Today is slightly different than usual but Eric Reque a consultant in the Atlanta area sent this to me a while back and I thought I’d share it with you …

This article was in Broker Universe today

Expert: Medical Collections Stopping Refi Opportunities

By Brad Finkelstein

PLANO, TX – According to a top producer of government mortgages, few borrowers are able to take advantage of the steep decline in interest rates, not just because of tighter lending standards and declining home values, but because of issues on their credit reports, specifically medical collections.

According to Rodney Anderson, executive director and senior managing partner of Rodney Anderson Lending Services here, 45% of the 1,701 loan applications he received between June and September 2008 had borrowers with at least one medical collection account. “In evaluating these loans, we uncovered a huge injustice against the American public,” says Mr. Anderson. “The tragedy is that the collection accounts, even those that have been paid in full, are lowering these individuals’ credit scores, often to the point that they either can’t qualify for a loan, or will have to pay higher interest rates if they do.”

He explains that medical collections are particularly problematic because of four main issues:

· Medical billing is a notoriously error-prone arena

· Many individuals with medical collection accounts never received the bill in question

· Medical collection accounts customarily remain on a credit report for seven years after the individual has settled or paid the account in full

· Medical collection accounts can reduce a credit score by as much as 100 points, sometimes more.

“Based on our extensive research, we can surmise that nearly half of Americans have at least one medical collection debt that’s lowering their credit score,” says Mr. Anderson, who uses analytical software to evaluate free credit reports and determine how borrowers can best improve their own credit scores. In doing so, he found that medical collection accounts are routinely reducing borrowers’ credit scores by 60 to 100 points or more. “This is disastrous news for loan applicants, especially since earlier this year Fannie Mae and Freddie Mac started requiring higher credit scores to qualify for loans, and loan servicers of FHA and VA loans have implemented additional credit score-based premiums,” he adds.

So he has initiated a petition to create a federal law mandating the permanent removal of a paid or settled medical collection account from the consumer’s credit report within 30 days of settlement.

“I’ve seen many hard working, conscientious individuals who diligently address their monthly obligations, but because they unwittingly incurred a medical collection account, are forced to settle for a mortgage rate that’s half a percent higher than if they’d never had that collection account,” adds Mr. Anderson. “That half point can translate into thousands of dollars in wasted money, and that’s only for a home loan. They can also expect higher rates for auto financing, credit cards and insurance. That’s a hard pill to swallow for the many individuals who were never notified of the initial billing and who have since paid the collection account in full. In this market, where interest rates and low home prices present the ideal time for buying, we need to make sure that individuals who deserve credit, get it.”

More information on the Credit 911 Medical Relief Bill is available at http://www.rodneyanderson.com/credit/medical_collections.php

Be Bold!

Herschel

There are 3 types of inquiries to know about as you look over your credit report. It’s important to understand them and how they affect your credit scores because they can affect your credit scores very seriously. I have seen a couples credit scores drop over 120 points because of “shopping for credit” and not realizing their inquiries were costing them points.

The first type of inquiry is one where you initiate the loan request. You fill out an application, or go to a store and they offer to sign you up for a store credit card processing and then will give you 10% or 20% or more off of your first purchase with them. Each of these is a hard pull inquiry and if more than 2 in a year will start to cost you points. There are many ways you might have a hard pull inquiry and not realize you are getting one. You might go into a auto dealership and ask about the financing of a car. Be sure that if they ask for your social security number, that they are going to pull your credit even if you don’t ask for them to do so… they will assume that since you gave them your social security number, that you authorized them to pull your credit. Boom, you just had a hard inquiry pull.

It’s not bad if that is what you wanted, but what if you go and look at autos from several dealerships and each pulls your credit? You just got hit with a hard inquiry from each dealership and your scores will be dropping as you go along.

There is an exception, as there always is… On the inquiry there is a place to put the type of inquiry that is being pulled. If the auto dealership, mortgage company, bank, credit union, etc, where you are applying for a loan fails to put the type of inquiry onto the inquiry pull, then this is where each credit pull will cost your credit score points. Another challenge to face is the type of scoring module they are using when pulling your credit. Because the credit bureaus have over 19 different scoring modules to choose from and the dealership, loan company or bank can choose which scoring module they will pay for, then the combination of error can be endless and very costly to you. How do you know? You don’t… you can ask but they won’t know which scoring module they are using because it is usually decided by someone at corporate headquarters and they don’t tell the sales people and don’t care anyway.

Credit Scores are important to track because of the need to know where you are before you go looking for a loan for your new home or a new car. Once you establish your lines of credit, credit cards and mortgage, car loan or student loan, don’t disturb the flow of things. The history is more important.

As you go along, it would be good to check it once a year to see how things are going but if you need to watch it more often, say if you are working on correcting problems on your credit report or need to watch it improve for a specific reason, like wanting to buy a new home and you need a specific credit score, then getting a monitoring service might be a good idea. Remember that you can pull your credit reports free once a year from http://www.AnnualCreditReport.com. But to get your credit score will require you to pay for a service. We recommend http://www.MyFICO.com because they are the more accurate for a consumer credit score. All others are “simulated credit scores” and seem to get a credit score that is higher than what you would get if you went shopping for a loan. It doesn’t make sense unless you consider that they are trying to make you feel good. But that doesn’t make sense when you find out that your score isn’t any good. So, it must be for money and the greedy nature of big business. It’s not really a service at all.

However, MyFICO.com is from the Fair Isaac Corporation who developed the credit scoring system and their credit scores are accurate. You can get a credit score from just 2 of the credit bureaus for about 20% less if you google search “myfico coupon”.  Cost would be around $22 for the 2 scores.  Unfortunately, Experian thinks they are too good for FICO and won’t let you get the score through them anymore.

Opportunities for credit come in the mail if you are doing certain things or member of certain organizations. I have found that if you are going to school, you are a target for credit card repair companies to send you multiple offers in the mail. You are gaining an education and are going to have more money earned to pay for things than those people who do not go to school, college or university.

If you join a frequent flyer organization, even if you don’t fly very often or at all, this will put you on a list of preferred offers from credit card companies to offer you opportunities to apply for their credit cards.

Opportunities come in a wide variety with multiple interest rates, pay back plans, credit limits and penalties if late or over limit. I am finding that credit card companies put in the fine print that they can check your credit when ever they feel like it and if they see your credit score drop below a certain point, that they determine, they can increase your interest rate from that nice 6% you started with to 19, 24 or even 29%. The highest I have seen an interest rate is 33%. I suppose this could go even higher if the credit card companies can get away with it.

It would be important to compare the differences in credit cards not only for interest rates, credit limits and penalty factors, but also for rewards for purchases and length of time with the company. There are cards that give you cash back or cards that give your flight rewards. Some will give you products to choose from a catalogue. If you don’t fly much, then getting a card with flight rewards may not be the best plan for you. Get one that fits your life style and remember to get that card paid off every month or you will be paying for every penny of the “reward” you are getting rather than have it be a great asset for you by paying your card off every month.