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Medical bills will have less weight on credit scores

Millions of individuals are struggling to pay off medical debt. This is especially true for medical bills that have ended up in collections and negatively affected credit scores. Iowa consumers may see their credit scores go up due to changes made by FICO regarding medical bills.

According to a report by the Consumer Financial Protection Bureau, consumers are being punished for medical bills, which are not relevant to their credit worthiness and should not be a contributing factor in someone’s ability to get approved for a loan. In the recent weeks, FICO made an announcement that there will be changes to how it analyses credit scores. FICO is a company that is in charge of calculating credit scores and is used by most lenders to determine if individuals are credit-worthy.

Useful strategies for paying credit card debt

Credit cards are useful in building credit and for emergencies. However, if they are not used properly, they can turn into an avalanche of credit card debt. Those who charge $3,000 may not be aware that they end up paying back $11,000 at 17 percent interest. There are strategies Iowa consumers can use to pay their cards the right way.

Credit card companies average the consumer’s balances on a daily basis throughout the month, which is what helps to calculate the monthly interest rate. It can be helpful to consumers to start paying their credit card bills as soon as they get them to reduce their interest rate. Apart from paying the bills sooner, it is also helpful to double up on the minimum monthly payments.

How to defend against creditor harassment

Americans have seen the economy start to take a positive spin, but there are still one-third of consumers who were turned over to collections last year. It’s likely that a number of Iowa consumers faced creditor harassment, and aggressive debt collection tactics have become a major issue. Debts that reached collections means that consumers failed to pay bills, including credit cards and child support.

A majority of complaints that are received by the Consumer Financial Protection Bureau are involving debt collectors. A recent study by Urban Institute revealed that 35 percent of consumers have been turned over to collections, and millions have approximately $5,200 in delinquent debts. It’s important for consumers to know their rights under the Fair Debt Collection Practices Act, and one of the rules is that collectors are not allowed to threaten or harass consumers.

Quick ways to reduce high credit card debt

Credit card debt affects millions of Americans. Many Iowa borrowers may find themselves trapped in credit card debt for years and feel that there is no way out. However, there are ways borrowers can pay off their debts faster and save money in the long-run.

One woman has credit card debt that is a mixture of credit line accounts and balance transfers. She is only able to make the minimum monthly payment at a 24 percent interest rate, but she wants to clear off the debt as fast as possible. If the consumer keeps on paying only the monthly minimum, she will not be able to pay off the balance any time soon. For example, if she paid a minimum payment for one year, her balance would only go down to $44,319.01. Overall, it would take her 42 years to pay off her balance, and her total cost would be over $99,000.

Many Americans have credit card debt in collections

A new study was released, which examined 7 million American credit files. The study revealed that 35 percent of the country, including Iowa consumers, has credit card debt that has reached collections. Debt that is forwarded to collection agencies can have dramatic effects on credit scores.

Debts that have been transferred to collection agencies are those that have been closed or that have not been paid in at least 180 days. Individuals in collections owe, on average, $5,200 in overall debt. Reportedly, a large number of people whose debts were forwarded to collections did not know they had an outstanding bill and also had good credit. Aside from credit card debt, a large portion of debt in collections is medical bills, since most are under the assumption that it will be paid by insurance.

Iowa consumers should beware of some personal loans

Sometimes, individuals may need a loan but have bad credit. Companies are out there that are willing to issue bad credit personal loans, but often at a huge price. There are loans that Iowa consumers may want to avoid.

One loan consumers may want to avoid is a payday loan. These are designed as small loans that can range from $100 to $1,000 as long as an individual simply shows proof of income. These loans are usually due two weeks later, and if someone only borrowed $400, they will owe the lending company $460. Another loan consumers may want to avoid is a bad credit auto loan, as the interest rates are usually high. One woman took out a $15,000 auto loan for $300 per month, but it would take her 84 months to pay it off.

Methods of paying off high-interest credit card debt

It is common for consumers to carry credit cards in case of an unexpected expense. However, those cards can become more expensive in the long run when cards are overused and interest piles up. However, there are ways that Iowa consumers can pay off their high-interest credit card debt.

One woman carries two cards that have high interest rates. She’s not sure if she should obtain a home equity line of credit to pay off one card and pay down the other or if she should take out two zero-percent-interest credit cards and transfer the balances. Both are good ideas, and the woman would be able to benefit from either choice as long as she pays off the cards as soon as she can. Some financial professionals have recommended that consumers simply pay off their balances as fast as possible, but they should avoid taking on new debt.

Patients could reduce their medical bills

Seeking medical care is expensive for most people, and one can rack up hundreds or even thousands of dollars in debt. Iowa consumers with health insurance can often find medical debt to be overwhelming. However, there may be help for those who have high medical bills by hiring medical billing advocates.

A 36-year-old woman gave birth to her daughter on Mother’s Day, but the baby was born premature and spent almost three weeks in the NICU. In addition, doctors determined that the woman had a heart defect that could be deadly, which resulted in her spending two weeks in the hospital. In spite of the woman having health insurance, she still received a bill for over $64,000. This amount was way too much for the woman to handle, especially since it’s more than three times what she earns per year.

Ways for consumers to free themselves from credit card debt

The average amount of credit card debt throughout the United States is a little over $15,000. Although the amount could be different for each household, the fact remains that many people view this as a huge barrier to achieving financial freedom. There are ways Iowa consumers can free themselves from credit card debt.

One way for people to free themselves from card debt is to restore their budget by finding ways to have more cash available. People can do this by eliminating unneeded expenses including going out to eat and cable. Once a budget is made, it’s recommended that consumers keep track of their spending. The next step is to stop making charges on credit cards. Instead of using the cards, just use cash on hand which can result in less spending.

How credit card debt can affect getting a mortgage

There comes a time when individuals want to stop renting and decide to purchase a home. In order for Iowa residents to be able to buy a home, they must become approved for a loan first. However, credit card debt can have an effect on qualifying for a mortgage.

Banks generally look into a few items to see if an individual will qualify. One of the primary items banks will look at is one's credit score, which often needs to be around 640 or higher to be approved. Another factor taken into consideration is someone’s income, which needs to be high enough to meet all of the mortgage payments. Also, banks would prefer that potential borrowers have a steady job history.

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