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 horror stories of debt consolidation companies that devastated credit scores for people because of how they work. The debt consolidation company will negotiate payoffs with your creditors and the creditor will automatically and immediately close your account with the debt still owing. This hurts your credit scores several ways. The account is closed and the history is lost, the debt to credit ratio is lost due to the credit limit being reported as $0 and the amount owed still showing, etc. So, my recommendation… avoid debt consolidation companies, debt counseling services at all costs unless they do not negotiate payoffs with creditors.

If you want to negotiate a settlement there are several things you should know before you begin. Understand that the creditor will close your account and you will be hit with the same things I described above, debt to credit limit ratio through the roof and loss of credit history for that account. It is better to make the minimum payments until you can afford to get the debt paid off in full and keep the account in good standing. The only accounts you should really negotiate payoffs which would be collections or accounts already closed by the creditor. The damage is already done and paying off the debt would help your credit scores return upward. Not to the original score because you will have lates, loss of history, but your debt to credit ratio would be negated.

How the payoff is reported will also affect your credit scores. I highly recommend negotiating how it will be reported as well. Reporting as “settled” is not good but being reported as “paid in full” or “paid as agreed” or “satisfied” would then reflect a positive on that account even if there are lates and the account is closed. Remember to always get the negotiated payoff in writing and don’t make the payments until the document is in your hands and written as agreed. Then make the payment and you are done. Oh, you can even negotiate for them to remove the collection off your credit file… if you are tough enough to stick it out with them, as they will complain that they cannot do that or company policy states… etc. They can and do regularly when the stakes are high enough.

How much to negotiate is also very important. If you don’t have the money, then negotiating payments may be the only thing you can do, but always ask to reduce the payment and the amount. If you have the money to pay it off immediately then you can negotiate a payoff that could be as low as 40% of the original debt. Factors such as how big the debt is and how old the debt is will determine how much the collection company will allow to be negotiated down. The bigger the amount and the older the account, the more they will negotiate. But waiting till your collections are old to reduce a payoff is not a good thing for credit scores and establishing good credit history. You will have to decide which is more important. Personally, I recommend getting the debt paid off and having the good credit scores for negotiating better interest rates to save money in the future.

However, there is another, alternative solution.  This involves a group of attorneys that do credit law, only credit law license repair and for over 24 years.  By having them work for you, they will attack the collection companies, and the credit bureaus for you and get the negatives off  your credit report, thus improving your credit scores and giving you back your freedom.  Check out National Credit Federation at http://www.VantageCA.com to see for yourself what they can do.  With an average 127 point increase in just 4 to 6 months… you can get your freedom back and start living life again.  Check it out today.

PS – They can also negotiate settlements down to 9 to 12 cents on the dollar.