The In’s and Out’s of Medical Debt

What is Considered Medical Debt

With there being more than 45 different FICO scores in circulation there is bound to be some variances in how each score is reported. Each debt listed on a report holds different weight; from revolving debt to past due debt, each instance is judged differently across each scoring model when determining risk. With the emergence of the Covid 19 pandemic, many consumers have experienced a new type of debt over the past year, unpaid medical debt.

It is rare for a medical debt to appear on your report listed under your practitioners’ company or service provider. You will primarily see your medical debt appear on your report as a collection under a third parties’ agency.

Medical collections is one of the more daunting debts held by a consumer as they do not willingly place themselves in the situation unlike opening a tradeline with a credit card provider or loan officer. The dilemma sits with the morality behind paying off the debt. Medical service provides are entitled to payment for their services like any other provider. On the other hand, no one chooses to fall ill or succumb to injury. Regardless of the situation, there have been many changes made by the credit reporting and scoring communities to attempt to pad and reduce the impact of medical debt to the consumer.

Are you unsure what is on your report? You’re entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies but monitoring your credit on a regular basis is the best way to help protect your score! Sites like Credit Armor allow consumers to monitor all three bureau reports with monthly pulls, track how your credit score changes over each month, and provides helpful identity theft protection tools like fraud insurance!

 

NCAP

In March of 2015, the three credit reporting companies (Trans Union, Equifax and Experian) established a plan to provide more accurate and accessible information. The National Consumer Assistance Plan was set to help consumers better understand and correct errors found on their reports as to bolster their credit portfolio. This plan adjusted common practices in many beneficial ways:

1- Consumers who acquire their annual credit report and dispute information that causes the report to change will receive an additional free credit report after updates have been made.

2- The reporting time for medical debts has been changed to report after 180 days to allow insurance to be applied. Credit reporting agencies will also be removed from the reports that previously listed medical collections if they have been paid or are being paid by insurance. If the debt is reported by a debt collector, the account still needs to be noted as being a medical debt as stated by the Fair Credit Reporting Act in Section 623.

3- Traffic tickets, parking tickets or any other debt that didn’t not come from a contract or agreement will not appear on a consumer’s report.

4- Victims of identity theft will receive special attention or those that have another individual’s information listed on their report.

Do you have medical debt on your credit report? Do you have questions about your credit report or credit questions in general? f you would like to speak with one of our attorneys or credit advisors and complete a free consultation please give Credit Law Center a call at 1-800-994-3070 we would be happy to help.

 

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An Ever-Changing Reporting System

Every few years a new credit scoring model is developed in an attempt to make meaningful changes in how credit report entries are considered. Currently we are acknowledging almost 50 different FICO scores, each assessing different aspects of the consumers debt. VantageScore (another leader in the credit scoring community) has also faced many changes in their scoring model throughout the years when it comes to medial debts. In the past, VantageScore had ignored medical debts that were furnished by the original medical provider. Though the situation was found to be extremely rare, this meant that a medical facilities debt had no impact on any generation of the current VantageScore (1,2,3 and 4).

Now, with the later VantageScore 3.0 and 4.0, all paid collections are ignored and removed from the account. This had provided a more lenient scoring model that has been much more forgiving to consumers who face medical debt. Keep in mind that a medical debt that is paid by insurance is different from an account that is settled. A settled account is not applicable when it comes to removal and only paid collections made by insurance companies will be removed.

The most current and forgiving VantageScore (4.0) is the only scoring model that distinguishes medical collections from other accounts on your report. This means that medical collections are in a realm of their own leaving accounts such as credit cards and auto loans to be reported normally. This is meant to minimize the impact of a medical collection on consumers reports and better differentiate these accounts from all other types of collections.

Article by: Joe Peters

 

MORTGAGE LENDING REFORM

4 Tips For Buying A House

Building Buying Power

 Have you been picturing the day when you can paint your own walls and mow your own grass? The dream of homeownership comes with great financial responsibility. Many first-time home buyers have questions about their down payment, and how they can start saving to make that first major purchase. We’ll discuss several organizations that are willing to help you with the financial burden and get you into your own home soon.

The process of applying for a loan can be overwhelming and stressful. Without an excess amount of funds, you may find yourself digging in couch cushions and trying to work extra hours to come up with the funds and savings to start the journey toward homeownership.

There are a few major factors that come into play when getting pre-qualified for a home loan.

  • Credit Scores
  • Income
  • Debt
  • Down payment

Paying Down Debts? │ Not Enough Left For A Down Payment?

If you have been trying to pay down debts or have been in the credit repair process, again, excess funds may be low. After your income has been reviewed by a trusted lender, more than likely you have discussed how much money you will need for a down payment. Did the amount of money sound manageable?

There are a few loan programs that require no down payment like USDA, which you have to meet strict income guidelines for. Another is the VA loan which is only available to eligible Veterans. Let’s say you won’t qualify for either of these, what happens next?

All hope is not lost! There may be help right around the corner, you just have to know where to look. Below is a list of some other options out there to possibly help jump-start the home buying process for you.  

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Down Payment Assistance Programs

For down payment assistance, there may be a household income limit or a limit on the purchase price. Look in your area where you are hoping to purchase. There are some cities will also contribute and help with down payment assistance. You can search on your City website where they may talk about things like how to get grant money or down payment assistance for first time home buyers!

Talk to your lender further about what programs they may know of in the area in order to help you with funds. If you are a first time home buyer, there may be a program for you! Hoping to buy a home in a historic district? There are grants for homes in certain areas of towns where they would like to see the homes restored and rehabbed too.

 

Habitat For Humanity

Habitat for Humanity occasionally partners with homes with income restrictions that are in need of an overhaul and some DIY. For this program, reach out to your local organization to learn about the qualifications and application process or visit their website https://www.habitat.org/

 

Community Land Trusts

Community Land Trusts are also nonprofits that are willing to make the buying process more affordable by selling just the building. There would be a lease on the land that you occupied. In an effort to strengthen and serve low-income families, these Community Land Trusts serve the community and work to create homes that are permanently affordable and last for generations.

 

Ready For Home Ownership?

Throughout the home buying process, there will be so many new things to learn as you become a homeowner.

A few things to start doing in order to take the next step in the process are:

Shop Around For The Best Mortgage

If you are ready to take on home ownership, start looking around at lenders in your area. Consider the pros and cons of a bank, credit union, online lender or mortgage broker.

Be extremely careful as you shop around that you don’t allow each institution to start pulling credit right away!

Apply

Your credit will be pulled at this point by the lender you are using. When you have decided on the best option you will need several documents like your paystub, recent bank statements and tax return documents. There will be many different types of documents that dive deep into your finances. Remember to hold off on applying for new credit, buying a new car or making large purchases before you close!

This can really hurt your credit scores and may cause an issue for your home purchase. If your lender cannot get you pre-approved with your credit scores they may refer you to a credit repair company so that you can work on your scores. Some credit repair companies work with you as quick as they can to get your scores up so you can get back to the lender as soon as possible!

Pre Approval

Once you complete the application, your lender will decide based on the documents you provided. At this point, the lender will let you know how much they are willing to loan. This document is typically good for 60-90 days.

Start Shopping!

Now is the time to grab your agent and start checking out all the open houses and find your dream home!

Make An Offer

Once you find the house you are looking for, your agent will write a contract up and have you sign the purchase agreement.

As you move forward with your home purchase there will be loads of paperwork and numbers thrown at you. Your lender will be your guide throughout the process and will keep you updated on documents they need in order to get your file closed on time. Talk with friends, your agent, and family about lenders they have used. The home buying process is one that can be stressful, but with the right guide, it can be exciting too!

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