Credit Card Issuers Can Drop You if Any Doubt About Your Credit-Worthiness

Q: I became delinquent on some of my credit cards and this information became a part of my credit

report. Now another company whose credit cards I hold canceled my card even though payments have always been current on that account. Do I have any recourse?

--T.D.

A: Unfortunately, you have no legal recourse. If you check the fine print of virtually any of your credit card agreements, you will find that the issuers have the unilateral right to cut off credit if they discover that you are no longer credit-worthy. Why would you suddenly be unworthy of your credit? In this instance, because you fell behind on your payments to another creditor.

Never mind that you’re not in default on the credit cards in question here. Basically, it’s perfectly legal for them to cancel credit if they get nervous for any reason, explains Robin Leonard, a San Francisco lawyer and author of several books on consumer debt and credit cards. Being in default on your other credit obligation, she adds, would certainly be one of those reasons.

Of course, losing one’s credit cards usually compounds a credit crunch because you have to come up with the cash to pay off your balance at a time when you are clearly in a cash flow bind. And if you fail to pay off those bills, those accounts will be classified as past due, just as the other accounts were.

Leonard, author of “Money Troubles: Legal Strategies to Cope With Your Debts” (Nolo Press), recommends contacting your credit card issuers and pleading for your credit life. She says that although you have no legal standing, you should appeal to the highest-ranking executive you can find at the store or bank. Explain your situation and ask for a chance to show that you are a responsible credit risk. If your history with that particular card is unblemished, be sure to point that out.

Leonard even recommends threatening to get everyone you know to boycott the store or bank in question. In other words, you should be prepared to use whatever meager leverage you have to get whatever you can. Sad to say, however, it may not be much.

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Q: Will you explain the mathematical formula used to figure out what portion of a monthly mortgage payment is interest and what portion goes toward paying off the principal?

-- W.L.W.

A: Let’s assume a $200,000 mortgage at a fixed rate of 9.375% interest for 30 years with monthly payments of $1,666.

First, calculate the interest portion of the payment by multiplying the mortgage balance by the annual interest rate:

0.09375 x $200,000 = $18,750.

Then divide the result by 12, for the number of months in the year:

$18,750 12 = $1,562.50.

This is the interest portion of the monthly payment.

To get the principal portion, subtract the interest from the total payment:

$1,666 - $1,562.50 = $103.50.

In subsequent months, the principal must be reduced by the amount of the previous month’s payment allocated to it before the formula can be rerun:

$200,000 - $103.50 = $199,896.50.

To calculate the split in month No. 2, the formula would look like:

0.09375 x $199,896.50 =

$18,740.30.

For the interest, again divide by 12:

$18,740.30 12 = $1,561.69.

Using the same formula, the principal portion would be $104.31.

You can repeat these steps 358 more times to make yourself a complete mortgage amortization schedule for the 30-year life of your loan.

One word of warning on adjustable-rate mortgages: For calculations to be accurate, change the interest rate in this formula whenever loan rates are adjusted.

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Q: How can a taxpayer find out if all the Social Security contributions that have been taken out of her paycheck have been paid to the government and that the government has accurate records of these payments?

--K.H.

A: It’s worthwhile to check to see every few years whether your Social Security account is at the level it should be, and there is a fairly easy way to check. The same procedure will also tell you how much you can expect to receive from Social Security upon retirement. Call (800) 772-1213 and follow instructions to receive Social Security Form SSA-7004, “Personal Earnings and Benefit Estimate.”

When you get the form, which asks your birth date, Social Security number and a few other questions, complete it and mail it back to the address that accompanies the form. The Social Security Administration will send a listing of your Social Security-qualified employment earnings and expected retirement benefits.

If you think there is an error, you should contact your local Social Security office. Be prepared to show agency officials appropriate tax returns or earnings statements to support your position. Officials say they cannot guarantee that they will be able to correct mistakes made more than three years earlier, and that’s why they recommend filing Form SSA-7004 every three years.

Carla Lazzareschi cannot answer mail individually but will respond in this column to financial questions of general interest. Write to Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053, or e-mail carla.lazzareschi@latimes.com