Student Debt and Credit Education Blog

On February 13th I added a blog entry titled How My Credit Score Dropped 30 Points in One Day. This entry is a follow-up to that. To summarize the original entry, I paid off and closed my Chase credit card because they were jerking me around by raising my APR because I was paying my balance off too quickly after a 0% interest balance transfer. Aside from that being a highly unethical and downright evil way to treat me, I then screwed up in trying to sever my ties with them and they socked it to me- again.

I paid off my balance plus some extra to cover the interest that I calculated had already compounded for the current month. I then proceeded to pay no attention to the invoice the next month since the account was closed and I assumed they were just going to bug me about a credit of a few dollars. Little did I know, the interest they hit me with was $3 more than I paid with left the account open. Instead of a credit I owed them $2 which I didn’t know about and so didn’t make a payment. Chase was thrilled to charge me a $30 late fee, and then another giving me a balance of $63 which was over 30 days past due. This they submitted to the credit agencies who then rocked my credit score by an average of 30+ points. luckily I use a service that alerts me when somebody dings my credit report so I was made aware of this balance for the first time. I immediately paid the balance off and then called Chase hoping for a goodwill adjustmen. I was fine with surrendering the $60 to cover being late on the $3 but I wanted them to retract the negative mark seeing as it was obviously an mistake. Their answer to me can be summed up by: “too bad, don’t try to rob us of $3 next time”. No, they didn’t want to work with me on that.

Well I’m happy to report that my score corrected itself and went back up today to just a few points less than where it had been a originally. So if you are wondering how a late payment will hurt you it all depends upon how late and how many you have. I researched how this works and here is the deal:

One late payment hurts your credit score in a major way because you could potentially go 90 days late. 90 days late is what lenders really fear because after 90 days their odds of not getting paid without going to collections skyrocket. Once its reported that the late payment was made and you are back on track in under 90 days the penalty eases up on you to show lenders you are no longer a 90-day late risk. If you have a history of being 30-days late this doesn’t work out so well, the penalty can stick for repeat offenders.

Anyway, so I’m back on track and now I can look into taking advantage of the dropping interest rates to try and refinance my mortgage and save some money each month. I was about to do that when my credit score got socked by Chase. With the economy bogging down, credit requirements are getting tighter so that’s why my score dropping was such a killer.

By the way if you are a student who will be looking at private or consolidation loans in the next 12 months, don’t wait! You should apply now before the credit requirements raise higher! You can go here to learn more about how the credit crunch is going to affect your student loans.

This is a very humbling blog post. It’s humbling but I also recognize that it’s an incredibly valuable lesson, particularly those with less credit experience than me or who are just starting out. Before I begin let me boil it down to one sentence for those of you in a hurry. READ EVERYTHING YOU GET FROM YOUR CREDIT CARD COMPANY IN DETAIL NO MATTER HOW INSIGNIFICANT IT MAY SEEM.

The Background

In February 2007 I decided to get a Chase Rewards Card in order to take advantage of a 0% APR for 6-months balance transfer option. I wanted to consolidate some smaller debts and free up some cash to pay down other debts faster. My plan was to pay only the minimum for 6-months while cleaning up the other debts and then when the normal APR kicked in I would have compounded available cash from the paid off debts to knock the Chase balance off in about 3-4 months.

I was diligent with my plan and executed it to perfection. When the regular Chase APR kicked in last summer I was ready to go and proceeded to make two consecutive quadruple payments. As I often do I called them one day to ask if I qualified for a lower APR since I was such a good customer (paid on time, more than the minimum, had a good credit score and history, etc.) The rep informed me that not only didd I not qualify for a lower APR but that they were going to move my APR from 11.9% to the maximum of 24%. I asked them why and was told it must be something on my credit report. I had a credit score of 730, no late payments in over 7 years, a great mix if credit including mortgage, auto loan and credit cards older than 10 years. The agent insisted that she didn’t know why then and there was nothing I could do about it.

I strongly suspected the reason that my APR was jacked up was because Chase made no money on me for the first 6 months due the 0% APR offer and some report revealed that I was a classic “gamer”. A gamer is somebody who takes advantage of low intro APR offers and never ends up paying the credit card company much in interest because they pay off or move their balance too fast. Companies who derive tons of money from fees and interest hate gamers.

The next day I made a balance transfer from my Chase Rewards card to my American Express and included an extra few dollars to cover any residual interest. Then since it was a new card anyway I cancelled the Chase Rewards card. I won’t have a long term relationship with a company who pulls out all the stops to earn fees off people unfairly rather than promote a lifetime business relationship.

Fast Forward to Today

All the Chase drama happened in November. I got a statement or two afterwards and tossed them assuming they owed me money and I enjoy when that happens because they owe me a few bucks and then have to spend money every month to tell me. Hey it’s a few cents every month but a small victory nevertheless.

Through American Express I have a service which alerts me of any changes to my credit report. It’s great, I like to tinker and see if I can always move my FICO credit score up but I have never received an actual alert- until today.

My alert informed me that I had a derogatory statement put on all three credit reports. I immediately logged in and saw to my disbelief that I am more than 30 days past due on my Chase bill. How can this be? I logged into my old Chase account to see that my “extra” payment made back in November was a couple dollars short of the interest charge. I had a balance of $3 which I didn’t pay for 2 months in which time it accumulated $60 in late fees and got me a negative comment on my credit report.

The credit report service from American Express allows you to also calculate your FICO credit score on the fly so I did that…30 points on average between the 3 credit agencies. My credit score got blown out of the water from this one thing!
I immediately paid Chase online and then called them to see if there was anything they could do about the negative report to the credit agencies. They passed me around to a couple of different people before informing me: Too bad, late is late and it’s your problem not ours.

So Chase got the last laugh. I now have to work even harder to get my score back up. I’m hoping the change will not be permanent and in a month or two when the balance shows I paid them their $3 and the account is closed it reflects that. I’ll let you know. In the meantime here again is the lesson learned.

READ EVERYTHING YOU GET FROM YOUR CREDIT CARD COMPANY IN DETAIL NO MATTER HOW INSIGNIFICANT IT MAY SEEM.

This goes doubly if you’re a gamer and move balances around frequently! Oh and I would personally not recommend getting involved with Chase for any number of reasons mentioned in this post.