Rep. Waters tackles mortgage woes created by medical debts
U.S. Rep. Maxine Waters, D-Calif., proposed legislation Friday that aims to improve Americans credit scores by ensuring any ‘paid medical debts’ are removed from a person’s credit report within 45 days.
While a delinquency tied to a medical bill may seem less serious than a mortgage default, lawmakers are upset with the practice of allowing late payments tied to medical debt to stick to a borrower’s credit report for an infinite period of time.
Waters believes the practice creates downward pressure on credit scores, freezing out access to mortgages and other lines of credit.
Waters’ bill – H.R. 1767 – is the sister legislation to Senate Bill 160 introduced by Sen. Jeff Merkley, D-Ore.
Waters and the bill’s co-sponsors also asked the Government Accountability office to review whether medical financing options provided to consumers are fair and transparent.
Source: Housing Wire
The NY Times posted a very interesting article on what the impacts, some very severe, can be for missing payments on mortgages and such. By taking a look at this article there will be fewer ways that you can get caught up in a mess of a poor credit score. Please follow the link below to the full article and as always, let us know what you think!
Fallout From a Poor Credit Score
By MARYANN HAGGERTY
IF you want to see how quickly you can ruin a great credit score, just skip a mortgage payment.
Lenders use credit scores to measure how you handle debt. The number you’ll see most often is your FICO score. It runs from 300 to 850. The major credit reporting bureaus developed a rival, VantageScore, with scores from 501 to 990.
Missed mortgage payments, serious loan delinquencies, loan modifications, short sales, foreclosures and bankruptcies all drag down credit scores. Because a mortgage is such a big slice of anyone’s credit profile, it carries more weight than other loans. Both FICO and VantageScore have studied and quantified those impacts.
They reached similar conclusions: for people with near-perfect records, a single mortgage payment that’s 30 days late reduces a credit score enough to hurt. For anyone, a short sale — selling a home for less than the amount owed — can be almost as destructive as a foreclosure.
In contrast, a loan modification — when the lender approves new loan terms — can have a “very, very minimal” effect, said Sarah Davies, the senior vice president for analytics at VantageScore. In some cases, the borrower’s score might drop 10 or 15 points.
With a loan modification, said Joanne Gaskin, the director of global scoring solutions at FICO, “the consumer does not have to go delinquent to get assistance.”
Modification horror stories abound; some borrowers have been told they can’t be helped unless they’ve already missed payments. That doesn’t have to be the case, said Josh Zinner, the co-director of the Neighborhood Economic Development Advocacy Project, a New York City nonprofit company active in foreclosure prevention.
The government-backed Home Affordable Modification Program, known as HAMP, specifically permits modifications for borrowers who can document hardship like a job loss, Mr. Zinner said. “What we advise people in New York to do” he said, “is reach out to a nonprofit loan counselor or to Legal Services in order to get a modification with a servicer.”
It’s not a perfect solution — HAMP has been criticized for not helping enough borrowers. There are plenty of paperwork hassles, and points in the process where credit scores are in peril.
Still, because of “some really profound consequences” to bad credit, modification is worth pursuing, he said. Employers increasingly check credit. Housing options may be limited. “Virtually all landlords look at credit,” he said, adding that getting a mortgage can be difficult. Car loan and credit card costs jump.
In a study last month, FICO looked at how choices would affect three hypothetical mortgage holders: One with a spotless 780 score; another with a good 720, who may have missed a couple of credit card payments three years ago; a third with a not-great, not-toxic 680, who has sometimes fallen seriously behind on credit cards or a car loan. (Most lenders consider poor credit about 650 and below, Ms. Gaskin said.)
¶30 days late: The gold-plated 780 drops to 670-690, the middling 720 becomes 630-650, and 680 is now 600-620. Effects are most significant for the strongest borrower. “A continued progression is going to have less and less impact on a score,” Ms. Gaskin said.
¶90 days late: This is seriously delinquent, and brings the onetime best borrower down to 650-670, the midlevel one to 610-630, and the weakest to 600-620.
¶Short sale, deed in lieu of foreclosure, or settlement, assuming the balance has been wiped out: The result is just a bit less serious. The 780 score deteriorates to 655-675; 720 to 605-625; 680 to 610-630.
¶Foreclosure, or short sale with a deficiency balance owed: For either, 780 is 620-640; 720 is 570-590; and 680 is 575-595.
At a certain point it might seem as if there was not much difference between bad and worse, but remember that the lower the score, the longer it takes to climb back.
Let’s say you’ve made some mistakes with your credit. With over 35% of the population scoring below 650 on the FICO scoring scale, you’re certainly not alone. But now that you’ve made the mistake, how long are you going to have to live with it?
Each and every negative item has a reportable statute of limitations. That means the credit bureaus can legally report it for some period of time before it must be removed. Let’s dive in…
This one has possibly the most confusing statute of limitations so let’s get it out of the way first. Chapter 7 bankruptcies can remain on your credit files for ten years from the date filed. Chapter 13 bankruptcies can remain on file for seven years FROM THE DISCHARGE DATE. This is important because most people believe 13s have to be removed seven years from the filing date, which is incorrect. It normally takes three to five years for a Chapter 13 to discharge due to the repayment process. That’s when the 7 years begins. The cap on all bankruptcies is ten years so most 13s remain on file for a full ten years, just like Chapter 7s.
This one has the longest statute of limitations and must be broken down into three categories; released, unpaid, withdrawn.
Released Tax Liens – Released liens can remain on file for seven years from the date released. This included liens that have been settled for less than you really owe.
Unpaid Tax Liens – Sit down. Unpaid tax liens can remain on your credit file indefinitely. That’s the bad news. Now the good news…
Paid and Withdrawn Tax Liens – Paid tax liens normally stay on file for seven years, but the IRS announced that they will withdraw the lien if paid in full AND the taxpayer requests a withdrawal. The credit bureaus do not report withdrawn tax liens so they will come off your files almost immediately if you get them withdrawn.
Defaulted Government Guaranteed Student Loans
The amount of time is actually governed by the Higher Education Act instead of the FCRA. Defaulted student loans can remain on your credit reports for 7 years from the date they are paid, 7 years from the date they were first reported or 7 years from the date the loan re-defaults. The point you should take away from this…pay your student loans!
The Seven Year Club
Delinquent Child Support Obligations
Judgments – Seven years from the filing date whether satisfied or not.
Collections – Seven years from date of default with the ORIGINAL creditor, not seven years from when the collection agency buys or is consigned the debt.
Charge Offs – Seven years from the date of the original terminal delinquency.
Settlements – Seven years from the date of the original terminal delinquency
Repossessions and Foreclosures – Seven years from the date of the original terminal delinquency.
Late Payments – Seven years from the date of occurrence.
You’ll notice “terminal delinquency” several times above. The seven year period actually begins 180 days AFTER the original delinquency that leads to a collection, charge off or similarly negative action. So, technically these items remain on your credit file for 7.5 years from the date of the last delinquency before the terminal delinquency.
If you’ve never heard of this term let’s hope you never do. Re-aging is the illegal process of changing the “purge from date” so the credit reporting extends past the allowable period of time. This is not common but when it’s done, it’s usually a collection agency or debt buyer who is breaking the law. It’s a clear violation of the Fair Debt Collection Practices Act and the Fair Credit Reporting Act but the debtor has to know it has happened.
In my daily grind, I come across many real estate professionals trying to lend a helping hand to their clients in helping with credit issues. In some cases it can be considered as “minor” work. But for most, I find that they prefer using the online websites for generating a dispute to the credit bureaus. This is a Big NO-NO! For several reasons detailed below, this online dispute does very little to help you out. Not to mention most real estate professionals, unfortunately, are handling the dispute process incorrectly to begin with. But when they do go beyond their scope of expertise, the following usually happens;
1) Time – The credit reporting agencies do not have to process an online request. The online dispute gets tracked automatically and a request to verify is automatically forwarded to the data furnisher through e-oscar. The restrictive 30 day clock is accomplished easier if everything is automated.
2) Paper trail- with online disputes there is no paper trail to evidence the details of the dispute, and creating a paper trail during credit repair is essential.
3) Limited Dispute Reasons- With the limitations of dispute reasons, an accurate description of the dispute is difficult in most cases. It will all get broken down to its most simple form.
4) Expeditious Dispute Resolution- The Fair Credit Reporting Act section 611a(8) changes the standard requirements and protection afforded to the consumer by the FCRA.
When the Fair Credit Reporting Act was amended, they put in a section for “Expedited Dispute Resolution” Section 611a(8) the on-line dispute system. It reads as follows…
“…the agency shall not be required to comply with paragraphs 2, 6 and 7 with respect to that dispute if they delete the tradeline within 3 days.”
Paragraph 2 requires the CRA to forward your dispute and all related documentation you provide to the furnisher. They rarely forward the documentation.
Paragraph 6 requires the CRA to provide you with written results of the investigation.
Paragraph 7 requires the CRA to provide you with the method of verification on request from the consumer.
What they are doing is…
The Credit Reporting Agency (CRA) can delete a disputed trade line for 30 days, then, the trade line can reappear when the furnisher (creditor or collector) reports it again in the next cycle. That is because the CRA is not required to tell the furnisher you disputed it thanks to section 2 being omitted. This is sometimes called a “soft delete” and it is not permanent.
Furthermore, you lose your rights to request “Method of Verification” (MOV) so you lose this powerful tool in the dispute process thanks to Paragraph 7 being omitted.
Finally, another powerful tool we use often is the five-day written notice of re-insertion. Essentially, what that means is that if a credit bureau is going to re-insert a previously deleted item, they must inform you in writing five days prior to re-inserting it. I have rarely ever seen them give that notice.
That five-day notice is only required if the credit bureau takes longer then 45 days to complete. IF it is deleted via the expedited system, often completed in three days, the five-day written notice is no longer required.
So, let’s let the experts handle their own respective expertise and call a professional credit repair company when help is needed.
Credit Score Recovery…
Wondering how long it will take your credit score to recover from a home foreclosure or short sale? That depends on how good your credit was in the first place, says John Ulzheimer, a credit score expert who blogs on the subject for mint.com.
Somewhat depressingly, the better your credit score was before your mortgage woes started, the longer it will take you to recover. Citing data from credit reporting firm FICO, Mr. Ulzheimer said it would take roughly three years for a consumer with a 680 FICO to recover to that level after a foreclosure, compared with seven years for someone with a 780 score. That’s because high scores require “pristine” credit files, he said, while a middling 680 doesn’t.
Late mortgage payments follow the same pattern. A person with a 680 score who pays 30 days late can bounce back to that level in about six months, compared with three years for someone with a 780 score. His (somewhat obvious) advice? Don’t miss payments.
This is where we can help. Want to get back to that status from earlier? Simply contact us for information on how to get your credit life back on track.
By Cesar Marrufo
ELITE FINANCIAL, LLC
Cesar is an expert in the credit repair field, with over 10 years experience reading and analyzing credit reports. For more information or for help with your credit, visit www.elitefinancialllc.com or call (909) 570-9048
So you would like to take advantage of the current housing market but you don’t know where to begin? Here is a quick 7 step list I discovered that can help you get started. Happy house hunting!
1) Get your credit in as good shape as possible. Your credit score can make a big difference in your interest rate and lenders are a lot stricter than they used to be. You can start by ordering a free copy of your credit report from each of the credit bureaus at annualcreditreport.com as long as you haven’t done so in the last 12 months. One study showed that about 70% of credit reports have errors in them so check to see if there are any in yours that could be hurting your credit score and if so, be sure to have them corrected.
You can also use a site like creditkarma.com to see your credit score for free and more importantly, figure out what steps you can take to improve it. The key things are to make sure you make your debt payments on time, pay off as much of your debt as possible (except perhaps car and student loans, which tend to be relatively low interest), and be careful of closing accounts. If you have a credit card that is charging you an annual fee, see if you can convert the card into a no-fee card rather than close it.
2) Be ready with your down payment. Ideally, you would be able to put down 20% of your home’s purchase price to avoid having to pay PMI (private mortgage insurance). If you can’t put down 20%, mortgage companies will usually offer you a smaller “piggy back loan” to help bridge the gap but those loans have higher interest rates.
Don’t dip too far into your savings though. Try to keep at least 3-6 months of expenses set aside for emergencies. If you don’t have enough money available in your regular accounts, you can access up to $10k without penalties from IRAs for a first-time home purchase and your employer’s retirement plan may allow you to borrow from your retirement account with a longer time to pay off home loans. There’s always the “family and friends” route too.
3) Try to pick a mortgage with a fixed rate for the longest time that you think you’ll be keeping the home. That’s because you could see your monthly payments jump up on a variable rate mortgage when interest rates eventually start climbing. On the other hand, fixed rate mortgages have higher interest rates so it may not make sense to pay more to lock in a fixed rate for longer than you need it.
4) Choose the right loan term for your needs. A 30-yr loan has lower monthly payments and can be advantageous if you’ll make good use of the savings by investing them or paying down high interest debt. You can always make extra payments if you want to pay the loan off sooner. But if you’re honestly more likely to splurge the money you save each month, the 15-yr loan could be better since it will cost you less in interest and be a form of forced savings every month.
5) Shop around for a mortgage. Even a slightly higher rate can mean paying significantly more over the life of the loan so don’t just talk to your existing bank. Consider credit unions, which often offer lower loan rates because they’re non-profit. Some brokerage firms like Charles Schwab offer mortgages and sometimes provide discounts for people who keep a lot of money with them. You can also try Web sites like bankrate.com and eloan.com or an independent mortgage broker who can shop around from multiple mortgage companies to find the one that can offer you the best deal. You can then use this calculator to compare the loans.
6) Figure out how much home you can afford. Remember, just because the mortgage company will loan you the money doesn’t mean you should take it. There are rules of thumb like not spending more than 28% of your income on mortgage payments but every person’s situation is different. Two people may have the same income but one may need to save more for retirement or have to make large private school tuition payments for their kids. Take a look at your current saving and spending needs to see how much you can realistically afford to pay each month and don’t forget to leave some room for the potential “hidden expenses” of home ownership like utility bills, HOA fees if applicable, and repairs and maintenance.
7) Start house hunting. Once you’ve gotten pre-approved on a mortgage, work with a real estate agent experienced in the neighborhoods you’re interested in and look at homes that are within your affordable price range. Make sure you look at several places even if you fall in love with the first one you see as you may change your mind with more perspective. Finally, don’t forget to have fun. If you’ve made it this far, you’ve earned it!
Will Defaulting on Season Tickets Hurt My Credit Score?
Attention sports fans: This answer could prove helpful if your team ticks you off.
We recently received a reader question that was very interesting — something we hadn’t thought of before. This one’s for you sports fans out there:
Does anyone know the impact of defaulting on season tickets will have on one’s credit? Will it have an impact on my car insurance, current loans for cars, or anything else? Please let me know. – Angry Fan
How defaulting on season tickets would impact your credit would depend on whether or not the organization reports the incident to the credit reporting agencies. If the default is reported as a collection, because collection accounts are considered severe delinquencies, the account would have a significant impact on your current credit standing and would hurt your credit scores.
This wouldn’t necessarily impact any accounts you currently have open, but if the impact is significant and your credit scores take a severe hit, it could affect future loans, their interest rates and your ability to qualify for them.
Your question prompted us to make a couple of calls to find out exactly how season ticket holder accounts are handled by major league sporting establishments. Interestingly enough, policies vary depending on the establishment, but what we learned may ease your mind.
According to the two major league establishments I spoke with, season tickets are normally paid for in advance, prior to the tickets being released and issued to the purchaser. Generally speaking, there are no contractual payment plans or financing options for standard individual season ticket purchases.
However, depending on the ticket package, some plans may allow the purchaser to hold their preferred tickets with a deposit, offering them a short grace period before they’re required to pay the remainder of the balance.
In the event the purchaser is unable to pay the remaining balance before the deadline defined by the establishment, the hold is ended and the tickets are re-released to the public for purchase.
In some cases the deposit will be refunded, and in others the deposit may be forfeited. It all depends on the purchase rules outlined by the individual establishment. In either case, defaulting on a season ticket purchase would have no bearing on your credit unless there were a contractual obligation or financing option involved with the purchase.
For corporate packages or purchases where suites are a part of the season ticket package, it’s an entirely different ballgame. Suites are contractual and legally binding. If you sign a contract and default on the purchase agreement, this is when defaulting on season tickets could end up as a collection in your credit reports and hurt your credit scores.
Here is some sound advice on what to do if you feel your credit card has been tampered with. Recent security breach teaches us all a lesson.
This is part 6 in a series of videos on basics of credit, which is Credit 101. What are my avenues of recourse? Where do I file a complaint? How do I challenge this information? Dispute to the credit bureaus and more is explained. This is something that should be taught in high school. A brief explanation of credit. Interview between Adam Villaneda and Cesar Marrufo. Elite Financial, LLC credit repair in Yucaipa, California. Learn how to fix your bad credit report and position yourself to purchase a home. I do NOT own rights to this music and am not claiming that I do.