports that the FTC makes the credit reporting agencies provide. Sure enough, the provider of my credit card has been checking my credit report monthly since last fall. They're looking for any sign of risk from everyone right now. I take the fact that I haven't been slammed with any new fees or anything as a good sign.
 

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