Medical Debt, The Inaccurate vs Accurate

Consumers should pull their credit report at least once a year. About 20 percent of all Americans have some error on their report. Checking your report and taking corrective action is the only way to have the issues resolved. However, credit reports aren’t the only credit-related item that is problematic for consumers. Medical debt collectors are becoming a routine annoyance. Up to two-thirds of all who have complained about them say they don’t owe the money that is being asked. With this, what can consumers do to tell the difference between accurate and inaccurate medical debt?

Medical debt, spot the difference.

medical debtMedical debt is the second largest debt-related complaint that is issued. The issues related to medical debt are largely due to the current health care system and consumer confusion. However, overaggressive collectors going after the wrong people can pose an issue on debt collections. How do you tell if the debt you’re being asked for is accurate?

  • Keep track your records and any treatments, office visits or hospital stays. If you’re in doubt, contact your health insurance provider to better understand what your plan covers as well as what your deductible and co-insurance is.
  • Once you’re contacted by debt collectors, take note of the communications and refrain from making any payments until you can contact your doctor’s office or insurance provider to confirm you owe said debt.
  • If you do owe for a treatment or procedure, don’t pay with a credit card. The interest you pay on the debt can affect you more in the long run.
  • As we’ve stated before, check your report annually. Doing so can help consumers detect any errors before they have a chance to hurt your purchasing power or when applying for a loan or credit card. In case of medical debt, it’s common for debt collectors to put small amounts owed on your credit report. However, these small amounts are usually too small to go after the owner, so they sit there.

Credit Card Mistakes to Avoid

As of April 2015, Americans had racked up $900 billion in revolving debt. While that is less than the $916 billion in 2009, consumers will not be putting away the plastic any time soon. Credit cards, when used wisely, can help save money and improve your credit score.  This is vital for obtaining the best interest rate and for qualifying for loans. However, buying things with a credit card can be a financial disaster if you’re not careful.

Mistakes to Avoid  When Using a Credit Card

  • Late payments or no payments.If you don’t keep track of your bills, its easy to credit-cardforget or miss a payment. You may think that paying a credit card late or skipping the payment isn’t a big deal, but you could seriously damage your credit score when you don’t pay on time.  About 35% of your FICO score is based on your payment history.
  • Maxing your cards and paying the minimum only. Card utilization ratio is another factor into calculating your credit score. This is the amount of credit card debt you have compared to your total credit line. Lenders prefer you to use 30% or less of your total available credit. Maxing out your card can also hurt your credit score. The total amount owed accounts for 30% of your FICO score. One of the biggest allures to having a credit card is making payments on things, rather than buying outright. While paying the minimum seems manageable, your balance will continue to creep up. Your monthly payments will continue to increase. The debt continues to increase and eventually you have a pile of debt and you can’t afford the payment anymore.
  • Taking out cash advances. When short on money, taking a cash advance may seem like a good idea. However, its a temporary fix. The advance may allow you to cover the gap you run into, but borrowing against your credit line typically comes at a high cost. You not only have to pay interest on the transaction,, but you likely will have a fee.

Landlords and Credit Checks

If you’re in the market for an apartment, you may have been told that the landlord will need to check your credit before you sign a lease. In addition to contacting references, landlords will often run a credit check to ensure potential tenants are responsible. You may have been curios as to what landlords look for when reviewing credit reports.

What do Landlords Look for in Credit?

landlordsWhen landlords run credit checks, they’re wanting to learn as much as then can about your financial habits. They do not expect tenants to have perfect credit scores, but having a good score can make the application stand out. In a lender’s eyes, applicants who have a good credit score seem more reliable and responsible. There are, of course, other credit-related factors that landlords consider. Credit checks can reveal if someone has been evicted, sued, or has a history of making late payments. These issues, along with others, like delinquent accounts, foreclosures, or bankruptcy filings, can make your application unattractive.

While your entire credit history can be viewed, landlords often focus on recent transactions. Someone who has a lot of open credit accounts is likely to use a large percent of their income to pay off debt. This may be a red flag. However, keep in mind not all landlord care about the same things when running credit checks. FICO scores are most widely used, but some use other credit scores like VantageScores. There are multiple tools when looking to run credit checks. Once you have provided permission, they can get credit reports and credit scores through tenant screening services.

For a landlord or property manager to run a credit check, they will need your name, social security number, and current address. In some cases, you can provide your own credit report, and landlords must accept these if they were pulled within the last 30 days.

Repossessed Homes, What Happens?

A repossessed house is a house where the mortgage has fallen into default. If a homeowner is unable to keep up with mortgage payments, the bank then may repossess the home. This is a foreclosure. What happens to homes once the bank takes them back? This does depend on what the bank decides to do.

What Happens to Repossessed Homes?

ReposessedBanks like to use foreclosure as a last resort. Lenders prefer to keep homeowners in their properties. If a homeowner falls behind on mortgage payments, they may be able to work out a forbearance or a payment plan with the lender. If the lender is unable to work out payment options, they will issue a notice of default. This puts the home on the path to being repossessed. This is not an automatic process. In many states, it requires a lengthy notification period and order from a judge.

When a bank repossesses a property, it becomes known as real estate owned property or REO. Investors and homebuyers looking for a bargain may try to buy real estate owned properties at a foreclosure auction. Banks will often sell repossessed property for less than it’s worth, they want to rid themselves of the burden of keeping it and make a quick sale. If you’re considering buying a foreclosed property, it is a good idea to work with a real estate agent with experience with foreclosures. Unless you have enough cash on hand, you will still need to prove your creditworthiness to qualify for a mortgage.

Banks don’t put repossessed homes up for sale right away. They may sit on the property hoping to get a better price down the road. However, no matter how long it takes they are responsible for maintaining the property. It is up to the bank whether to sell or hold repossessed houses on its books. In some states, homeowners whose homes have been foreclosed retain the right to redeem the property if they can come up with the funds within the time frame specified in the law.

No-Doc Loan, What Does It Mean?

A no-doc loan is a mortgage loan that requires limited income documentation. Normally when applying for a home loan you disclose your assets and employment status. This shows lenders you’re capable of keeping up with the mortgage payments. No-doc loans waive this requirement.

What is a No-Doc Loan?

no-doc loanSo, what is a no-doc loan? The term can be misleading. It is not a document free process. There are however, less documents than a typical mortgage application. When it comes to a no-doc loan, you don’t have to show proof of employment or tax returns to verify income. However, you do have to submit to a credit check. The lender will use this to determine your credit worthiness. The home will have to be appraised and checked for any title claims. In some cases, you may be asked for proof of income. However, it will be less detailed than you would have to provide for a regular mortgage.

There are a few reasons to be wary of no-doc mortgages.  Lenders who offer these mortgages target customers who worry they may not qualify for a regular mortgage. These lenders often provide mortgages at a higher interest rate. They may also come with a higher down payment. Requiring a borrower to put more down is another way lenders hedge their bets when taking chances on an applicant who can’t or won’t provide income and assets.

If you don’t have a source of income or assets to make a large down payment, you may be better off waiting to purchase a home. However, with self-employment or non-traditional income sources, investments for example, you may have better luck than a traditional mortgage. No matter the route it’s important to shop around and choose one you’re comfortable with and can afford. Generally, lenders call loans with less strict documentation requirements for income no-doc. However, true no-doc loans are rare.

Statute of Limitations for Debt, What you Need to Know

Debt does have a statute of limitations. This limits how long a creditor or collector has to sue to recoup any unpaid balance. Statute of limitations, also knowns as SOL, does vary by state and debt type. Usually, it is between 3 to 6 years, though some do have longer windows. However, you should never treat the SOL as a solution to money trouble. The SOL does not have anything to do with how long debts appear on your credit report. Unpaid debt can appear on your credit for 7 years or longer.

Frequently Asked Questions about the Statute of Limitations

  • Statute of LimitationsHow long is the SOL for my debt? Usually the statute starts either when you fall behind, or from the date of your last payment. The length can of time depends on state law and what type of debt it is.
  • Can a debt collector try to collect after the SOL has expired? In most cases, yes. However, should you tell the collector to not contact you again, they must stop. It’s best if this request comes in writing. Once they receive the request, they can only contact to notify you of receiving the request, or to notify of legal action.
  • Can I still be sued if the SOL has expired? If you are sued after the SOL has expired you can use the expiration as a defense against the lawsuit. However, many consumers do not appear in court and this allows the creditor or collector to get a judgement against them. This is one reason to never ignore legal notices about a debt.
  • Do I pay the old debt? This is a judgement call. However, you should be aware that if you pay, even a small amount, you can restart the SOL.
  • Does debt still appear on my credit report after the SOL has expired? Generally, yes. The length of time that negative information gets reported is covered by the federal Fair Credit Reporting Act. Most negative information can be reported for seven years.

First-Time Homebuyer, Money Mistakes to Avoid

Moving from renter to homeowner is an important milestone. However, it is not always a smooth transition. Home buying involves research and planning. This is especially true if you’re a first-time homebuyer. If you don’t plan carefully, your dream home can become a financial nightmare.

Mistakes to Avoid as a First-Time Homebuyer

  • Always check your credit. Before you start checking listings in your area, you need to check your credit. It’s important to know if you’re able to buy. If your credit history is spotty, getting first-time homebuyerapproved for a mortgage may be difficult. While you can qualify for a loan with a lower credit score, you will pay a higher interest rate. Just by checking your credit, you can save time and money when starting the home buying process.
  • Don’t focus on price, and be realistic. After you’ve determined your credit is in shape enough to qualify for a loan, you need to determine how much you can afford. Most first-time homebuyers assume because the bank approved them for a certain amount, that they can afford that. Set a limit on what you can afford. However, you do not want to only focus on the list price. There are more costs that come with buying a home. The appraisal and inspection costs, real estate agent fee and the closing costs for the loan. Once the loan is complete you want to also consider homeowner’s insurance and property taxes.
  • Choose the right kind of mortgage. A traditional 30-year mortgage is the most popular type of home loan. However, this is not the only option. If you can put down a large down payment, you may be able to afford a 15-year mortgage instead. This means your home is paid off much faster.

Most homebuyers look at several homes before deciding on one. You should be just as selective with a lender. Instead of going with the first deal you’re offered, it’s a good idea to speak with several banks.

Pre-approved Mortgage, Credit Score Tips and Tricks

It’s that time of the year where there is an increase in real estate activity. Spring and Summer are ideal for buyers to hunt for their home. Before you buy, you need to be pre-approved. However, getting pre-approved can be easier for some, harder for others. Some buyers need to have credit repair to increase their credit score before they can be approved.

Improve Credit Scores for a Pre-approved Mortgage

pre-approvedThere are a few options you have to improve your credit score quickly. It’s important to remember these tricks will only work if you have something minor like a late payment. More severe issues like a defaulted payment will require much more time to repair. Don’t fret, there is hope to eliminate minor problems that can be preventing you from being pre-approved.

The first step is to contact the company that reported the late payment and explain the situation. If you thought you made the payment, or it it was an honest mistake. Regardless of the situation, explain what happened. The lender may review the case, analyze your credit, and determine if they want to reverse the decision. Lenders want to keep your business, work together with them and your chances are good.

Should you not get anywhere with the lender, you can write the credit reporting agencies. Explain the situation to them, they then will conduct a 30-day investigation to determine if the lenders decision should be reversed. This method does take longer than working with the lender. If the agency rules in your favor, it can help improve your FICO score. With the improvement, you may be able to get pre-approved.

Unfortunately, not all consumers will have great credit. You may not be able to fix your credit issues by contacting the lender or the credit reporting agencies. If this were the case, it is best to start establishing good financial behavior. This does include making on time payments and keeping a low balance on credit cards.

Identity Theft, Protect your Child

Identity theft has little mercy. Anyone can be a target and have their information stolen. This is the same for minors. It’s important to monitor not only your own credit report, but also your children’s. You must be vigilant and ensure your child does not become a victim.

How to Protect your Child from Identity Theft

  • Include your child. Identity theft should always be a concern. One of the best ways to protect identity theftyour child is to explain why security is important. Even children as young as five can understand the risks that come with giving out private data. You should encourage your child to talk to you when they see something unusual. You can keep your child safe by setting up parental controls online.
  • Watch for unusual activity. There are many signs of child identity theft. When opening a checking account for your child and they are denied due to poor credit, or there is one already open. If the IRS states your child owes taxes and if your child receives credit card or loan applications in the mail.
  • Keep information secure. It’s best to store personal documents in a safe place. You should shred paperwork with private information.
  • Check for a credit file. It is a major red flag if your child has a credit report with accounts. You can access your child’s report to check for fraud. Each credit bureau has their own process for parents to check. Experian and Equifax require parents to mail in copies of the child’s birth certificate, social security number, and proof of address to confirm if there is a credit file. TransUnion has an inquiry form you can fill out.
  • Consider a credit freeze. Freezing a child’s report may be possible to eliminate the threat of theft. This has been difficult in the past. However, Equifax now allows parents to credit reports for their child and then freeze them. A freeze will only prevent new lines of credit.

Does Selling My Home Improve Credit Rating

When you’re trying to maintain a good credit score, it isn’t easy. Making late payments and maxing out credit cards are just a couple of ways you can hurt your credit. Selling your home could potentially impact your credit. If you are making good financial decisions, you can use your home to boost your credit score. With the FICO credit scoring model, 35 percent of your credit score is based on payment history. When making on-time payments every month, over the course of your mortgage, you can expect you credit score to rise.

However, if you tend to miss your mortgage payment or make a late payment, this could prevent you from qualifying for another line of credit. Mortgage loans are installment loans. This means they are paid on a fixed schedule. Credit cards are revolving credit. Missed or late payments on credit cards affect your credit more than mortgage payments.

How does selling my home affect my credit?

sellingSelling your home will not automatically hurt or help your credit score. However, the impact is all dependent on the state of your credit history before you sell. If you have a negative credit score, selling will not help. Black marks can remain on your score for up to seven years. Past mistakes can continue to haunt you for long after you’ve sold. This can hurt you if you’ve sold with the intent of purchasing a new home.

With your FICO score, 10 percent depends on the type of credit accounts you have. If a mortgage is your only installment loan, you should expect your score to drop a bit. However, remember that if even you no longer have your mortgage it can stay on your credit history for up to 10 years after it is paid off. In conclusion, it comes down to how you handle your payments. If you have a negative payment history, you will continue to have negative marks after you’ve sold your home.