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Impact of "Closed status" Barclay Card Closing

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Posted (edited)

Hi

Am unable to keep up with my Barclay Cards. They are offering to permanently 'close' the accounts. And, also move the debt to a low interest 5.9% and fixed payments for 5 years. I want to move forward with it.

 

How will this impact my credit bureau reporting? Are there better options?

 

Thanks!!

Edited by theGman

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if you are in financial distress and this option helps you overcome the distress then FICO scores can be ignored. Any negative on the credit card tradeline will most likely remain on your reports and you may take a score hit from the new tradeline. This assumes the new "loan" is not simply barclays closing the card and reporting 60 payments on a zero-limit card that may or may not have derogatory information. If that is the case, you will have >100% utilization on this tradeline for the 5 years.

 

What do the terms of your written agreement/contract with Barclays say?

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Thanks, Hegemony!. You are the best.

1. It is 20 days late. I believe if I cross thirty days, then it will report 30 days for 5 years.

 

2. There are no negatives (yet).

 

3. It is not a new loan. Same trade line being paid off at 5.9% over 60 months. Will double check.

 

4. How will it report? I do not know. Maybe 100% utilization is accurate. And 'current' and 'closed by issuer'?

 

5. Will other creditors start reducing/closing because of this?
 

6. Will review contract terms. I will have to find it. Haha.
 

 

 

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4 hours ago, theGman said:

Thanks, Hegemony!. You are the best.

1. It is 20 days late. I believe if I cross thirty days, then it will report 30 days for 5 years.

 

2. There are no negatives (yet).

 

3. It is not a new loan. Same trade line being paid off at 5.9% over 60 months. Will double check.

 

4. How will it report? I do not know. Maybe 100% utilization is accurate. And 'current' and 'closed by issuer'?

 

5. Will other creditors start reducing/closing because of this?
 

6. Will review contract terms. I will have to find it. Haha.
 

 

 

closed at your request or at barclay's request doesn't matter.

 

if it reports as a revolving tradeline then it will be OVER 100% utilization for the 5 years and not good for scores. If somehow this tradeline is converted to an installment loan in terms of reporting, it will not have the same impact.

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As noted, the manner of closure statement is a non-starter save for the very rare manual review...and even then, most would just presume that you flushed a turd.

 

DO NOT drag repayment out for the full five years.  A closed card is a score killer when a balance is reporting.  If you can make the current payment, I would HIGHLY recommend doing so in order to prevent the derogatory from reporting.  An over-limit closed card with a late is MORE than a score killer...

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Posted (edited)

thank you @centex and @hegemony.

 

@hegemony : checking to see if they will report as revolving or installment.

 

@centex : where is the derogatory? if it is closed by consumer and current, then there should be no derog. yes? i am on time across the board and if i did not have a high credit balance, my score would be super.

 

another point: i have several creditors. one option is to go through with hardship programs and the other is to default and negotiate down to 40 cents on the dollar.  i prefer the former and also believe that this will be the fastest way back to a good score. am i right?

 

thanks!

Edited by theGman

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17 hours ago, theGman said:

thank you @centex and @hegemony.

 

@hegemony : checking to see if they will report as revolving or installment.

 

@centex : where is the derogatory? if it is closed by consumer and current, then there should be no derog. yes? i am on time across the board and if i did not have a high credit balance, my score would be super.

 

another point: i have several creditors. one option is to go through with hardship programs and the other is to default and negotiate down to 40 cents on the dollar.  i prefer the former and also believe that this will be the fastest way back to a good score. am i right?

 

thanks!

You said you were already 20 days past due.  You do NOT want a 30 to report.  THAT is the derog (potential) that was referenced...

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Just to note, a late payment will report for 7 years, not 5.

 

I’d focus on financial health and on time payments instead of FICOs for now. Your FICOs will recover if you need to close the account to ensure financial health.

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You need to ensure they will report the account as current during this payment plan. If they notate the account about a payment plan or other derogatory note, it's just as bad or worse than a 30DL.

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I'll toss in my 2 cents based upon an experience with Chase some 20+ years ago.  I had 2 credit lines with a balance for which I sought hardship terms.  The accounts were closed (or may already have been closed for delinquency).  The credit lines were set to 0.  The accounts continued to report as revolving.  The monthly payment field agreed to the payment amount that had been arranged.

 

I don't see any reason that Barclays would reclassify these accounts as installment accounts.  So long as payments are made as agreed, the accounts will report with a current status.  (These are not collection accounts.)  There will be a score hit associated with reporting a balance on a closed line.  However, so long as these were in repayment, I would not actively be looking for new credit, so the score impact would be of secondary importance.  At such time as these accounts are paid in full, the past reported balances will have a nominal impact, at most.

 

FWIW, I don't expect that Barclays will consider reopening the accounts at a later date (such as when they're PIF).  As with most issuers, once these are closed Barclays won't reopen.

 

I consider the terms extended by Barclays to be your best option to keep these balances in active repayment.  A better option might be if you could roll them to another credit line via bt, however, that would not remedy the current excessive monthly payment requirement.

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thank you @centex @shifter @hdporter @mendelssohn

two more questions as i negotiate with barclays:

1. it is an automated system and they are coming up with a number that  does not work for me and i can't get to a human that can do anything

2. is it worth going through a hardship program (as i need to negotiate with other creditors also) or that 'looks' worse or is worse for reporting and it is better to do this myself?

thanks!

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52 minutes ago, theGman said:

thank you @centex @shifter @hdporter @mendelssohn

two more questions as i negotiate with barclays:

1. it is an automated system and they are coming up with a number that  does not work for me and i can't get to a human that can do anything

2. is it worth going through a hardship program (as i need to negotiate with other creditors also) or that 'looks' worse or is worse for reporting and it is better to do this myself?

thanks!

 

The "hardship" arrangement I spoke of was extended specifically by Chase.  It wasn't part of a larger debt management (DM) program, involving additional creditors.  (General CB consensus appears to be that it's best to avoid DM programs, if possible.)

 

I'll reply with some observations re the Barclays offer:

 

Details are a tad sketchy, but if I understand correctly, they're permitting you to repay the balance owed over 5 years, at an APR of 5.9%.  A fixed monthly payment set at approximately 2% of the current balance outstanding would be sufficient to service the finance charge and leave you with no balance at the end of 5 years.  (If your budget simply can't accommodate this payment amount, you might briefly explain and ask if they can extend repayment over a longer term initially, such as over 8 years (which should cut the payment amount by 1/3), with an eye to accelerate to a shorter period after you've got your financial situation more firmly grounded.  No promises.)

 

It's important you realize just how golden these terms are.  They keep you out of collections and you're unlikely to substitute them with anything nearly as attractive outside of this agreement.  Bottom line, it's well worth your while to restructure your finances in whatever means necessary to accept these terms and submit timely payments.

 

A hardship program, on the other hand, typically is extended for only 6 months at a time, renewed upon review.  The intent is to permit you to recover from a temporary hardship and ultimately renew payments under the standard account terms.  There can be room to set payments under a hardship program at relatively nominal amounts.  Once standard terms are re-established, your finance cost will be a multiple of that under the deal they've extended to you above.

 

Each program has a specific focus.  The offer they've extended presents easier permanent terms that they look for you to accommodate, if possible.  A hardship agreement, on the other hand, extends a lifeline for you to resolve your current financial challenge and set things back on a steadier course.  You need to assess which option (where available) best serves your needs and interests.

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@hdporter : thank you for that. i talked to them just now and that is 'exactly' it : 2% a month @ 5.9%.  I will look for the 8 year option. This will be great until this Covid thing passes or sooner. are you aware if other creditors (citi, chase, us bank) offer similar terms?

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8 hours ago, theGman said:

@hdporter : thank you for that. i talked to them just now and that is 'exactly' it : 2% a month @ 5.9%.  I will look for the 8 year option. This will be great until this Covid thing passes or sooner. are you aware if other creditors (citi, chase, us bank) offer similar terms?

 

Unfortunately (or, fortunately, depending upon your perspective), my credit distress days are 20 years past.  These days my obsession is over a couple of weird looking "growths" rather than credit issues ;)

 

Still, I don't think the basics have changed too much.  Card issuers would much prefer getting you into some type of resolution payment program rather than see your accounts go into collections.  Each issuer likely has it's own mix of short-term fix and longer-term payment programs.  Flexibility to tailor such programs to your specific repayment ability likely varies.  All you can do is see what they offer, counter with what might work better for you, and have a back-up plan in the event that they can't accommodate your needs.

 

 

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8 hours ago, theGman said:

@hdporter : thank you for that. i talked to them just now and that is 'exactly' it : 2% a month @ 5.9%.  I will look for the 8 year option. This will be great until this Covid thing passes or sooner. are you aware if other creditors (citi, chase, us bank) offer similar terms?

I have to be honest. The deal they gave you is the best deal you're going to get. Anything further is going to be after major derogs and missed payments. They have a program and you either take it or leave it. I dealt with the same thing. It sucks, but you have to find a way to make the payments work or you deal with the consequences. They will not extend to 8 years, etc.

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