Missed One Credit Card Payment

LTommGunn on 16/03/2021 - 17:56

Hey guys

My credit score was in a bad way a few years ago. I've cleared all my debt and my score has been steadily improving to the point where it's actually been quite good.
I still had a few old credit cards that I don't use but have just retained.

One of these was a credit card which got charged an annual fee of $60 to it. Because I never use it, I didn't notice the statement until it was already overdue.
This one slip up has caused my score to drop a massive 122 points on one of the credit score tracking sites I use.

I'm beyond pissed about it. I know it's mostly my own fault

I lodged a dispute with the bank to try and get them to reverse it and do a correction to the credit agency. After about a month I just got an email to say after looking into it the repayment history information accurately reflects my payment history and as such no corrections are required.

Any ideas on how I can respond and try to weasel out of this and get my credit score restored ?

Or am I just going to have to wear it.

Financial Credit Card

Comments

  • bobbified on 16/03/2021 - 18:03
    +28

    You probably can't do anything about what's happened, but you can look at preventing it in future by cancelling the cards you no longer use and just keeping one with a reasonable limit as a backup if you ever need it.

    • TommGunn on 16/03/2021 - 19:31
      +4

      Yep, I'll have to do this. Thanks

      • Kangal on 16/03/2021 - 21:55
        +16

        Even better, stick it to the man, and quit using Credit Cards all-together!!

        • Cyphar on 16/03/2021 - 22:05
          +4

          This was the lesson I learnt when I turned 18, got given a card and maxed it out real quick. Paid it off at 20 and cut it up. I'm 35 now and don't have one. Wife has never had one before. It sucks sometimes when things are rough and we would live paycheck to paycheck but that hasn't been the way for a few years now and it's nice to live comfortable without any debt.

          • TheOtherLeft on 17/03/2021 - 08:55
            +22

            @Cyphar: Nothing are wrong with credit cards as long as you are disciplined.

          • TilacVIP on 18/03/2021 - 10:51
            +4

            @Cyphar: No offence, but its clear credits cards are not for people like you.

            I have 2 credit cards and never paid a cent in interest, ever!

            Always pay them off on time. If one can't do that, don't own a credit card or b prepared to pay through the nose in overdue interest charges.

            • Cyphar on 18/03/2021 - 16:20

              @TilacVIP:

              but its clear credits cards are not for people like you

              People like who, exactly?

              People like me that don't need to rely on credit for expensive purchases? Wife and I have ample savings in the account. We have no need to rely on credit.

              If this is the people you're referring to, OK then. Very odd statement.

            • Tin man on 18/03/2021 - 19:07

              @TilacVIP: The side you don’t see is that some people tend to spend more than you need to, under the false impression that you have more money than you actually have.

          • john71 on 18/03/2021 - 12:21
            +5

            @Cyphar: I've had credit cards for decades. Never paid a cent in interest - but racked up some incredible bargains using their point bonuses. (Went around the world in first class a few years ago, just for the hell of it. Paid about $1200 in fees for a $44,000 ticket. Amex points covered the rest.)

            It all depends on your money management skills. Credit cards are useful to have around and, if used wisely, will pay for themselves many times over.

            • johnwinds on 18/03/2021 - 13:12
              +6

              @john71: The problem is, people who are bad with credit cards hear stories like yours and are tempted to get them.

            • [Deactivated] on 18/03/2021 - 13:16

              @john71: True

            • Cyphar on 18/03/2021 - 16:25

              @john71: Oh yeah, can be a great way to rack up points if it's your only source of earning them. Plenty of people in the Frequent Flyer FB groups I'm in always share the latest points deal and will admit I'm sometimes tempted. I'm not dissing the idea of credit cards in anyway. I just don't have a need for them. Pre-Covid19, I travelled frequently around Asia for work so still have plenty of QFF points sitting in the account waiting…. and waiting lol.

              • john71 on 18/03/2021 - 16:45

                @Cyphar: Yeah - I feel you. Points and complimentary lounge passes piling up, and no way to use them. (Domestic travel is nice, but international is where the fun is.)

                I've racked up huge point balances by endlessly churning credit cards. Admittedly, this was way easier when I lived in the US. Every day a new card offer seemed to pop up in the mail as soon as you were making decent coin.

                Money management is hard for some people. I don't really understand why. But then, I can't go anywhere near power tools without an emergency room visit, so I guess each to their own.

  • nedski on 16/03/2021 - 18:13
    +11

    Also dont have credit cards that have an annual fee. A lot of the low interest ones dont have annual fees.

  • whooah1979 on 16/03/2021 - 18:16
    +14

    Why don't you get a debit card and give the credit rating the boot?

    • TilacVIP on 18/03/2021 - 10:54

      In the event of fraud, do you really think the Bank would work just as hard to get your money back [debit card] vs theirs [credit card] ???

      Thats one good reason I don't use a debit card.

      • whooah1979 on 18/03/2021 - 10:58

        Has legacy bank stopped issuing Visa/MC debit cards?

      • Bren20 on 18/03/2021 - 13:10
        +1

        I've had no issues getting money back from debit fraud

      • wozz on 18/03/2021 - 15:38
        +1

        @tilacvip it doesnt make a difference.. if its a visa card banks dont care whether debit or credit.. easy to reverse charges. But this isn't even important, even if they detect fraud in your general bank account i haven't had issues

      • Ryk on 18/03/2021 - 17:00

        you still need to pay the credit card until the bank accepts the fraud

        • realfancyman on 18/03/2021 - 17:36

          CBA at least will put those charges on hold while they investigate, so you don't need to pay a cent unless they deem you responsible. I'm assuming other banks do this too.

  • dmbminaret on 16/03/2021 - 18:19
    +4

    Use google calendar?

  • Godric on 16/03/2021 - 18:23
    +12

    Your dispute is on the basis you forgot?

    GL

  • tsunamisurfer on 16/03/2021 - 18:23
    +10

    Any ideas on how I can respond and try to weasel out of this and get my credit score restored ?

    Your banking institution has already told you that the record on your file reflects the truth and no revision is required.

    Having multiple credit cards when one has a history of bad credit is imprudent.

    Having multiple credit cards you don't use with annual fees is financially irresponsible.

    Ignoring the credit card statements, the accompanying reminder emails and SMS's , then defaulting then bitching about the credit score is lunacy.

    • TommGunn on 16/03/2021 - 19:44
      +11

      I'm not "bitching" about it at all. I'm asking for advice on how I could put a case to them to try and undo what's been done.
      If you read my post, you'd see I've already accepted I'm to blame, I'm just asking if there's any suggestions on how to get around it. You know nothing about me or my situation.

      And for the record, I didn't get a statement in the post or accompanying reminder email or an SMS.
      I get one email, per month with the statement, which I've accepted fault for not reading. Yep it was dumb, but life gets busy and I didn't think to check a card statement for a card I never use to look for an annual fee getting charged to it.

      • Bren20 on 18/03/2021 - 13:12
        -1

        Your credit score has dropped as you're demonstrably someone that doesn't pay their card off. There is no mistake to be corrected, they are marking you down for non payment which is huge credit risk, they don't particularly care why you didn't pay, just that you didn't

      • madreece on 18/03/2021 - 20:14

        We had one reversed and I think it was Citibank. Overseas for seven weeks and just forgot about it. Noticed it on a credit check when we got home and asked them if we could get it reversed. (I think it would be detrimental to our card churning.) Anyway next month it was off the credit rating. I must admit I was very surprised. Then cancelled the card and onto the next one.

  • dsar on 16/03/2021 - 18:51
    +3

    Unfortunately, you'll have to wear it. I don't think credit scores are an Australian thing anyway. May I ask why you care about it anyway?

    • Stewardo on 16/03/2021 - 19:20
      +3

      The once weren’t. But introduced in 2018

    • TommGunn on 16/03/2021 - 19:34
      +2

      Well I'm planning on re-financing my mortgage later this year and taking on a second property.
      I want my credit score in best possible shape by then, I don't know how much your credit score comes into play with mortgages but I figured it can't hurt to keep an eye on it and try to improve it.

      • Halo375 on 16/03/2021 - 20:39

        Focus on increasing your income, reducing your expenditure and getting rid of your credit cards. Credit score doesn’t mean much but having multiple credit cards is a red flag to me.

      • DingoBlue on 16/03/2021 - 20:41
        +1

        I don't think they actually take much notice of your score unless it highlights something particularly unusual. They focus more on their own assessment of your payslips, ongoing balance and the thousand other things they ask for.

      • dsar on 16/03/2021 - 22:46
        +5

        https://www.reddit.com/r/AusFinance/comments/kyat3g/a_bank_m…

        Will be of interest to you

        • motui302 on 18/03/2021 - 16:00

          This is gold! A damn good and important read!
          Would have given you 10 upvotes if I could!

    • afah0447 on 17/03/2021 - 08:37

      They aren't 'a thing' yet in Oz unlike in the US but the credit scoring companies are trying like mad to make them one.

      Any credit/loan any sane or sensible person should have is a mortgage. Anything else is making someone else richer and you poor.

      'The borrower is always slave to the lender'.

  • AndyC1 on 16/03/2021 - 18:52
    +1

    OP's first post…. Sorry forgot to post a response as I was busy with something else.

  • trapper on 16/03/2021 - 19:16
    +6

    Always set your credit cards to automatically pay off the full balance at the end of the statement period. Then you will never need to worry about this.

    What does your credit card score actually mean to you anyway? I mean why do you care what it is, I've never checked mine or even thought about it at all really.

    • kanmen on 17/03/2021 - 15:58

      This is what should be told to everyone that gets a credit card. It took me about 3 years to realise I could set this up. What's worse for me than missing a payment is the additional interest charge, literally money wasted on nothing when I'd always have the money to pay off the card entirely anyway. The only benefit to manually doing the payments is that you could prepay and put in more money into the card than what you owe.

  • Drakesy on 16/03/2021 - 19:33

    It'll recover.
    You'll be fine as long as you don't have to buy a house.
    But even then if you're relying on credit cards, probably buying a house shouldn't be on your radar for a while.

    Get a debit card. Spend the money you have and once you're sure you're disciplined enough then graduate to a credit card.

    • TommGunn on 16/03/2021 - 19:38

      Hmm I see. I have a mortgage already, but looking to re-finance and convert existing mortgage to an investment loan and take out another loan for the new property.
      I won't be in a position to do this until late this year at the earliest, so hopefully some time to recover.

      I'm not relying on credit cards - I do have and use a debit card for everything day to day.
      The credit cards are merely remnants - I paid off the debt that had accumulated years ago, but never closed the card down.

      • Bob Svargis on 17/03/2021 - 08:47

        Hey mate, like others have said, you should get rid of your other credit cards. I know this better than many as I am right in the middle of borrowing against my house and the first thing the mortgage broker (and 2 lenders) wanted to know (and were happy with!), was the fact that my wife and I only have a single credit card with 0 balance, and it's had 0 balance for a long time. Yet they still hinted to us that it might still be a good idea to lower the limit when applying, just in case ($11K limit presently).

        Like you, we have spent the last few years getting rid of all debts and credit cards - it's a great feeling even though sometimes delayed gratification is a pain in the butt! However it paid off - having just the single credit card certainly helped rather than having a bunch sitting there unused.

        Good part is, we were able to secure the loans against our house for the purpose of purchasing an investment so I can say that it worked for me. Suck it up, go through a broker if you need to as I have found that brokers tend to try to understand your situation better than banks which means they can position your financial situation in a more favourable light with their panel of lenders (this is just my opinion, backed up by recent experience although no doubt there will be someone who wants to argue this).

  • hashtagbargain on 16/03/2021 - 19:34
    +4

    Try lodging a request through the afca. Banks tend to sit up and listen when you deal through them. Given its honestly a mistake and such a small amount I’m sure they’ll be able to sort it out and remove it from your credit history. Good luck op!

    Source: they helped me in a similar situation many moons ago.

    • TommGunn on 16/03/2021 - 19:38
      +3

      Thank you for the helpful reply, I'll look into this :)

  • JimmyF on 16/03/2021 - 19:42
    -4

    I know it's mostly my own fault

    Its 100% your fault. They sent you a statement, you didn't look at it.

    No one elses fault here but you.

    • TommGunn on 16/03/2021 - 19:48
      +6

      Well, yes.

      I also happen to think that 2+ years of hard work cleaning up and paying things on time getting undone by missing one credit card repayment for a card that hasn't been used to actually buy anything is a raw deal, so you'll have to forgive me for asking the community if there's a way I can fix it.

      • JimmyF on 16/03/2021 - 21:12
        -4

        I also happen to think that 2+ years of hard work cleaning up and paying things on time getting undone by missing one credit card repayment

        Regardless if the card was used or not, it was a credit card bill that you missed paying.

        As tough as it is, thats kind of the way it is. Miss paying a bill or a credit card statement regardless of the amount of why, its all the same to them aka you didn't meet your repayment :/

        • pe arl on 16/03/2021 - 23:32
          +14

          Is it just me? It seems when someone in a pickle seeks advice, so many of the responses are along the lines of "well tough luck, it's your fault, no one to blame but yourself" - so much so that I can tell in most posts that the OPs, in anticipation of such responses, have to add some sort of disclaimer that they do accept responsibility and just need advice, e.g. whether they should ask for leniency. Yes as grown-ups we need to take responsibility for our mistakes, but unless an OP is being plain selfish/unreasonable and trying to weasel out of their mistakes (I don't think OP was trying to do that by using the word "mostly" my fault), I feel in many cases such responses are unwarranted. They already know it's tough luck, they know it's their fault, perhaps they don't need a reminder. In an ideal world maybe we could put ourselves in the other's shoes and say "there's nothing much you can do but at least you'll remember not to repeat the mistake next time".

          • Lichen6420 on 17/03/2021 - 07:28
            -4

            @pe arl: If they know it’s “tough luck” and “their mistake” the why come make a thread on ozbargain and bitch about the situation?

            What purpose does this serve other than having a whinge? Stupid people get stupid prizes.

            • pe arl on 17/03/2021 - 08:26
              +5

              @Lichen6420: Lol read my post again. I said sometimes people come to ask for advice or others' experiences on e.g. if banks tend to grant leniency in their situation, not to "bitch" about the situation or try to pass the blame to others. If they do the latter then yes they deserve their prize but that's not what I'm talking about here. Trying to explain the details of their situation or providing some background does not equate to whinging (believe it or not, everyone will criticise for not providing details if you don't explain in full in a forum post). Should you never ask anyone for advice on ozb unless you're not even 0.0001% to blame? What a boring place it would become. God why such aggression? smh

          • JimmyF on 17/03/2021 - 09:55
            -5

            @pe arl:

            It seems when someone in a pickle seeks advice, so many of the responses are along the lines of "well tough luck, it's your fault, no one to blame but yourself" -

            Isn't this the entire reason we are here? When someone is in a pickle seeking advice as you put it, it normally is because they don't want to accept responsibility for their actions. Which is what the OP is asking. Yes I didn't pay it on time, how do I get it removed from my credit record? aka I don't want to accept responsibility for what I did.

            Yes as grown-ups we need to take responsibility for our mistakes, but unless an OP is being plain selfish/unreasonable and trying to weasel out of their mistakes

            We agree, you need to take responsibility for your mistakes. The OP mistake was missing the payment. The OP is being selfish/unreasonable and trying to weasel out of their mistake by asking the bank to pretend that missed payment didn't happen.

            I paid my credit card late the other month as I was busy. I got hit with interest. Do I call the bank and ask for that to be removed as I was only a few days late? No I made the mistake, I sucked it up.

            I don't think OP was trying to do that by using the word "mostly" my fault

            Whos else's fault was it? The bank sent the OP the statement, the OP didn't pay it on time. By the OP using 'mostly' would imply someone else is also at fault, the bank did their part, the OP didn't. Who is left in this transaction to blame?

            I feel in many cases such responses are unwarranted.

            The internet isn't your mother/father to sugar coat things. Welcome to life.

            • pe arl on 17/03/2021 - 10:25
              +1

              @JimmyF: If you consider putting things in a different (nicer) way to be "sugarcoating" things then so be it. I prefer to talk to strangers asking for advice like I do to friends colleagues or neighbours.
              By the way, admitting the mistake and asking for leniency is different to asking the bank to pretend the mistake never happened. But if that's your view, that's your view.

              • LFO on 17/03/2021 - 11:47

                @pe arl:

                admitting the mistake and asking for leniency is different to asking the bank to pretend the mistake never happened

                I would not call "a mistake" not to pay on time.

                Besides, how will the bank know that it was a "mistake" and not a case of not having enough funds?

                Banks are now responsible to assess our payment capability, they cannot assess forgetting mistakes versus having no funds.

                I wholeheartedly think is a case of avoiding accountability.
                Should be accepted. Learn from it and put a thousand and one reminders so it will never ever happen again.

                • pe arl on 17/03/2021 - 12:00
                  +1

                  @LFO: Point taken, though I'd say forgetting to pay or not checking statements on time is a mistake in that it was unintentional. Silly yes, deliberate no, if OP is telling the truth. If the bank says Why should we believe you? then they have every right to decline the request for leniency. I do agree it is irresponsible, I just think some responses could be worded better.

  • wombok2 on 16/03/2021 - 19:49
    +1

    How long was it since you received the 'overdue' notice?

    I last checked there shouldn't be any records unless it was 14 days past the first overdue notice?

    https://www.oaic.gov.au/privacy/credit-reporting/repayment-h…

  • Platinumtelecom on 16/03/2021 - 20:05
    +1

    What bank? Because I have successfully got a late payment notice on my credit score removed from CBA.
    Kind of similar situation. My argument was that the bank had not sent reminder notices either via the app or via SMS.

    • TommGunn on 16/03/2021 - 20:16
      +1

      It was HSBC.
      Thanks for that info, that's exactly the kind of thing I was hoping to get in replies.
      I'll definitely use that in my argument. There was no SMS, app notification or reminder email.

      Did you just go directly through the bank or via AFCA ?

      • Platinumtelecom on 16/03/2021 - 20:20

        I was trying to retrieve the email, but pretty sure it was direct with the bank.

      • mbck on 16/03/2021 - 20:22

        Hsbc used to have no reminders at all.

        But I think from last year they had email and sms reminder.

        Check the credit card settings (this is just for future reference so then you don't forget in the future).

    • RockyRaccoon on 16/03/2021 - 20:23
      +3

      Yea some better than others. My Latitude cards (28D and Infinity, btw both of which have no annual fees) sends a reminder by email each month.

      But I also use a bill reminder app so I dont miss a payment.

      I think others are a little harsh on the OP, hey know they made a mistake, we all do every now and again, and its no harm in asking if others here know how to "bargain" with the financiers to see if they can improve their lot.

      Hope that hashtagbargains advice works for you.

      • TommGunn on 16/03/2021 - 20:30
        +6

        That's it mate. That's all I'm asking for here.

        The banks take enough don't they?
        Not really in the spirit of being on Ozbargain if I'm just going to take every fee and charge lying down if I think there's some wiggle room right?

        If it was purely monetary I could live with it. But I know what it took to get those 122 points, I'm not giving them up without trying.

        Thanks for your reply!

        • Topdog on 17/03/2021 - 08:34

          In the grand scheme of things, I do not think Australia has caught up to the score based credit yet. And you will get those 122 points back long before this score based credit system is in full swing. I had no issues getting a loan with a very bad credit score. (Less then 500). (Citibank put like 5 credit enquirers for one application. They would not remove none of them cause I ticked a box saying I agreed, so fair enough, I left it.)

          Yet I have not applied for credit in a couple of years, so it could of caught up a little, But I don't think it is. So I do not think its overly worth stressing over the 122 points, annoying yes,however not worth losing sleep over. I assume you have payed the $60. Cancel the card if you don't need it, or ensure you are ready for the next annual fee, your score will recover within no time at all.

        • RPGPlayer on 18/03/2021 - 14:06
          +1

          Hi TommGunn, you are right to question this. It can take a little while for points to be restored (mine took one to two years). They usually try to warn you a few times before doing that. You are doing your due diligence and only human.
          Best wishes.

      • john71 on 18/03/2021 - 16:50

        I pay off my credit card balances in full as soon as I get paid every fortnight. It's a system I've used pretty much ever since my first card.

  • soan papdi on 16/03/2021 - 20:50
    +1

    Have you considered direct debit? It's the first thing I do whenever signing up with a new service or credit card. Yet to miss even one payment.

  • deme on 16/03/2021 - 21:21

    Did you ask the bank to waive it?
    If not always worth a try.

  • Kranbone on 17/03/2021 - 00:55
    +1

    Firstly, good work on being accountable and trying to take steps to better improve your finance health. Speak to the bank directly and explain it was an error in good faith. Maybe even offer to pay the outstanding balance (if not too high) as an incentive to have the report/score adjusted.

    As long as you keep good habits, you'll get there.

  • backpaqer on 17/03/2021 - 07:40
    +3

    Get someone in the phone. Be polite. Tell them you're in the market for a mortgage or a personal loan etc (something that means bigger $$$ for them) they might waive the fee to win some points. Otherwise close the account and take your business elsewhere.

    • nickj on 18/03/2021 - 14:01
      +1

      And if you do close it, and they when they ask why you are closing it, explain again that it's because you don't use the card and got charged an annual fee, and it caused a missed payment record on your credit file, and that you're more worried about the missed payment entry than the fee itself. There is probably not a lot that they can do, but you can certainly try, and being clearly spoken, calm, and polite is the best way to approach this.

      In terms of avoiding/preventing this problem in future, additional to what everyone else has said:
      1) I would suggest setting up an app like Credit Card Manager: https://play.google.com/store/apps/details?id=net.thesimples… ; basically you enter a statement date (e.g. 5th of the month) & a due date (e.g. 25th of the month), and it reminds you when payment is due. I use it because I churn cards, so I want heaps of reminders to remember to pay off in full every statement. That app will remind you when a statement is due in around 10 days, and then it gets more and more naggy (e.g. reminder at 5 days, 3 days, etc), until you mark it as paid - I like that, naggy that actually helps save me from an easily avoidable mistake is fine in my book. I think it also reminds you when an annual fee is about to be due. So in this case, you would have got several reminders (some for the annual fee, plus others for the statement due date).
      2) I would suggest setting up pocketbook ( https://getpocketbook.com/ ) with all your credit cards + get the app on your phone. That links to your transactions and allows you categorize them (I find it useful to track spend in terms of descriptions for what it was for anything outside of groceries, and to tag purchases that are tax deductible, and it categorizes for budgeting purposes, and keeps an electronic record of my transactions that survives account closures when I churn). But one cool feature is that it emails you and gives you an app notification when you have been charged a bank fee. I like that - I always want to know when the bank charges me a fee - I'm usually always expecting it, but I like to watch bank fees in particular like a hawk. So that notification would have saved you. Secondly, I think you probably got extra fees (like a late payment fee), which should again have generated another notification - and I think you get 60 days to pay a late statement before it gets recorded as missed on your credit file? So again, I think that would have saved you.

      You can also keep your credit card accounts in credit / overpay them. I do that for some where I get charged a fee based on the balance owing, so in effect I never owe them anything, hence, no fee.

  • b0rnwithabeard on 17/03/2021 - 08:17

    if it’s a card you’re never using, why not just set up a direct debit that automatically puts $5 in that account each month? Or if you will use it occasionally, make it $60 on the week it’s due You won’t notice it, and you’ll never have to think about the annual charge

  • Lawrencep93 on 17/03/2021 - 08:46

    You can use a company/service to help fix your credit score, I have used a mob with a few clients of mine, they generally can get things like missed payments removed from your score

  • jimbobaus on 17/03/2021 - 09:14

    I remember when it was against the code for banks to list or record a default for a missed fee / annual fee
    When CCR came in that all changed.

    With the introduction of the new reporting system missed payments will always show on your report and are unlikely to be removed, unlike the old system where you needed to be 60 or 90 days overdue before a listing occurred now its updated monthly automatically by all your lenders.

    • whooah1979 on 17/03/2021 - 09:32
      +1

      The lenders were criticised for giving out credit like candy back in the day and now get criticised for making it more difficult to get credit.

      The old system exposed the lenders to high counterparty risk. The new system reduces their exposure to bad debt and is a step forward to a society with responsible and lower personal debt.

      • JimmyF on 17/03/2021 - 10:00
        +1

        The lenders were criticised for giving out credit like candy back in the day and now get criticised for making it more difficult to get credit.

        100% this…..

        It use to be, why did the banks lend me so much money when I can't afford it, they banks are reckless!!!!

        Now its, why won't the banks lend me money!? Life is so unfair!!

  • LFO on 17/03/2021 - 11:39
    -2

    Or am I just going to have to wear it.

    I don't wish to sound unfriendly or unsympathetic to you but perhaps, based on previous events you recounted, credit and credit cards are not quite the financial tool for you.

  • hikaru78 on 17/03/2021 - 18:59

    If you're planning on refinancing probably bin the cards anyway.

    In the past every dollar of credit limit you had actually reduced your borrowing capacity

  • giventofly on 18/03/2021 - 13:06

    I would suggest getting a good savings plan going and getting off credit cards altogether.

    It can be quite fun and exciting to see your savings increasing.

  • carboncider on 18/03/2021 - 13:42

    As others have said, there probably isn't much you can do here in relation to credit score.

    I am unsure how credit scores currently play into bank borrowing power calculations. From what I understand if you have a default or arrears event in the past (for which this may count as one) the bank's credit assessment team may call you to ask for some background, in which case you can explain the above to them.

    In relation to credit cards, how this affects your borrowing power on a new mortgage is usually directly tied to the credit limit on the card.
    The bank calculates how much you can borrow by looking at your overall repayments and expenses. Because credit cards don't have a fixed 'repayment' amount given this is driven by the outstanding balance, they would typically proxy this as 3% of the limit on the credit card.
    E.g. if your credit card limit is $10,000 they will assume you have a $300 expense p.a. which factors into how much you can borrow.
    In general, if your 'income' exceeds 'expenses plus repayment on your new mortgage', then all good, mortgage will more likely be approved.
    The $300 will factor into 'expenses' in the above.

    Based on this you can decide if you want to continue to keep the credit card (or any other credit cards) or not, when it comes time to looking at setting up a new mortgage.

    TLDR, don't let it stop you from applying for a new mortgage, it doesn't sound that serious and you may be able to explain it to the bank. Close as many credit cards as you can if you want to borrow more.

    • SgtBatten on 18/03/2021 - 14:15
      +1

      Whats your experience with mortgage applications? Do you work in that industry?

      In my experience the bank assumes you have maxed out every card and it has significant impact on your borrowing power. $300pa on a 10k credit card is peanuts and I do not personally believe that is the case.

      • motui302 on 18/03/2021 - 15:47

        What @carboncider commented above is NOT how it works when banks review mortgage applications. The fact that you have a credit card, no matter how often you use it or how much the outstanding balance is, will reduce your borrowing power significantly.
        As @SgtBatten pointed out, banks give no respect to how you've been using your credit cards. They would just assume the most conservative scenario that you will max out on all your cards. Then use this assumption to calculate borrowing limits.

        I re-financed my mortgage last year and did it through a broker. Was told to terminate all existing credit cards if possible. A credit card with 10K credit limit will reduce your borrowing limit by 60K.
        I ended up closing my Amex and Latitude cards while my wife reduced the credit limit on her Amex to 2K. And that got us over the line.

        • carboncider on 18/03/2021 - 17:30

          @motui302 My mistake should be $3,600 (3% per month not p.a.) for a $10,000 limit.

          Reduction of $60,000 borrowing power sounds about right assuming an interest rate of 3.5% on the mortgage

          PMT(interest rate of 3.5%, 25 years, 60000 principal) = $3,640.44 repayment p.a.

      • jv on 18/03/2021 - 16:02

        the bank assumes you have maxed out every card

        what rubbish…

      • carboncider on 18/03/2021 - 17:18

        Actually you are correct, I made an error above it is not 3% p.a. it is 3% per month. So it is actually an assumption of $3,600 p.a. expense.

        I used to work in the industry, this was a few years back so would welcome input from others who work post Royal commission if policy settings have changed significantly, only if they can share.

  • SgtBatten on 18/03/2021 - 14:13

    I missed a payment on a new card once, just rang up and they sorted it out for me fairly easily.

    • motui302 on 18/03/2021 - 15:54

      Depends on the credit card provider. I got one sorted out quickly with Amex. The late payment fee of $30 was also waived.
      My other late payment was with Skye, now changed to humm90, for an interest-free sofa purchase. Got nowhere with that one.

  • Weezle on 18/03/2021 - 15:50

    I wouldn't worry about it too much. If you are going for a loan with a bank/lender they will ask you about it, as long as your explanation is legitimate (which it is) and everything else checks out (ie no other issues with other accounts) then from that perspective I think you'll be fine.

  • motui302 on 18/03/2021 - 15:52

    To OP: I refinanced my mortgage last year, switching from NAB to CBA. Hope my experience could help.
    I did it through a mortgage broker. Had many conversations with him during the process. Not even once was the topic of credit score brought up.
    However, he did strongly advise me to close all my existing credit cards if possible.
    A credit card with a 10K limit will reduce your borrowing limit to the tune of 60K.
    My advice would be to be credit-card free a couple of months before you go for re-financing.
    Can always jump back on one afterwards.
    IMHO, the role played by credit score, as far as Australia is concerned, is quite highly overstated.

    • TommGunn on 20/03/2021 - 00:59

      A credit card with a 10K limit will reduce your borrowing limit to the tune of 60K.

      Wow! That's huge. Thanks for the comment, that's good to know.

  • jv on 18/03/2021 - 16:00

    Any ideas on how I can respond

    From what you've said, you missed the payment so the credit history accurately reflects your repayment history.
    That's what it is used for…

  • El-Rhi on 19/03/2021 - 07:09
    +2

    Which credit bureau did you lose the points with? Have you checked the other two bureaus? If it wasn’t with Equifax (Getcreditscore) I wouldn’t worry too much as Equifax is by far the most widely used bureau by banks.

    Either way, if you leave the card open and don’t miss any repayments going forward, your score should improve relatively quick, but it won’t get back to what it was for possibly 2 years.

    I wouldn’t bother going to AFCA… they will throw this out pretty quick as clearly it was your (administrative) error in missing the payment.

    As someone else mentioned, next time you apply for credit, the lender will likely ask what happened, but it won’t automatically stop you from getting a loan as there are more important factors such as serviceability.

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