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Can someone explain the credit report

Posted by softballmom (My Page) on
Thu, Jul 31, 08 at 13:05

I just recently received my credit report since I was denied credit. I'm trying to figure out what are they thinking when I looked at my report.

My husband and I have 1 dependent we make over 175K a year our mortage is 2400 a month and normal utilities nothing surprising there. Anyway when we got the report it was 20 pages long 4 of the pages were dedicated to explaining how to read your report. Of that report there were 3 credit cards that I had closed but were still showing as open. 4 other credit cards that are open and I'm working on them. 2 new autos and 2 debt consolidations. I've been making these payments for years and the only thing that I was trying to do was trade in my old intrest rate from 11% to an 8% rate for the last 2 years that I will have these open.

We were not asking for more money just doing another debt consolidation to get a lower %rate. There was nothing here we have not been handling as a matter of fact my new car payment is $100 less a month then my old car and I factored in that savings into paying one of the 4 cards off early.

Anyway we received a letter from the company who turned us down and they said that our mortage was to high to consider giving us more credit. $303K

We have been in this house since August 2001 never missing a payment sometimes paying early so I'm trying to figure out what is going on here? The only new debt is my husbands car everything else that we have been making payments on has been there for a few years.

Any of you guys got a read on what is going on in the banking world and can explain this to me. And please do not come back with a comment that I should be getting rid of my debt that is what I'm doing and I'm doing a pretty good job considering where I started about $75K worth of credit card debt alone.

P.S. Even with the new car we still save the max for both in 401K's college savings and eat out 2-3 times a week. I just don't think that banks look at individuals but at everyone as being potential loosers. What do you guys think?


Follow-Up Postings:

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RE: Can someone explain the credit report

Banks are trying to add $$$ to their capital reserves - this leaves less money for loans; e.g., the definition of a "credit crunch".

Try some other banks, and if you have access to a credit union, you could talk to them as well. Every financial institution has different credit criteria. Don't take it personally, in a tight credit market this is what happens.


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RE: Can someone explain the credit report

Hi SoftballMom,

From your post, I can't tell many of the important things. I realize that this seems like Greek to the common-man, and the analysis is counter-intutive to most folks...

Have you CLOSED your revolving accounts, or merely paid them down (closing them eliminates the facility, and makes it appear you are less trustworthy since there are obviously fewer banks willing to lend you funds, or who have perhaps refused to continue lending you funds.)

Open, but unused, revolving credit makes it obvious that ou are indeed credit worthy, and responsible with your credit management to boot.

RECENTLY opened credit makes it appear you are "reaching" and not so strong.

LONG STANDING OPEN credit looks like you are well-established and stable.

NEXT; what is your current real-market home value? What loan-to-value are you proposing?

NEXT: What is your proposed debt-to-income ratio, after the consolidations? Currently the general target is 38-45% or less of your gross (pre-tax gross) income can be alotted toward the combined total of minimum consumer debt payments, mortgage payments, monthly property taxes & insurance (and condo dues, if applicable.)

If you're solid in these aspects, then the loan officer is probably not seeing your numbers accurately.

Hope that's helpful.
Dave Donhoff
Leverage Planner


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RE: Can someone explain the credit report

"...they said that our mortage was to high to consider giving us more credit. $303K..."

Sounds to me like you're trying to use your house as collateral for this loan consolidation? If so, the problem sounds like the house isn't worth enough for the dollar amount you're seeking. What's the total percentage of your consolidated debt plus existing mortgage compared to value?

/tricia


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RE: Can someone explain the credit report

Thanks for the input. Sorry but I wasn't trying to use my house, I would never use my house to refinance credit card debit. I'll go back and look at what the total debt is compared to income. I just thought it was weired since each time I've paid off a card I've rolled that amount into paying the next card, and sometimes I take a bonus and pay a debt.

It just irridtated me that they would say something like that and the house was not even in the picture.

Want a big laugh we got a stupid flyer in the mail telling us that we qualified through HUD for $1M right after we got the denial letter. I just don't know what they are thinking.


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RE: Can someone explain the credit report

Anyway we received a letter from the company who turned us down and they said that our mortage was to high to consider giving us more credit.

It doesn't sound like they were denying you because of your credit score. I'm guessing a bit, but it sounds to me like they were denying you because you have too much debt (in their opinion). Usually, the higher they consider risk of non-payment, the higher your interest rate, so to qualify for a lower interest rate, they'd want to be pretty sure you would continue to be able to make your payments. If you were to run into financial difficulty, you'd probably pay your mortgage first (so as not to lose your house), your car payments second (so as not to lose your cars) and other debt last. So they are afraid you are stretched to the limit as it is and at fairly high risk of non-payment if you hit any bumps in your financial road. So you do not qualify for their lower interest loan.


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RE: Can someone explain the credit report

4 other credit cards that are open and I'm working on them. 2 new autos and 2 debt consolidations.
You have 2 credits cards and have a car charged on each of them. Is that correct? I'm wondering if it might appear worse that they are amounts being carried on credit cards as opposed to being auto loans of some sort.

I say that because years and years ago I was turned down on a credit card application. I inquired why, and found out that my 2 home loans (one for 5 years, and one for 15 years) were showing up at the credit bureau as car loans. Once that got corrected to reflect that they were mortgages, I got approved with no trouble.

If a car is on a car loan, at least that is some collateral...where there is none on the amount owed on a credit card. Carrying considerable balances on 4 cards looks like (IMHO) you have been overspending, regardless of the circumstances.

I'd try and get rid of those 2 cars, and car payments and just get something that you can pay cash for. Then on down the line, when all the cards are paid off, and some additional car money saved, buy a new or newer car then. I've always been told to not borrow for anything that will depreciate....cars, electronics, anything other than real estate...which we now see can also go down.

Sue


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RE: Can someone explain the credit report

If at all possible, snowball those cards starting with the highest interest rates.

Creditors are cutting credit lines left and right and this in itself will lower your scores (if you revolve balances), since it makes you look like you are utilizing more of your credit line.

The creditors are also rate-jacking and chasing balances. Rate-jacking is obvious. Chasing balances is where they feel like you're becoming too much risk, so everytime you make a payment, they decrease your credit line that much.

Right now they are trying to salvage as much risk as possible. Not to mention, by getting these balances down, you will raise your credit scores! Obviously, higher scores and less debt make you less of a risk.

Also, a credit card reported as open but should be closed, does not effect your score. A card that is closed, but has a balance that has yet to be paid will hurt because it factors into your utilization.

You'll gain more points on your credit score by paying down revolving credit. Paying installment loans down faster will save you money (especially early on in the loan), but will not gain you any points.


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RE: Can someone explain the credit report

No offense, but I wouldn't lend you money either right now.

2 debt consolidations
2 new car loans
4 credit cards with balances
1 good size mortgage

Since you make very good money, I can only assume you have been living beyond your means for quite a few years and are now trying to dig yourself out. That is admirable and I wish you all the best. However, while you are digging out, you shouldn't expect creditors to lend you more money or refinance your debt. In the boom years, they were giving credit to anyone with a pulse. Now, they are only lending to very "safe" borrowers. Despite your recent efforts, you aren't a safe borrower at this point. If you keep on task and pay down your remaining debt (and not create any new debt - new cars when you have CC debt!!!!!!)you'll eventually become a safe borrower again. You aren't quite there yet though.


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RE: Can someone explain the credit report

Any time you close an account, write to the company that you ( same name that matches the social security number on file), are closing the account and please notify all three credit bureaus to show account closed by customer. Do this in writing.
It will show up on your credit report as closed by customer.
Make sure all the account are yours, and labeled right.


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