At the time when the credit card bill would soon become law, the credit card companies decided to really whack everyone's credit limit....including mine. What was once only 25%-50% of my credit card limit became 90% in a split second! "Coincidentally" (I don't believe in coincidences by the way) the loan companies started changing criteria for loan programs and all of a sudden my buyers did not qualify.
Even your home buyer's credit score dropped and they weren't qualified any longer!
It's no wonder a home buyer can't get a loan! At a time when it appears it is the best time to buy, it may not be the case for MANY others. It depends on the circumstances of each individual and household and definitely depends on their credit score.
They are screaming, "The interest rates are low"!
They double scream, "But home prices are low AND interest rates are low"!
My favorite Geico commercial is about ‘the bird in the hand is worth two in the bush" and the woman can't believe it and says....REALLY? Well, that's my answer for interest rates and prices of homes at all time low for the past four to five years is..... REALLY?
They got bailed out from situations that arose from their own doing.....
....and they make it nearly impossible for most middle class Americans to get a home loan.
The American Dream........
Celeste "Sally" Cheeseman is a Realtor-Associate® and Certified Residential Specialist (CRS) with Century 21 Liberty Homes in Mililani, Hawaii. With a sharp understanding that a listening ear is the key to a client's needs she serves the island of Oahu (Honolulu County) and all Hawaii Military Relocations, Hawaii Retirees, Hawaii Job Transfers and Hawaii Residents, Home Buyers and Sellers.
© 2007-2012 Celeste "Sally" Cheeseman's Hawaii Real Estate and Relocation Blog.
All rights reserved.
Yes, there are ways to get the credit score back up....keep paying down those credit cards and in my case got rid of (paid off) a couple of them and just stuck with my credit union card as they have a FIXED rate :)
I know what you're talking about. A friend of mine paid $3,000 on her credit card and the cc company immediatly lowered her limit $3,000.
A mortgage broker recently told me just one laste payment can lower your credit score as much as 100 points.
Ann: In my case (I like to use me as an example) I had NO late payments...ever.
The credit card companies took no prisoners. Every body on the battle field was bayoneted. Small business people like real estate agents and appraisers took this one right on the chin.
Celeste, I never thought about using my credit union credit card...since I retired...but I am going to check into this.
I sincerely believe we as citizens need to move away from credit cards in this new decade, and make them a thing of the past. When they made that move and dropped my credit limits and shot my 25% balances to 90% overnight, they also jacked my interest rates to double, and not just them. Other cards now pulled bureaus, and said 'Oh you have high balances on other cards, so we are lowering your limits on ours and raising interest rates too, even though you did not have a balance...' So forget about balance transfers.
I imagine the next national crash will be credit cards, as millions of people are going to go into default because of these moves.
Perhaps the direction we are headed is a bad credit nation, and George Orwell's predictions of a government owned society of 'Big Brother' will control everything.
Sally, though you and I usually have a positive spin on life, this is ridiculous. My CC company suddenly reinstated an annual fee, something they dropped a number of years ago and the banks...they are never here to "help" us. Dang! I will be calling the card company though!
Thanks for the heads up ... I haven't paid attention to my limits at all! And yes, if your utilization shoots up from 25-50% to 90% your FICO will go down ... and it wasn't your fault!
We all have felt that credit card pinch...and Michael...I believe we need to move away from those 'bogus' credit cards. We all need a credit card or two...ordering biz cards online...trips etc. Like you my interest rates were jacked too....
Russell: Positive does not mean we let 'them' run all over us. I am human and believe it's all a bunch of horse crap but moreso that our livelihood is threatened by the unaccountables.
People should use their credit cards less. Of course we need them for certain things, but I know people who are juggling over $50,000 on their credit cards. It's absolutely insane.
Indeed. We have buyers that have good credit, never late, use only about 40-60% of available credit yet their credit scores are in the low 600s, which, of course, means that the interest rate for their mortgage loan will be higher too.
Which is one reason I'm focusing on First Time Buyer Programs with low credit score requirements. The average prices of the homes is lower, but some programs protect buyers.
Sally,
This is news indeed. It shouldn't come as any surprise, though. Maybe if the new Congress will repeal Wall Street reform, the credit card companies will go back to business as usual...
The credit card companies had each of us right where they wanted. They realized there would be casualties and some would default, but not so for others such as ourselves. By doubling interest rates and increasing fees, they would make up the difference in what they stood to lose. Unfortunately, those of us who care about our credit and want to qualify for future purchases have the burden of keeping the "unaccountables" afloat.
Sally, I guess it's fortunate that Americans are so beaten down emotionally nowadays that they don't even bother dreaming anymore.
Sally, it goes way beyond being "economically viable" so much more is at stake with every strand of personal information the credit card companies receive. When your portfolio does not fit their formulas a disaster is eminent. Even paying balances in full each month does not shield you from the dimishing limitations imposed. The "bottom-line" appears to be if you are not satisfying the greed with fees you are not a needed customer any longer.
Sally -- I had my limit cut in half about two years ago because they told me I never came close to using that much credit. So, of course, my utilization went up. I quickly paid it off and only use it minimally. I wanted to close it out, but that would have lowered my FICO.
Sally this really low that banks can do this without any warning. Last year my wife called a CC company to get ours lowered, as we didn't see the need to carried the large of a limit that wasnn't being used. They raised it back up in 3 months.
Malcom: That is insane. I'm talking about the responsible ones who are always paying...but this happened and voila...no more good credit.
Lenn: How low is the credit scored requirements? Does this include VA?
William: Ain't news to me...this happened a year ago to me...and others. the bottom line is that our home buyers are suffering.
doug: You're on target with that one...they do have us where they wanted. They counted on the ever paying consumer who cares about their credit.....and the unaccountables are right where they wanted to be too.
AA: to put it bluntly :)
Kevin: Yeah...that's for sure. I am resorting to opening up new accounts at other credit unions to keep the others alive with minimal use.
Barbara: Can't win right? I can't close mine completely either...all those years of credit would go down the drain.
I think that it is unfortunate that these things are not considered by lenders when they are qualifying buyers for a home loan. These things are not in our control but they definitely affect the scores!
One program is 620 in MD and Va and one is 640.
With VA they're looking more at residual income than credit score.
I am of the same opinion as Dave Ramsey - Credit card companies are the devil! (not even disguised!) Run Forest, Run!
Sally- I am getting calls from short sale sellers all with notices from their credit card companies that they are not getting their cards renewed or that their limit was dropped to what they owe which of course results in a lower credit score. And these sellers I am talking about were not late on payments!
This is the unintended consequences of a government not understanding that regulations increase higher fees which are then passed on to the consumers, and then like with this faulty bill of the new credit card act, thousands of small businesses are now without credit because it is too risky for the credit card companies to issue the credit with the new regulations. This is just the tip of the what is going to be happening.
You should have been a mouse in our pockets when we tried to qualify buyers when the interest rates here were 21%! Katerina
You really nailed this. And I think Michael Delaware is right on the mark too. Big Brother is looming.
This whole craziness has been a fast moving target for 4 years now. Right hand doens't know what the left hand is doing - and seems like it's been a lot of 'let's try this' on the governments end and look at the mess we're in. The way I see it is that I've got to be a couple steps ahead of their crazy games - and that ain't easy. We work with a lot of 1st time home buyers with many local programs and they are a grateful bunch to be able to buy their 1st home.
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Wonders where NAR was on all the finance issues...?
Lenn: Yup...41% debt to loan ratio... I should have clarified better.. How low is the credit score requirements for the first time home buyer programs (down payment assistance) and ...you answered it :)
The lenders are not making this any easier on anyone...and let's see...how does one make money lending, when there is no one who qualifies for a loan? Hmmmmm.
Dawn.....and we can say
REALLY?
when they tell us our buyer doesn't qualify. lol
Dawn. In many cases, the lenders make money on the spread between the cost of money and what they make on depositing it at the fed.
The average loan officer doesn't benefit from that.
Sally:
I use my credit cards as a convenience and pay off the balance every month without fail. I just received a statement that said that I owe $105 in interest payments for the year. I am still trying to get an adequate explanation for this. I think these banks are reaching right now.
You are absolutely right! I didn't have my limits cut, but back before the legislation went into effect all the interest rates skyrocketed. It is nearly impossible to find a card with a low fixed rate anymore. I went from having a couple of cards with a low fixed rate to variable rates almost double. I think the worst is yet to come with the CC companies.
Claudette: Many need to follow that lead......
Sally - I think most, if not all, of us have been impacted negaitvely by the tactics of the credit card companies. One can't help but notice who is NOT seeming;y having financial difficulties these days.
And it is certainly creating more problems for buyers, including those with little debt, high scores, and cash to put down.
Jeff
Wow, I need to check that one out. I use two cards, pay the family one off monthly, the business one carries a balance that goes up in the winter months in Michigan, then paid off in Spring. Thanks for sharing this, I will be on the lookout.
Happy New Year Grandma Sally.
Jeff...you're darn right...even those with great credit and no debt have a problem because they want big bucks for a down payment....
Missy...that kid is going to be spoiled all his life w/many grammas :) Yeah...I actually didn't realize the interest went up until 6 mos later when I decided to check out my statements. arghhhh
I got hit by this, too. I had a couple of cards that were at or below the 50% ratio. They crushed my limits and viola! Instant credit lowering. Amazing.
@Sally, additionally, I had my largest credit card cut to 1/4 limit after I decided to pay it off. I closed it. That Geico guy makes you stop and listen...I think I will need to get a tv voice for my videos LOL
@Lenn, you are so right...I tend to forget and think like a normal person and not a banker when I get upset. Normal folks don't know how the bank is making money and how could they? That's why they always say, of course the bank doesn't want to foreclose and take your house!!!
It's a shame, the banks got bailed out with tax payer dollars, but they won't reciprocate and are making it harder top get loans.
Hi Sally~ I haven't paid attention since I use a credit card but always pay it off each month and will do without something else if I have to. I refuse to pay one penny in interest on a credit card!
What a great conversation. It is not a very good place to be until things settle down.
My partner and I moved our money out of Bank of America & Chase and moved it to Credit Unions. My only credit card is through a credit union. I hate banks and I can't stand when a buyer has a pre-approval from Wells, BofA, Chase or the like.
Two different dreams - American individual dream of home ownership & business dream of profit at any cost.
I agree with Karen, CCs are the devil (and not even in disguise anymore). My buyer just closed on her new home last month. If she waited one more month and we were to close this month, she wouldn't qualify. That's how difficult it's getting. I expect more of the same this year.
I know many business owners and individuals who had impeccable credit, paid their cc balances every month have had their cc limits shut down. In one case $30,000 to $600! She NEVER had a late payment on anything in her life and she told them to take their card and ..........! We had a line of credit with ADVANTA for years that we used only occassionlly and paid the balance off every month if used, that we received an email one morning stating "your account has been closed and remove any reoccurring transactions within 3 days", oh and by the way it has nothing to do with your payment history etc.....no, the funding had been cut for "all business" accounts!
Sally...
Everyone is getting discourages. It is really going downhill fast.
Sally, I heard the other day that credit card companies are starting to lighten up because they are realizing this is a cash cow for them. Let's see what the future will bring.
I've heard about this ! Buyers start paying off debt only to have their limits slashed !!!!!!!!!!
You are right on the money on this one and mortgage interest rates are going UP. According to NPR a few days ago, they are expected to be near 6% soon - those fence sitters that could have gotten a mortgage because they had good enough scores to qualify may not want to purchase anymore.
Eric: I was amazed....needless to say I've brought it back up....but what about all the buyers who could have..but this situation prevented them from?
Michael: Bring us more news if you hear an update...
You're preaching to the choir. This is not a dream, it's a nightmare.
Sally - I have been reading about American credit card issuers cutting credit limits for at least a couple of years. Many people have stated they have very good FICO scores, pay on time and other factors.
The CC Companies will make their worst fears come true, as they teach us that credit is expensive and unreliable. We are changing our behaviors. More of us are moving to mainly cash - card used ess, and more carefully.
They'll be trying to get us back before long...
They live for interest, and won't be collecting much under these terms...
Marc...they do until they get cut and then have over a 50% credit to debt ratio
Laurie: I'm down to minimal and will continue on to get back to where I need to be...and yeah...they won't be getting much off me anymore...if ever.
Donna -
Advanta closed accounts for everyone. They were shut down by the feds....without any bank being willing to take them over and operate them.
Jim: I guess that was a good thing :)
Ire over this banking climate is part of what motivated the Tea Party movement...whether you agree with them or not.
The whole nation should be in a revolutionary mood over the credit card mess.
But it was not the new legislation that forced these kinds of credit card changes. It was the credit card changes that motivated the new regulations. The public demanded it.
The real legislative travesty is that the Congress (including the bankers continuing long term friends in both parties) delayed the implementation dates of the regulations to make it easier for the banks to further screw the public.
That's what I say....gave so much time to implement the darn thing that we all got screwed. Not a good thing back then but straightened me up quick :)
Hi Sally, I'm back again. I guess hind sight IS always 20/20, eh? We should have been screaming from the hills for our (future) clients to knock down their debt as fast as possible. Everyone should. I know that's at the top on my list of Revolutions for 2011. I think as interest rates climb, and the banks make more money, they'll be able to take on a little more risk. Hopefully, they'll loosen the lending guidelines a little because of this and we'll be able to more a few properties. Happy New Year!