What Can Happen to Credit Cards After Foreclosure

Like so many of you, I too have had my share of financial problems the past couple years. During the good times, I got a little overzealous and purchased a 2nd home and a seasonal vacation rental. Basically this meant that I had 3 mortgage payments and the rental income I received only covered the expenses on the seasonal vacation rental during the summer months. Once winter came around, those came out of my pocket too, so I decided the best thing to do was sell the vacation rental, so on the market it went.
There my listing sat, and sat, and sat, collecting dust with no offers. It got to the point where I could no longer afford to make the payments on the 1st and 2nd, so with much hesitation, knowing I was going to ruin my perfect credit rating of the past 20 years, I stopped making the payments on December 1st, 2008. I had no choice.
The late payment letters and collection phone calls started coming fast and furious by February. I really needed to learn another language or two, because how many times can you tell a collection agent “I don’t have the money” after 3 phone calls from the same lender in ONE WEEK? Maybe if I could say it in Spanish or Greek, they’d understand and stop calling. But no…..persistent buggers they the saga continued until I just stopped answering the phone.
So April came and I got a letter from my credit card company who holds both my Visa and my American Express accounts for the past 15 years. These two accounts didn’t start out with this “ungentle giant”, but they ended up there much to my dismay. So anyway, I got this letter saying that my $45,000 credit line (that I paid perfectly up to that point I might add) was being cut to $13,000. Guess how they came up with that amount? It wasn’t rocket science or anything. My balance on the card at that point was $12,800, so I guess $13K looked like a nice round number. Ditto for my American Express account. This company is nothing if not efficient! Nothing like killing two birds with one stone!
Being the so called “credit expert” that I am, I knew this was the start of the ramifications of my not making my mortgage payments on my seasonal vacation rental, but boy, did that hurt the ego or what? I’d had that account for 15 years with a $45,000 credit limit; had never missed a payment or ever been late, and now it was down to $13,000. If that wasn’t bad enough, do you know what happens when your balance is basically as high as your credit limit? It totally dumps your credit if the late payments on the mortgage weren’t bad enough. I went from a 768 score down to a 569. Thanks for the help! Deep down I knew and understood their reasoning. I was now considered a credit risk and they had to limit their possible loss. I sure didn’t like it, but I understood it.
Okay, so I had to adjust my auto payments around to another card that hadn’t cut us yet and generally fight on-going depression for the next few months while I adjusted to my new crappy credit standing. I knew that once the foreclosure was actually done and over with, my credit would start to repair itself, (after about 2 years) and I wanted to get that clock started, but the lender hadn’t foreclosed yet. By September of 2009, I was getting really frustrated, so I wrote a nice letter to my first mortgage holder saying “Please take my house!” and I enclosed the house key. Thought I’d make it easy for them and give them the incentive to just go to sale and get this thing done. I guess it worked because on October 19th, I lost my house to my first mortgage holder.
I sat back and said “Ahhh….” That chapter is over and I can move on, but noooooooooooo……. I had a 2nd mortgage too and they wouldn’t go away. In all fairness, I got this 2nd in 2007 when I saw the writing on the wall with the economy and real estate values. I took as much out of this home as I the tune of $135,000. I put some of the money into upgrades on the house that got foreclosed on, and I used the rest to live on for 2008. Wells really had every right to want their loan repaid and since they didn’t initiate foreclosure proceedings themselves, I was now being hounded by Wells continuously. “Either pay or we’ll seek legal action.”
Again, being the “credit expert” that I am, I knew if they decided to seek legal action, that would result in a judgment against me which would be another big ding on my credit and it also would start to accrue interest on a much higher scale. My Second Mortgage lender told me that if I made payments NOW, directly to them, the interest would stop accruing on the account and any payments I made would be credited directly to the principal. Since I didn’t see any other way around the situation, short of filing for bankruptcy, I started to pay them $200 a month. They really wanted $65,000 and they’d call it settled, except for 1099’ing me for the difference. Isn’t that nice? Yeah, like if I had $65,000, I wouldn’t be in this mess.
So far, so good with the $200 a month until last month, when they tried to talk me into the “10 year plan” for $1,200 a month. ‘s a bit about $300? They seemed to be okay with that, but now I’m getting a “Mortgage” call a couple times a week again. That’s okay. I know the number now and unfortunately I’ve been too busy to answer the phone when they call. I know this arrangement is not going to last forever, but for now, I’m dealing with it.
To top this whole sucky last year off, after taking care of my elderly dad for the past two years, he passed away this last October. I’ve spent so much time with him in the past two years, that now I’m a little lost, but he’s in a better place. It was his time. He was 87 and his quality of life was deteriorating quickly in the past 6 months before he passed, so I think it was a good thing that he went before he got any worse. It brings me comfort too, knowing he is now with my mom, who passed almost 11 years ago now.
My sweet, sweet dad, who was my financial advisor forever, looked out for himself well over the years, and I was left with a little bit of money from him. It wasn’t a ton, but I was very thankful for it and it allowed me to pay off my Visa and my American Express last week. I thought, okay, at least I have two credit cards now with $11,000 to $13,000 limits on them, and that should help my credit scores come back up now, because my balance-to-limit ratio is not going to be high anymore. This was going to be the beginning of starting to get my credit rating back.
WRONG!
This past Friday, I logged into my credit card account on-line and noticed that my Visa credit limit had been cut to $500!!!!! I WAS LIVID!!!! Now I felt justified in calling the credit card company Best Personal Loans to give them a piece of my mind and find out why they cut my limit again! Luckily my American Express was still at $11,900, but I just figured they hadn’t gotten around to that account yet….
So I called the credit card company and was transferred over to the credit department. I explained to the girl that I had just paid off this account, so WHY would you cut my limit from $13,000 to $500? She said “Let me check your credit”. Being ever-so-helpful myself, I had to explain that there was foreclosure on my credit, but those two accounts were the only two accounts affected and I have no other dings or late-pays on anything else, not to mention, I’ve never, ever been late on either account. I thought that once she knew that, she’d straighten everything out.
WRONG!
At that point she said to me, “Oh, you have a foreclosure? Well then, I have to close your account.” WHAT? YOU’VE GOT TO BE KIDDING ME? “No, it’s our policy that if you have a foreclosure on your credit, that we can no longer offer you any kind of credit. I see you have another account with us as also. That account will have to be closed as well.” REALLY? You’ve got to be kidding me! I’ve had these accounts for 15 years and never been late! How can you do that? Know what her response was? “Didn’t anyone tell you that a foreclosure affects your credit?” DUH! I guess I’m just not being punished enough.
ME AND MY BIG MOUTH!!!!
Being the so called “credit expert” that I am, I know for the most part, the people in the credit department have limited access to your credit. I’m not sure exactly what they see, but I don’t think it’s a breakdown of each account. I believe Define Term Financing they only have access to your score and that determines what they’re going to cut your credit limit to. Why my brain didn’t kick in before I decided to tell her I had a foreclosure showing on my credit is still giving me indigestion.
So now, my longest and best credit accounts have been closed. My scores are going to drop even further into the abyss then they are now because they will no longer report and I lose all that history. I’m still sick to my stomach!!! So much for my credit score improving for the time being.
Here are a couple tips for you if you find yourself in this situation. With a different company, I have another credit card with a $20,000 credit limit that I religiously PAY OFF every single month. This credit limit has never been cut and I believe it’s because I pay it off every single month, so no attention is being drawn to me for them to look into my account, or check my credit.
As for the Visa and American Express accounts, I used to pay both of them off as well every month, but because I was having financial difficulties, I started keeping a balance on them. I believe that is why I became a “red flag” for them to inquire into my credit status. Once they did that, my credit limits got cut.
I have no choice now but to move forward, continuing to make my payments on time and trying to re-build my once perfect credit rating. I know this is going to take a minimum of 2 years before the foreclosure is not going to have as much of an impact as it does now.
As for my 2nd, what impact that has, still remains to be seen. I don’t believe they are continuing to update that account, as it’s been placed in “charge-off” status with the lender. I’m keeping track of every payment I make to them now, because it’s “not their policy” to send me statements anymore.
Maybe one day I’ll win the lottery and give them the $65,000 they want to settle this account. If not, it’ll only take me about 39 years to pay them off at $300 a month.
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