Today is the last in a Biz Beat series featuring your credit questions, with answers provided by Consumer Credit Counseling Service of Greater Atlanta.
If you have a question about credit card debt, worried about foreclosure, or in need of budget counseling, you can call CCCS at 1-800-251-2227.
I’d like to thank everyone who participated and hope it was helpful.
Q: I’m considering a loan modification. I can make the current payment, but I have some expenses on the horizon this year related to college. Is getting set up in this new agreement going to impact my credit scores? How can I avoid a negative impact on my credit history? Should I try to do a regular refinance?
A: If you change the terms to your existing loan, which is what a loan modification does, your credit score could drop. Typically a loan modification drops the monthly payment by reducing the interest rate, or by extending the length of the loan.
If you can qualify for refinancing, that would indicate your credit score is probably already healthy and it won’t be changed one way or the other. If you are struggling to pay your mortgage and can’t qualify for refinancing, you should not let the possible impact on your credit score stop you from pursuing a loan modification if it puts you in a sustainable financial situation.
Q: There are two credit card histories that are showing up on my son’s credit report. We have the same name, except I am the 3rd, and he is the 4th. Initially there were three cards, but we were able to get one of them to switch the card and its history over to my credit report. I have not had any success with the other two cards. They tell me to contact Equifax, but that has proven to be a dead end as well. Any suggestions?
A: Common names of fathers and sons can result in a mixed credit report. It can take persistence to clear this up once it has happened. In addition to Equifax, you should be contacting the other two credit reporting agencies, Experian and TransUnion. When you write the agencies with your dispute, please be sure to say that you are writing as the “3rd.” Also, notify your creditors in writing of the mix-up. From now on you and your son should be careful to use your full name, including suffix, when filling out credit applications.
Q: I have 35,000 in credit card debt. My credit is affected by high balances. I pay everything on time. What is the best approach to pay these cards off? I have a first and second mortgage. I can’t get refinancing because of the credit card balances. I would not get a lower rate than the 6.3% I have on my first mortgage and 9.5% on the 2nd. My income had gone down for a couple years but is back up now. Nothing is leftover after all the bills. I spend $1,500 a month in paying credit cards. What is the best plan to take care of this? I feel like I don’t trust any of these companies out there.
A: The interest rates on your mortgages are not terribly high. It appears your biggest challenge is going to be paying down your credit card debt. You don’t say if you are paying mostly interest on your credit cards, but it would appear that might be the case. Please get some help with your debt situation by contacting an accredited, nonprofit credit counseling agency. You can find a trustworthy referral list by going to the Web site for the National Foundation for Credit Counseling at www.nfcc.org. Of course, you can also get free, confidential credit counseling from CCCS.
Q: How is it that with years of outstanding credit history and no changes in your behavior, a credit card company can lower your credit limit or cancel an account outright? That significantly lowers your FICO score, sends all your other creditors into a tizzy and adversely affects your ability to attain credit and favorable rates and terms.
A: Not many of us read the fine print on our credit card agreements, but many of them say that the terms can be changed at any time for any reason. This is happening more often now because banks are trying to limit their unsecured debt exposure and because a new federal law that goes into effect February 22 will limit their ability to do some of the things you mention.
Among the provisions, creditors will be required to provide consumers with a 45-day advance notice of changes in rates and other significant contract changes. Something called Universal Default will also be prohibited. That’s the practice of unaffiliated creditors raising your rates when you’ve paid late to another creditor.
Here are the links to the other parts of this series:
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