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Medical Debt Impacting Credit

Does Medical Debt Impact Your Credit Score?

By | Debt

Medical debt is no longer displayed on your credit report the same way it used to be, but it can still impact your credit if it goes unpaid for too long. With recent changes in reporting requirements, there are new rules surrounding how long you have to pay off your medical debt before it gets reported and starts impacting your credit.

Here’s what you can expect to happen to your credit once you start to accumulate any kind of medical debt.

When Medical Collections Show Up on Your Credit Report

Medical debt doesn’t show up on your credit card until it’s left unpaid and goes to collections. Early on, it’s treated like any other bill in that it’s not listed on your credit report. If it’s a large amount that you can’t pay off in a lump sum, it’s best to try and sign up for a manageable payment plan with your medical provider. However, if you don’t pay on the balance for whatever reason, your account could end up being sold to a debt collection agency.

At that point, the collection agency is likely to report your medical debt to the credit bureaus. Like many other types of negative entries, medical debt is listed on your report for seven years, unless removed by initiating a credit dispute. The seven-year period starts from the first delinquency date associated with your medical debt.

What Happens to Unpaid Medical Debt

On the plus side for consumers, there are some extra restrictions that the credit bureaus must abide by when listing medical debt. Even if the collection agency reports the debt to Experian, Equifax, or TransUnion, the credit bureau must give you a 180-day grace period to pay off your balance. That period starts from the original due date, giving you a full six months to make arrangements to pay the bills.

So even if your health care provider sold the debt three months after your due date, you still have another three months to catch up. This also gives you time to potentially ask your insurance company to help you negotiate. The claims process can be a slow and tedious one, so this extended grace period is meant to make sure your credit doesn’t tank just because your insurance company took too long to pay all or part of the balance. Once the debt makes it onto your credit report, it’s listed as an unpaid collection.

How Credit Scoring Models Weigh Your Medical Debt

If you don’t manage to pay off your medical collections debt within the grace period, it will then likely be listed on your credit report. However, your score won’t suffer as much compared to other types of debt. That’s because the latest scoring models from both FICO and VantageScore don’t weigh medical debt as much as other types of debt, particularly credit card balance. It makes sense why — medical bills don’t generally indicate a pattern of poor financial decisions.

On the downside, not all lenders and financial institutions use the most current scoring models from FICO or VantageScore. Older versions may weigh medical debt equally with other kinds. Still, as companies continue to move forward and upgrade their lending platforms, it’ll be much easier to improve credit related to medical debt.

How Credit Disputes Work for Medical Debt

It is possible to get unpaid medical debt removed from your report so that you can fix your credit score before you reach the seven-year delinquency mark. Check your records for any credit errors. If you find any discrepancies in the debt amount, payment debts, or any other information, you may be able to start a credit dispute and have the entry negated. This entails sending a letter to the credit bureau. Regardless of their findings, the investigation should be completed within 30 days. Be sure to keep copies of all your communications related to your medical debt, both with the collection agency and the credit bureaus.

If you’re trying to fix your credit related to medical debt or any other negative items on your report, it can be helpful to get professional help. You certainly can execute the dispute process on your own, but it can be an extremely time-intensive process. And if you don’t research your rights adequately, you may end up doing more damage to your credit score.

Luckily, a professional firm like Ovation Credit can help. Our team of lawyers has years of experience in the field, plus knowledge of the intricacies of credit and debt law.

Get started with a free consultation today to start the credit repair process.




Women Curb Spending Habits

3 Easy Ways to Curb Your Spending Habits

By | Credit Cards

Spending less on your day-to-day life can help you put extra savings away, whether for an emergency account, a retirement fund, or even a vacation. But when it comes to actually saying no to swiping your card or hitting a purchase button online, you may have a harder time sticking to your savings goal.

Before you give up, try out these three easy ways to curb your spending habits. They’re not difficult to implement and you’ll notice a major difference in your bank account when you keep up with them each week and month.

1. Purge What You Already Have

It may seem counter-intuitive, but having a ton of stuff in your home can actually lead to buying more stuff. For starters, you probably don’t know everything you have. Think you’re out of shampoo or conditioner? You very well may have a brand-new bottle crammed at the back of your bathroom vanity. Spend a couple of hours to clear your space of clutter and take inventory of what you already have. You may be surprised by what you find. Plus, you won’t be tempted to buy tons of organizing containers and other supplies because you don’t have any clutter. It can be an incredibly freeing experience while simultaneously leading to better long-term spending habits.

2. Reduce Your Food Spending

Another way to curb your spending is to be mindful of what you’re spending on food and make a concerted effort to slash that number. Start off by adding up everything you spent on food and dining out last month. Even if you reduce that number by 10 to 20 percent, you’ll notice huge savings over the course of a year. You don’t have to be a crazy couponer. Instead, try these simple hacks to reduce your food spending.

Prep Your Breakfast and Lunch

The Internet is brimming with easy, budget-friendly breakfast and lunch ideas that are designed to help you avoid picking something up, no matter how busy you are. You can go all out, making and freezing breakfast burritos for a week, or do something as simple as getting a bag of bagels rather than stopping at the bakery on your way to work.

Leftovers for lunch are always easy (and prevent you from growing a mold experiment in the back of your refrigerator) and it’s simple to keep some sandwich materials on hand. With so many grocery delivery services available, you can do your shopping in 15 minutes online, see how much you’re spending before you check out, and avoid last-minute impulse buys.

Preplan How Often You’ll Eat Out

Depending on your financial situation, you likely don’t need to deprive yourself of ever going out to eat again. If you’re regularly struggling to make ends meet, you may want to take a total hiatus until you regain your financial footing. But if you just want to curb your spending in general, all you need to do is set guidelines for yourself and follow them.

Maybe that means allowing yourself one happy hour a week and one night out with friends. Or perhaps you commit to a single family date night twice a month. Figure out how much you want to save each month and use that number to create your social calendar.

Shop Your Pantry

Chances are, you have some kind of pantry space holding non-perishable food items. Before you do your weekly grocery shopping (remember, online makes it easy!), first figure out what food you already have and use it to inspire your grocery list. Also note what may be going bad in your refrigerator soon, especially when it comes to fruit and vegetables. See how low you can get your grocery list by shopping your own kitchen first.

3. Hide Your Credit Cards

Credit cards make it all too tempting to buy things we don’t need or can’t afford. If you’re really having trouble curbing your spending, hide your credit cards. Stick them in a drawer or go the extra mile and freeze them in a bowl of water. To really do this well, however, you also have to go to your online accounts and delete your saved credit cards (Amazon Prime, we’re looking at you!). That way there’s no temptation whatsoever to mindlessly shop from your sofa while watching Netflix.

Have debt and overspending affected your credit score? Ovation Credit may be able to help. Reach out for a free consultation today.

How Much is Your Bad Credit Costing You?

By | Credit Scores

There are many motivations for improving your credit score: lower interest rates, the ability to secure a loan or mortgage, higher credit limits and more credit card reward options. In the world of credit, the best deals go to the people with the best credit scores. But what is a good credit score actually worth in dollars?

More than $5,000 on a Loan

Whether the money is used to go to college or to buy a new car, almost everyone applies for private loans (from a bank) at least once. However, if you squeak by – meeting the lending requirements with the lowest acceptable credit score – it’s going to cost you. Compare the interest rates on a $25,000 loan that is to be paid off in six years (or 72 monthly payments).

Interest Rate Total Interest Paid Monthly Payment
5.5% $4,460 $413
7.5% $6,200 $437
12.5% $10,800 $501

The difference between the highest rate and the lowest rate is more than $5,000! However, there are still significant financial gains if you are able to improve your credit enough to shave off a few interest points – the difference between 7.5 percent and 12.5 percent is $4,600.

More than $500 per year on Credit Cards

Without a decent credit score, it can be difficult to secure a credit card. Many lenders have tightened their application requirements, and the best interest rate (after any promotional period) is 10.99 percent. If you are able to get your hands on a credit card with less-than-perfect credit, you will likely have an APR of 20.99 percent. How much in interest does that cost you? With an average balance of $8,000, the higher interest rate will cost about $60 more per month, or $720 annually.

More than $50, 000 on a Mortgage

Buying a home may be the most expensive purchase you will ever make, and with bad credit, it can cost you even more (if you can even qualify for a home loan). While the best rates go to the people with the best credit scores, the difference of even a few interest points can add up to big money over the life of a mortgage. Here is an example of three different mortgage rates, the resulting monthly payments and the total interest paid over the life of a 30-year mortgage:

Interest Rate Total Interest Paid Monthly Payment
2.75 % $140,005.67 $1,222.25
4.75 % $260,364.46 $1,556.58
5.66 % $319,621.06 $1,721.18

The difference between the best rate and the poorest highest rate is nearly $180,000 in total interest costs. However, improving your credit score from a rate of 5.66 percent to 4.75 percent can save you almost $60,000.

Having bad credit is expensive. Improving your score can mean huge interest savings over the life of your borrowing, as well as significant savings on a monthly basis. If you combine the three examples above, the difference between good credit and bad credit amounts to $645 in monthly payments, or a cost of $7,740 per year.

How much is good credit worth to you?

Credit Monitoring: What, How and Why

By | Fraud Protection

We can’t all go to the extreme measures Jason Bateman takes in the movie “Identity Thief.” While it might be nice to think about personally chasing down the person who steals your hard-earned credit to go on shopping sprees, the likelihood of ever discovering who the culprit is may not be as easy as Hollywood makes it look. Of course, if Bateman’s character had a credit monitoring service, he might have known much sooner about his stolen identity.

Credit monitoring gives you the opportunity to monitor your finances proactively, so you know before something or someone ruins your credit entirely. Identity theft can happen very quickly, often without you noticing. Rather than keeping constant tabs on your credit report, a credit monitoring service will monitor financial activity for you and trigger alerts if something happens out of the ordinary.

You should monitor your credit for the same reasons that you don’t purchase that brand new car that you can’t quite afford: A new credit card or loan opened in your name, likely without any payments made toward the debt, can wreak havoc on your credit score. Without credit monitoring, you may not discover that anything is awry until a legitimate application of yours is denied.

Even if there has been no fraudulent activity credit, monitoring will notify you of any mistakes on your report, which could also harm your credit. If there is incorrect information, you have every right to dispute. Credit monitoring reduces the impact of any identity theft that does transpire, and it alerts you to account fraud much sooner than you would discover it on your own. By monitoring all three credit agencies, you gain access to information more frequently than your yearly free credit report.

There are multiple types of credit monitoring services, all with the same goal of detecting and preventing any fraudulent activity. One-bureau credit monitoring keeps tabs on one of the consumer credit reporting companies, and three-in-one credit monitoring tracks information reported to all three major credit bureaus. We now offer credit monitoring through our Essential Plus program, which is all the benefits of the Essentials program, in addition to TransUnion credit monitoring as well as additional advantages.

Since each credit reporting agency operates independently of the others, it is more beneficial to you to take advantage of the option to monitor all of them. Cost will vary depending on how often you want your report scanned, what kind of alerts you would like, and other additional benefits.

Credit monitoring is your opportunity to protect your credit. With all of the hard work you’ve done to build your credit score, it would be devastating to discover that someone else has gone on a shopping spree with your name on the card. Take charge of more than just your spending, and protect your information with the tools available to you.

Windfall Management – Investing in Yourself

By | Debt, Save Money

If your boss offered you a $100 a month raise, would it make a difference in your life? Almost certainly, no matter what your current income level, an extra $100 per month would come in handy.

You don’t have to wait for your boss to offer you a raise to change your standard of living, and tax time gives you a chance to give yourself a raise.

If you have survived the tax season and the check really is in the mail – or more likely, headed by direct deposit to your account within a couple of weeks, think fast – how are you going to spend the money?

Do you have a list of things you’d like to buy? A big screen TV? A used car you’ve had your eye on?

When a windfall comes your way, the first thing you may think of doing is spending the money, but there’s something better you can do with the windfall that is almost like giving yourself $100 a month raise: pay off or pay down a credit card.

Why? Paying off a credit card with high interest rates not only immediately affects how much you’re spending each month on high interest minimum payments, but it also improves your credit rating, and when you improve your credit rating, the money you do have to borrow costs you less.

Consider trying to purchase a new car with a credit score hovering around 560. The car dealership can either laugh you out the door, or offer you a payment plan that includes a 7.5% or higher interest rate. With better credit, you could get a 2.9 – 3.5% interest rate. The difference? $1200 per year or more!

Raising your credit score is a slow process which means that you will have to wait to buy the things you want right now, but consider the things you’ll afford in the future, without going in to debt for them.

Rather than spend the tax refund money immediately, take some time to go through the pile of bills on your desk and make a note of the ones that have the highest interest. Pay as much as you can afford into the one with the highest interest rate, paying it off completely if you can.

One tax return or financial windfall can be enough to get you started on the path to debt freedom. Once there, you can reward yourself by using your free cash to buy that TV or a brand new car. Invest in yourself now, so you can actually enjoy your money later.

Managing Your Credit to Protect Your Credit Score

By | Credit Cards, Credit Repair, Credit Scores, Revolving Debt

The responsible use of any kind of line of credit, whether it is home equity or credit card, can have a tremendous affect on your overall credit score. High balances and late payments can sink your score fast. If you’re going to have a balance on your card, you want it to be 30 percent or less of your available credit.  And, you always want to be focusing on moving your balance down. Think of credit like a pie. You may want to eat the whole thing, but it isn’t good for your waistline. So you nibble on and savor one little piece. It’s the same thing with credit: nibble at your credit and don’t gorge yourself.

You should be able to pay your credit balance(s) in full each month.  This reduces the impact of interest rates and keeps a healthy line of credit to use when needed. It may not always be possible, but it should be a goal. Think of it like a marathon race. People don’t start out going full force and maintain it for the whole 30 miles because they would eventually drop to the ground exhausted. Instead, they pace themselves.

Lines of credit are often used for emergency situations, such as car repairs, when the money isn’t there. It may be impossible to take care of the bill in a single month, but you should set a goal to pay a specific amount off every month (far more than the minimum) until it is paid off. Pace yourself. An emergency line of credit isn’t any good if your balance is too high to pay for the emergencies.

Be cautious when using lines of credit as a buffer for expenses. If you have a  $10,000 or $12,000 limit on a credit card with a $3,000 balance you are paying on, then something happens to drop your credit score significantly, you risk an evaluation at the bank level. The bank can decide that whatever balance you currently have is your new limit. There’s nothing like having the rug pulled out from under you by a credit card company.

Credit is expensive. Even low interest rates on large balances can be financially crippling to the point where even minimum payments can be tough to make. Lines of credit are an important part of maintaining and improving your credit score and can be important financial tools, but only when used correctly. Too many people become caught in the credit quagmire and become lost, with their credit gone, their credit score decimated and their lives impacted. Don’t be ruled by credit debt. Use it sparingly and in ways that it will give you the most financial gain. Time for pie?

Handling Credit

By | Ask a Credit Expert, Credit Cards, Credit Reports, Credit Scores, Debt

A line of credit can be a valuable tool for a consumer, but only if it’s used responsibly. It can also be a trap that is very difficult to escape. Your new credit card may have a $5,000.00 limit, but should you go out right away and buy $5,000.00 worth of home theater equipment? If you couldn’t afford to buy all that gear before the card, chances are you’ll be stuck making just minimum monthly payment and carrying the balance for a very long time. By handling your line of credit irresponsibly, you’ve essentially trapped yourself.

So how do you avoid the trap? Under ideal circumstances, you should only carry a balance on your line of credit that can be paid in full every month. Two key things are accomplished when you get into this habit of credit use:

1)      You establish discipline over your spending patterns.

2)      You avoid revolving interest charges incurred by carrying an ongoing balance.

This approach, however, isn’t achievable for everyone’s financial situation. If you must use a line of credit to make a purchase, come up with a plan to pay off that balance in four to five months. You will incur some interest charges along the way, but you still get the all-important benefit of practicing discipline in your spending and reduce the amount of interest you pay. Remember, the goal here is responsible use.

A common pitfall is the idea that an available line of credit can serve as a buffer in times of financial hardship. If you’re carrying a balance of $3000.00 on a card with a $12,000.00 limit, you’re probably thinking, “Hey, I’ve got a $9,000.00 cushion I can use if something bad happens.” What most people don’t realize, however, is that banks and other credit lenders have the power to lower your credit limit if your risk level changes.

Let’s say the crisis hits. You lose your job, start paying bills a little later, and before you know it your credit score starts to drop. The bank’s risk evaluation department now determines that you are a higher credit risk and decides to drop your limit all the way back down to $3000.00 until you pay off the balance. Poof! The buffer you were depending on to get you through this financial drought is gone in the snap of a finger. The lesson here is that, in the end, saving money is the only way to create a reliable financial buffer to get you through life’s stormy seasons.

Use credit lines wisely. Don’t trap yourself with undisciplined spending and no savings. Make a payment plan and stick to it. Handling credit well is one of the most important keys to your overall financial freedom.

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