Wednesday, May 16, 2012

Credit Cards, FICO & RV

There used to be a time when a FICO of 728 was considered very good, today, you need a 780 or better to be considered for luxury things like RV’s at the lowest rates. A little over a year ago Ronda and I decided to close the credit card accounts knowing full well the affect it would have on our FICO score because lets call a spade a spade, the credit card companies got the rules into place to hurt your ability to get credit if you not only closed a credit card account but even if you paid it off.

Paying it off reduces the amount of credit you have, high balances, balances that are close to your limit, debt to income ratio, all can have a negative affect on your FICO. Our combined FICO 60 days after closing all of the accounts was a dismal 620, since then mine has climbed back up to 728 but because of what American Express did to an account that was in Ronda’s name, her FIOC plummeted back to a 622. Is this unfair, yes, I can understand that things affect credit but when our history of payments is perfect one charge off that we had no control over shouldn’t have the ability to tank your credit like this but because of these rules it can and does.

In 6 months to a year her FICO can recover but guess what, we had 4 American Express accounts and we now believe as we pay them off they will do the exact same thing tanking both of us back into bad scores. They as much as admitted the policy and also stated they do this to help you. We know better since we see the result. Our big credit card was with Chase, I can only imagine what they will do when we are close to paying it off but I can’t wait for when it is!

There are people who pay cash for everything, God love them and I wish I were one of them. I’m trying to be, but do you know what their credit score is? Who cares is the answer, when you pay cash for everything then who cares. There will be a problem however if they ever try to use credit, but that’s another topic.

Life is a balancing act, the huge percentage of us use credit because there would be no way to buy our house with cash, or our car or heck maybe not even a TV. When we start out on our own we want these things and use credit to get them. Man how I wish I was smarter when I was younger. My best friend will be in great shape come retirement time, he, has been smart.

Ronda and I are 50 and darn near 50, it took us a long long time to realize that we don’t need all of this stuff. I have my own business and to stay in business I had to purchase the gear to be competitive, it’s a hard balance to compete and not use credit. Anyway we no longer want all of this stuff so a little over a year ago we decided to scale back. I have diabetes and it’s a battle, even people who have better control over it than I do have a lower life expectancy than the average person so this is why we decided to buy an RV in 2010 when we should have waited until we were in better shape. Still, we should have waited until this year anyway, again lesson learned…

Our income is very good, but when your debt is as high as ours is, you can’t tell that your income is very good. Ironic isn’t it. I learn lessons the hard way but I learn them. Unfortunately I pretty much know with my sports injuries and diabetes I probably won’t make it to retirement age and if I do my ability to do many of the things I do now will more than likely be greatly diminished. I am walking a lot, trying to get into better shape and lose weight, I’m making progress on all of it but I know what I know, don’t ask me how. I would explain it but I can’t do that here, as much as I’d like to. That’s as far as I can go.

Regarding the Dutch Star, I spoke with the finance guy and he explained that he was shooting for a top tier rate of 5.2% and declining offers of anything higher. So, right now he is working on seeing what these same banks will offer. Funny isn’t it, they deny you a lower payment because of risk, but will qualify you for a much higher payment because of the higher rate that makes it harder for you to afford. The deal is dead as far as I’m concerned but if he thinks he can get us in at 6%, we would think about it.

Have a great day folks and thanks for stopping by “As the Erik’s Rantz Blog Turns” soap opera, tune in again tomorrow for the next episode!


Big Matt said...

Just got a credit kick in the teeth myself thanks to the Federal Stafford loans.

Because of Obama's amazing college loan "fix", I got a nice hit when my nearly paid off loan got transfered from the main Education Loan group to Mohela, so I got an account closed (without my approval) and a new one opened to take over the loan, knocking me back from 710 to 680.

Had hopes to finally buy a used TT to bring out to the island next year so that I could finally get Dawn moved in with me, but looks like that will have to wait a little longer :(.

Merikay said...

Your Endevor sounds like a nice rig. You have been working to fix it up, get new tires etc. I know you want to replace the carpets, don't we all.., but maybe you should just pass on the upgrade and enjoy what you have.

I find myself in the same frame of mind sometimes. Always looking at something other than what I have.

When I really need to dream, I spend one dollar on a lottery ticket. Then I don't look to see if I won for weeks.
Get lot of dreams for very litle cash!

Diana said...

I am so with you Erik. I hate credit, but it is something we must expect to deal with. I'm in the process of teaching two teens who are just counting the days till they can fly away!
I keep stressing the good credit lesson but don't know if it's absorbing or not.
Perhaps I should instruct them to read your post!
I feel just as you do on this point. Love Di ♥

Alan and Marilyn McMillan said...

We got rid of Chase years ago, never have had AmEx. I did what everyone says not to do -- took my 401K and paid off everything, sold our house, got rid of the stuff and hit the road. Better for me to have the $$ than to risk it in the stock market, etc. Never looked back and would do it again in a heartbeat. We currently have 2 credit cards we alternate between.

TexCyn said...

I left a nice long post, then lost it because I lost my internet connection again - grrrr
Anyhow, step back & look at the big picture. The Endeaver is a really nice rig. You baby it & take really good care of it. It has nice new shoes, it's in good shape. It's better to have it than no rig at all. Unless you want to trade me for a widdle ClassC?? ;-)
I don't let the credit game mess with me anymore. I don't care anymore. Wells Fargo screwed me badly when they kept losing my payments! Then they upped my service charge to 22%. That was back in 2005. So I got rid of all credit cards after that! I try to pay cash & keep my needs small now.

JOJO said...

thats a lot of credit cards. I never heard anything good about AmEx. When I worked for a large Corp. they used those cards and it was always a mess.
Like others have said the Endeaver is in good shape. It has been taken care of by you.
Get rid of the cards and just wait until you don't have any other credit cards or loans.
I also used my 401K to pay off the few little bills I had when I lost my job. I only have on credit card and I will get it paid off in Oct.
Hang in there.