Thursday’s need-to-know money news

Credit report with score on a desk

Today’s top story: How ‘Pay for Delete’ might help your credit – if you’re lucky. Also in the news: 19 less-obvious wedding costs to bake into your budget, why financial advice is still important regardless of your income, and how to make sure you’re not going to an Equifax phishing site.

‘Pay for Delete’ Might Help Your Credit — If You’re Lucky
Negotiating with a creditor.

19 Less-Obvious Wedding Costs to Bake Into Your Budget
Budgeting the entire package.

Not Made of Money? Financial Advice Is Still for You
You don’t need to be to rich.

Make Sure You’re Not Going to an Equifax Phishing Site
Don’t make matters worse.

Tuesday’s need-to-know money news

Today’s top story: 3 ways to scrub a collections stain off a credit report. Also in the news: Why you probably need title insurance, socially responsible investing, and the Equifax hack just got worse.

3 Ways to Scrub a Collections Stain Off a Credit Report
Do your homework.

Title Insurance: What It Is and Why You (Probably) Need It
Title insurance protects the insured from a financial loss related to the ownership of a property.

Socially Responsible Investing Takes Clearing a Few Hurdles
Align your investments with your values.

Your Credit Cards May Also Have Been Compromised in the Equifax Hack
It keeps getting worse.

Dealing with collectors? Here’s a free ebook to help

dca-new-ebook-free-3DsmGetting calls from collection agencies, or spotting collection accounts on your credit reports, can be scary. You can deal with this, but not alone. Check out  “Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights,” which is now a free ebook on Smashwords. You can get it here: https://www.smashwords.com/books/view/520261.

Written by long-time consumer educators and advocates Gerri Detweiler and Mary Reed, this book will tell you what you need to know to deal with collection accounts and fight unethical collection agencies. Longtime readers of the column will recognize Gerri’s name, because she’s the person I turn to when I have questions about debt and debt collections.

Get the book and get started!

UPDATE: Gerri tells me some people have trouble downloading from Smashwords, so here’s another link:

http://www.debtcollectionanswers.com/buy-now.html

 

 

4 hacks to boost your credit scores–fast

FICO-score-calculation-300x281Losing points from your credit scores is all too easy — and getting them back is hard. But if you know how credit scoring works, you can hack the process to rehabilitate your numbers faster. Here are four effective strategies to do just that.

(This article first appeared as “4 hacks to boost your credit score quickly” on DailyWorth.)

Pay your credit cards twice each month. Even if you pay your balances in full every month, using up too much of your available credit at any given time can hurt your scores. You can lessen the damage by making two payments each month: one just before the card’s statement closing date and another just before the due date. The first payment typically reduces the balance that’s reported to the credit bureaus, while the second assures that you don’t wind up paying interest or incurring a late fee on any remaining charges.

Dispute old, small collection accounts. The latest version of the leading credit scoring formula, the FICO 8, already ignores collection accounts where the original balance was less than $100. Not all lenders use this formula, though, so you might see an increase in your scores if you dispute that $50 parking ticket you forgot to pay or the $75 medical bill that slipped through the cracks of your insurer’s reimbursement system. The collection agencies that report these minor bills may not bother to respond to the credit bureaus’ investigation attempts, especially as the accounts approach the seven-year mark, where they’d have to be dropped from your credit reports anyway.

Get added as an authorized user on someone else’s account. Another person’s good history with their credit card could be imported into your credit bureau files to help burnish your scores. Plus, the other person doesn’t have to give you access to the account — you can be an authorized user in name only. Some card companies will allow this importing only if you’re a relative, so check in advance.

Pay off your credit cards with a personal loan. Paying down your credit card balances widens the gap between your available credit and the amount you’re using, which is great for your scores. If you can’t pay your cards off immediately, consider moving the balances to a three-year personal loan. Balances on such installment loans don’t affect your scores as strongly as balances on credit cards. Check with your local credit union first, since these member-owned financial institutions tend to offer the best rates and terms on personal loans.

For more of my DailyWorth columns, visit https://www.dailyworth.com/tags/liz-weston.

Q&A: Paying an incorrect bill to avoid a credit hit

Dear Liz: I was a volunteer for a research study at a local university. It required a blood draw done at the university’s hospital. A month later, I received a bill for the blood draw, which I questioned. I was told it was a mistake and that I was in no way responsible for costs associated with the research study. Because the hospital was installing a new billing system, I was told it would take a while to resolve and not to worry about any bills that would come to my house.

Now, three months later, the hospital has turned the bill over to a collections agency, with the amount due double the original cost. They have given me 30 days to pay up, or they will report the delinquency to the credit reporting agencies.

The university seems unable to fix the problem, especially now that the debt has gone to collections. Should I pay the bill to save my excellent credit rating? Or should I continue to fight the university and now the collections agency?

Answer: To avoid damage to your credit scores, sometimes the best course is to pay a disputed bill and then sue the creditor in small claims court. Since you have some time to fight back, however, you should do so.

The good news is that medical bills are usually placed with collection agencies on assignment. That means the hospital can take back the account if it’s sufficiently motivated to do so. Your task now is to make the hospital motivated — if not desperate — to help you out.

Write a letter outlining the facts as you’ve done here and send it to the head of the research study, the president of the university, the head of the university hospital, your local newspaper columnist and, if you’d like, your congressional representative. It’s outrageous that doing a good deed has put your credit at risk because of a hospital billing department’s incompetence. You need to stop dealing with front-line billing people, who obviously don’t have the power to help you, and bring your problem to the attention of people who can.

Credit scores “overly penalized” for medical bills, regulator says

Zemanta Related Posts ThumbnailIf you have a collection account on your credit reports, chances are pretty good it’s from a medical bill. And chances are also good that the collection is having an outsized impact on your credit scores.

Today the Consumer Financial Protection Bureau released a study saying credit scores unfairly penalized people with medical collections. Those scores underestimated the creditworthiness of such people by 16 to 22 points, according the bureau’s review of 5 million people’s credit reports.

The byzantine way medical care is bought and paid for in the U.S. contributes to the problem. Even if you’re insured, it’s easy for a medical bill to slip through the cracks.

“Sometimes insurance does not cover everything.  Sometimes [people] do not know what they owe because of how complicated the billing process can be,” CFPB Director Richard Cordray noted in a prepared statement.  “Other times they may not even know they owe anything, thinking that their insurance will cover the bill.  Sometimes the debt is caused by billing issues with medical providers or insurers.  Complaints to the Bureau indicate that many consumers do not even know they have a medical debt in collections until they get a call from a debt collector or they discover the debt on their credit report.”

FICO, creators of the leading credit score, have already tweaked the formula to ignore collections under $100. The next version of the score, FICO 9, will use “a more nuanced approach to assessing consumer collection data,” promised spokesman Anthony Sprauve. With this formula, scheduled to be released later this year, “medical collections will have a smaller impact than non-medical collections.”

The problem, as credit industry insiders will tell you, is that most lenders continue to use older versions of the FICO formula that don’t have these upgrades. So even though FICO concedes the point that medical bills aren’t as predictive as other types of collections, they can still unfairly wallop your scores.

 

Settling student loan debt: not exactly the easy way out

Education savingsCredit card debts can be settled for pennies on the dollar. Not so student loan debt. Borrowers usually can’t threaten bankruptcy to get a settlement, and the federal government has extraordinary powers to force borrowers to pay. (The feds collect between $1.11 and $1.22 for every $1 owed.)

But in the right circumstances, student loan debt can be settled. My latest column for Reuters explains who might be in a good position to try: those who have a lump sum to offer, and whose prospects for paying up otherwise are dim.

Also, in case you missed it, check out “Saving for college? 529 plans aren’t as safe as you think.” These tax-advantaged plans are still the best way for most families to save, but you need to keep a close eye on your mix of stocks, bonds and cash as your kids approach college age. Bond-heavy portfolios are common in the final years of age-based plans, but those could be in for some shocks if interest rates rise.

 

Credit denial: a corporate trick or cause for alarm?

Dear Liz: A few years ago when buying my son his college laptop computer, I applied for the store card at a big, well-known electronics store (at the encouragement of the sales associate). I was denied. I have never been denied a credit card before. I have eight cards that are always paid off monthly, own my own home and have a satisfactory retirement income and a top credit score. By receiving the card, I would have had a substantial savings on the computer. The denial has bothered me ever since. Was this a ploy on the company’s part to deny me the savings?

Answer: That kind of bait-and-switch happens sometimes, but there may be other reasons you were denied.

When you were turned down, the company should have provided you with the name, address and phone number of the credit agency it used to evaluate you. You should have immediately requested your report from the agency to see if the information was accurate. Someone may have stolen your identity, and credit denials are often the first sign many victims have that there’s a problem.

A collections account also could have torpedoed your scores. Many people discover that a medical bill, library fine or parking ticket went unpaid only when they find the resulting collections on their credit reports.

Does charged-off debt disappear?

Dear Liz: I understand that creditors eventually write off unpaid debts and receive a federal tax deduction for the loss. Then they sell that “debt” to a collection agency. However, isn’t the debt rendered void by the fact the original creditor charged it off and got the deduction? So how can collection agencies attempt to collect an invalid debt?

Answer: Charging off a debt and taking the tax deduction for the loss indicates the original creditor doesn’t believe it can collect the money. That doesn’t render the debt invalid or erase it in a legal sense. Debts typically exist until they are paid, settled or wiped out in Bankruptcy Court.

Retiree burdened with unpayable student loan debt

Dear Liz: In a recent column, you fielded a query from parents whose son took out student loans in the mother’s name. You wrote, “If your only income is from Social Security and you don’t have any other property a creditor can legally take, you may be ‘judgment proof,'” which means “a creditor wouldn’t be able to collect on a judgment against you.”

I understand this advice was meant for the mom. But could it equally apply to the borrower who benefited from the loan?

In my case, I will be 70 next year and my only income is Social Security. I owe about $80,000 in private student loans and about $80,000 in federal student loans. I can’t afford to pay either loan. Is there hope for me to get out from under this burden by being judgment-proof? Right now, I can’t afford to see a bankruptcy attorney. It is a struggle just to pay the rent and put some food on my table.

Answer: You can’t afford not to see a bankruptcy attorney. Federal student loan collectors have enormous powers to collect, including taking a portion of your Social Security check.

The concept of being “judgment proof” applies to collections of private student loans. Collectors for those loans may be held at bay if you are, indeed, judgment proof. But you really want an experienced bankruptcy attorney to review your situation to make sure that’s the case. Fortunately, many bankruptcy attorneys offer free or discounted initial sessions. You can get referrals from the National Assn. of Consumer Bankruptcy Attorneys at http://www.nacba.org.