About 9 months ago, I wrote you in tough shape. I had racked up about $35k in credit card debt through undergrad, law school, and a period of unemployment before starting a job which I began last July.
I’ve really been scrimping and saving, and between the money I’ve put from my paychecks into debt repayment, and my entire tax refund, I’ve knocked off $10k of the debt, and am now down to $25k. I anticipate repaying another $5k by the end of April.
So – I feel great, it feels like the gorilla on my back is calmer, and maybe even taking some days off. I’m still being very frugal, but feel like I can splurge every now and again and have a nice meal without feeling terribly guilty, things are going reasonably well.
I’m writing you today because I’m confused and concerned about my credit report.
As part of my debt repayment, I negotated with American Express a plan to repay my $6k that I owed them. The deal was that I had a year, they would charge me no interest, as long as I made a certain payment every month. I made this payment every month, and all of the sudden, in January, I got a notice that they had cancelled my card. I had about $3k left to pay. I put my entire tax refund towards repaying them, and got down to a $0 balance. I called them, and asked about reinstating my account, which they agreed to do. No more than three weeks passed between when my account was cancelled and reinstated.
In the meantime, Amex put a “charge off” of $3k on my credit report, and the entry also said that the account had been closed at the creditor’s request. Once my account was reinstated, I called Amex and asked them to fix this. They said they report information once a month to the three agencies. I also initiated investigations at the three agencies. Two came back with no changes, one changed to show that I owe $0, but that the account is closed at the request of the creditor.
Since that happened, nearly all of my creditors have written me letters saying that they are reducing my credit limit to very close to the current level of debt (e.g., one card had a $5,000 limit, I owed $3,400, now they dropped the limit to $3,500.) This, of course, just KILLED my credit score, which went from just-ok to bad, because I have no basically no credit available.
What should I do to fix this? I signed up for credit monitoring in the meantime, just to have unlimited access to my reports and scores. How I can get Amex to report that I have an account in good standing, to remove the bad information, and can I get my creditors who have reduced my credit limit to raise them back to what they were if corrections are made to my report?
This is not the first time I’ve seen American Express do this. Basically what happens is that once an account becomes 180 days past due they must charge off the account and report it. This is required by the Office of the Comptroller of the Currency, (OCC). If your American Express card was one that was due in full on the original statement the account would have aged and charged off even though you were making payments.
The problem at AMEX seems to be that the collectors making promises on repayment are either unaware or don’t care this mandatory charge off date is looming and the account charges off prior to when it should.
Once this hit your credit report, your other creditors who had been automatically monitoring your report leapt into action in a millisecond and automatically reduced your credit limits. They took the opportunity as evidence of risk or an excuse to jack up your interest rates and/or lower your limits.
Here is where the tough part is going to come, even if you could get American Express to change their reporting of the account it can’t automatically un-ring the bell with the other creditors. What you’ll have to do with them is plead your case individually but don’t get your hopes up. Once you account has been flagged it is difficult to get them to unwind that process. Customers are not treated as individuals. What is more likely is that the creditors will reevaluate your account after six months and be willing to adjust your credit limit and/or interest rates at that time.
My concern is that this all began with American Express charging off your account as I described above. I think your account was probably charged off by AMEX and they reported it correctly according to their actions. If so, the charge off and/or closed by creditor notation will be reported again on your credit reports the next time American Express dumps their data to the credit bureaus.
The first hurdle would be to get a letter from American Express stating that your account was not charged off and that your account was paid as agreed. Then using that letter you could plead your case with your individual creditors for reconsideration.