Before Our Credit is ruined

Budget101 Discussion List Archives Budget101 Discussion List Before Our Credit is ruined

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      Once your house goes into forclosure, you can forget about another credit card company giving you zero percent. You may even have some of your rates with existing credit cards go way way up. . It is called universal default. Credit card companies that apply universal default raise you to the highest legal rate if you default anywhere with anybody. You may have a perfect payment history with them, but too bad you defaulted somewhere and it shows up on the credit rating.
      Not all credit card companies apply universal default. If you are real lucky, then you may not have this happen with the
      existing cards.

      ‘Universal default’ rules explained

      The provision, generally buried in the fine print of your credit card agreement, basically says that if you are more than 30 days late on any payment to anyone, the interest rate on your credit card could shoot up and your credit score may be damaged.

      The problem has reached an all-time high, say consumer credit experts.

      “Universal default complaints are definitely on the increase — at a disturbing rate,” says Paul Richard, executive director of the San Diego-based nonprofit Institute of Consumer Financial Education. “More than one-third of major credit card issuers now say they act on these clauses regularly.” A recent survey found that a staggering 39 percent of credit card issuers said they apply the rule to customers, even if they had no late payments on their own card.

      But, Richard adds, many consumers are still unaware of the dangers because they either don’t read or don’t understand the credit card agreement.

      Original Message
      From: Melissa Calapp
      Sent: Monday, August 04, 2008 11:54 AM
      Subject: : Re: Before Our Credit is ruined

      Thank you everyone for your advice on this topic. Many of you do not seem to think giving up the house is a good option, but it is something that we have pretty much already decided to do, so that wasn’t exactly my question it was about other areas. The reason we are letting our house foreclose is becuase we bought three years ago near the height in our area and our area is plummeting. The house is worth about $130,000 less than what we owe now and the market is still going down. I doubt we could stay in that house long enough for it to even break even. Our payment is currently $1800, and is scheduled to go up to $2300 in nine months. We have already rented a larger home in a better area, closer to my husbands workfor $1100. We talked to our first lender and they said they would take the loss on a short-saleif we could find a buyer to take it, our second lein holder agreed to$5000, which is an $85,000 loss for them if we can find a buyer. We found four buyers, but because the first took so long getting back to us-three months-all of the buyers moved on. Wearestill looking for a buyer and hope to find one, as the house will cash flow at what we are asking, but it may not be possible and in that case we have decided to let it foreclose.We are in California, so thelender cannot come after us for a deficit, becuase the loan was backed up by the house and nothing else-it was not an equity line or anything, they are only allowed to go after the house. So my question was more along the lines as to what would you do if you knew you were going to loose all of those 0% credit card rates soon? I am also in school so getting student loans to replace the credit cards is an option, but they tend to run 8-12% and I’d rather not do that. We have one car that is financed and one not. I don’t think we will need a new car loan for about three to five years, so we should be okay there.


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Budget101 Discussion List Archives Budget101 Discussion List Before Our Credit is ruined