If I short sell my house will it effect my current credit cards. I heard that if I short sale and get a negative mark on my credit report, my current credit card creditors can raise my interest rate and or decrease my line of credit.

Mary

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Hi Mary,

The Credit Cardholder’s Bill of Rights of 2008 went into effect and Universal Default on existing balances is now outlawed.  If the rates do increase then there must be a 45 day wait and it can only be applied to new balances.  Credit lines can always be decreased by the creditor.

Thanks for the questions and hope this helps.

Paul

In the past week, BOA stated the interest rate would be changing to prime plus – get this – 19% and Capital One to prime pluse 15%.  No late payments on ANYTHING. 

What would cause this?  Do I need to check my credit report??? 

TIA – Gayle

———

Hi Gayle,

That’s ridiculous.  Bank of America may have jacked your rate through something that should be outlawed which is known as ‘Universal Default’.  Capital One does that if you’re more than 3 days late twice in a year.

Yes, I would definitely recommend that you check your credit report.

Read: Universal Default: BOA & Discover and Don’t Be 4 Days Late With Capital One!

Thanks for the questions and hope this helps.

Paul

I use this blog for not only myself, but also for my husband, my father (he just purchased a new home thanks to your tips!!) and now I have a question from my Mother. 

She has been with a certian credit card company for 10+ years.  About 6 months ago she had mailed her payment to this CC Company and it got posted 10 days later than the due date.  They ended up reporting this as a 30day late on her credit report. 

Since then, they have raised her interest rate to 24.99% because of the one late payment.  When this CC Co raised her rate, the rates on all her other CC went up to 24.99% as well.

She also had swiched jobs and is making less money and has ended up greatly in debt. ($20,000 worth) 

Her min payment on 3 credit cards is $300.00each so she is paying $900.00 a month in credit card debt. 

My mother is thinking about filling for BK even though her FICO is above 750. 

She disputed the late payment, and they will not delete it. 

So my question is how can she get the rates dropped on her cc and pay it off to avoid BK?

Thanks  Paul you’re awesome!!

Amanda 

———————

Hi Amanda,

First off, only God is awesome.  Paul is just some guy typing answers on a blog.

Secondly, in a more perfect world, the consumer would identify the payment posting error within sixty-days of receipt of the bill containing the error and therefore file a timely dispute through the Fair Credit Billing Act.  Specifically, the FCBA requires the following:

§ 164. Prompt crediting of payments

Payments received from an obligor under an open end consumer credit plan by the creditor shall be posted promptly to the obligor’s account as specified in regulations of the Board. Such regulations shall prevent a finance charge from being imposed on any obligor if the creditor has received the obligor’s payment in readily identifiable form in the amount, manner, location, and time indicated by the creditor to avoid the imposition thereof.

Amanda, has your Mom requested the cancelled check from the bank?  Look at the back of the check to determine the date stamp evidencing when the check was processed.  Compare that with her monthly due date.  Here is how credit bureaus determine thirty-days late based on Metro 2 standards. 

After completing the above, you’ll know for certain whether or not you have an airtight dispute through the CRA.  For what it’s worth, your Stump the Experts question reads to me like a classic FCRA case with a large jury award for Mom. 

Now, if on the other hand, you find that the payment was in fact thirty-days late then I agree that bankruptcy may be something to consider.  Another viable option may be debt settlement.  Later this week the Broken Credit Blog will (or at least should, I hope) have a form specific to debt settlement for any Broken Credit Bloggers who want Paul’s referral to a legit debt settlement company.

Thanks for the questions and lots of work for you to do!  Mission: save Mom!

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.

Why?  Chase had decided to conduct an automated review of all it closed credit card accounts where balances were being paid off.  Because that automated review found that Mr. Glasshof’s FICO credit score had dropped, it hiked his rate.  Think about that.  His account was closed.  He made no new purchases.  All he did for years was send in his payments like clockwork.  But his interest rate was automatically hiked from 15% to 27%.  Not only that, to rub salt in the wound, the new 27% rate was applied retroactively to his existing credit card debt, and his finance charges skyrocketed.

Under the 27% interest rate, out of his $119 monthly payments to Chase, about $114 went to pay for finance charges and only $5 a month went to pay down his principal debt. 

Opening Statement of Senator Carl Levin
Hearing on Unfair Credit Card Practices:
Unfair Interest Rate Increases
December 4, 2007

Money.cnn.com

“Two of the nation’s top five credit card companies automatically increase cardholder interest rates when their customers’ credit scores drop, according to an investigation that will be the subject of a U.S. Senate subcommittee hearing Tuesday. 

According to the report, Bank of America (BAC) Card Services and Discover Financial Services (DFS) monitor credit reports and use “universal default” clauses in customer contracts to justify raising interest rates, even for customers with a good payment history with their companies.” (emphasis added)

And what is Universal Default?

Read, learn, write, mail, negotiate, write, mail and Raise Your Credit Score!

My name is Wes Wannemacher, and I come from Lima, Ohio.  I am married and raising a small family.  I wish I could come here and tell you that I’ve always paid my bills on time, but my goal isn’t to convince you that I’m the most responsible adult in the U.S. Despite these and other faults, I am well liked and respected in my community.

Toward the end of 2001, I had just accepted a higher paying job, and my wedding was approaching.  My wife and I wanted to show everyone a good time and have a memorable experience.  As a young adult, I really had no idea just how much my wedding would cost.  I had applied for and received a credit card from Chase with a $3,000 credit limit.  This was quickly reached after paying for flowers and a photographer.  I charged a total of $3,200 on this card and never charged anything beyond that, I have been trying ever since to pay it off.

Although I was working a new job, living in Columbus was more expensive than Lima.  Right away, I could tell I was going to have problems paying this and other debts.  Debt seems to invoke a feeling of hopelessness unlike any other problem I’ve encountered.  When a debtor calls you on the phone and you make a minimum payment, you know that you’ve made no real progress and that in a month, they will be calling again.

From 2002 to 2004, I was able to increase my income.  Although big raises and promotions are exciting in that time period I learned what many adults already know.  As your pay increases, your expenses increase as well.

During those two years, I tried to make payments to Chase.  I had not asked for a payment plan or any method to resolve the balance, but I made whatever minimum payment they would take when they called.  These payments were usually close to $200.  With limited funds in your checking account, you have to prioritize.  Since Chase couldn’t turn off my lights or kick us out of our home, there were times that their payment would be the lowest priority.

In the last half of 2004, a few events changed my plans for the future.  First, my wife left her job because of complications with her pregnancy.  Second, my father asked me to move home and help out with family business.

As 2005 started, we had another baby and we had moved back to our hometown.  I realized that my problems with Chase would only get worse unless I took action.  Early in 2005, I called Chase and asked if they would take $3,000 to settle the debt, which, by this point was $4,600.  I offered $3,000 because it was my original credit limit and I had never gone much past that.  Unfortunately, Chase was not willing to settle for $3,000.  I shouldn’t speculate why they declined my offer, but I’d guess that the person on the other end of the phone had a goal to get as much money as possible.

This meant I was back to making minimum payments and watching the balance rise.  In 2006, my balance had exceeded $5,300 and I knew that I needed to make them work with me before I ended up in bankruptcy.  I called and asked if there was something they could do to help me.  Eventually I was offered a payment plan.  The premise of the plan was to payoff the $2,300 that was past the credit limit.  The representative was very clear that once I got the balance down to $3,000, I would be taken off this plan and the interest rate would go back to normal.  At the time, it seemed like a gift.  Finally, I could see the balance go down rather than go up.

While I was making regular payments between $140 and $210 a month, my stepdaughter was enrolled in therapies that were not covered by our new insurance plan and she had her tonsils removed.  Before I knew it, I had a very large medical debt.  With these offices calling asking for payment, we were quickly overwhelmed.  This time, we decided to enroll in a debt management program.  In Decemeber of 2006, I had gathered up all of the statements from the various companies I owed money to and took them to a credit counselor.

My credit counselor sent proposals to everyone and curiously, Chase was the only creditor who declined the offer.  Despite filing out a Power of Attorney, Chase made many attempts to contact me directly.  I would instruct representatives who called me on the phone that they needed to contact my credit counselor.  Many times they would say things to try to pressure me into making extra payments directly.

Around this time, I saw a news article mentioning Senator Levin and his desire to look into cases like mine.  The article mentioned that people who feel they’ve paid excessive fees and charges should contact his office, so I did.

Over the last few months, I’ve been contacted by Chase representatives who tried to convince me not to enroll in debt management and asked for direct payments.  Finally, in February 2007, my credit counselor offered Chase a payment plan of $130 a month for 47 months, totaling $6,110.  Chase accepted.  At the same time, I was working with Senator Levin’s office, which, after reviewing all of my account information, asked if I would testify here today.

I was asked on Thursday to testify today, and the following Monday, a representative of Chase called me on the telephone to let me know that they’ve reviewed my account and decided that they are forgiving my balance.  I asked the representative if my pan to testify today had anything to do with their change of heart.  The representative told me that their decision was solely based on a review of my account.

I had to agree to come to testify because my primary concern is for the future of my own children.  I am only here to let people know what happened to me.  From September of 2001 to February of 2007, I’ve paid Chase over $6,300.  If they hadn’t reviewed my account, I would have paid another $6,110 on a $3,200 debt.  Thanks again for listening.

Wesley Wannemacher
Lima, Ohio
March 7, 2007
Testimony before U.S. Senate Permanent Subcommittee on Investigations

Stephen

——————-

Hello Stephen,

I believe you are describing the Universal Default provision that many credit card companies use to skyrocket your APR.  This credit card company claims not to have a universal default policy unless, of course, you are three days late.  Just so you know, three days is not much of a grace period.  This article outlines what being late means in credit report lingo.

Anyway, the credit card company sets the terms and the consumer must be wise to their strategy and while we’re at it – here’s how to beat the credit card company at its own game.

Thanks for the questions.

Paul

John Finneran, General Counsel
Capital One Financial Corporation
Testimony before U.S. Senate Committee on Banking, Housing and Urban Affairs
January 25, 2007

Capital One Financial Default Policy     “What’s In Your Wallet?”

—————

Greetings Liz,

Yes, there is a chance that your credit limit could be lowered, but I wouldn’t let that get in the way of reducing the balance.  The bigger risk is that the credit card company may invoke a universal default clause and skyrocket the APR. 

The subject of universal default has come under scrutiny in recent Senate Banking testimony.  The following is an excerpt from Michael Donovan and the NCLC’s January 25, 2007 testimony (page 4):

“Even consumers who always pay on time cannot avoid the pricing abuses.  Mr. S, a consumer client from York, PA, is an example.  He had two credit card accounts: one at U.S. Bank; the other at Chase.  He always paid these accounts on time and diligently.  Nonetheless, in March 2005, U.S. Bank increased the APR on his account from around 9.9% to about 21.9%.  The Bank told Mr. S in writing that a review of his credit report indicated he had too much total credit outstanding and, therefore, his APR was being increased.  At about the same time, Chase also increased the APR on his account, from about 11.9% to about 27.9%.  But Chase went even further; it also lowered his available credit line.  Like U.S. Bank, Chase told Mr. S that his lower FICO score caused the increase in his APR and the reduction in his credit line.  Incredibly, Chase lowered the available credit to the exact amount of the outstanding balance on Mr. S’s credit card.  So, when Chase added the daily finance charge to the account, it caused the account to go over the reduced credit limit, which then caused automatic over-limit fees to be charged as well.  Mr. S did not learn of this bank-caused over limit “default” until his statement arrived just days after the letter telling him about the reduced credit line”.

You’d have to check your cardholder agreement to see if a universal default provision exists.  A nice young lady I spoke with on the phone yesterday reminded me of an article that was written on this site that explained how to beat the credit card companies at their own game.  You can read that at credit card tricks.

Thanks for the questions and pay down those credit cards!

Paul

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