If you’ve ever been sent to collections over an unpaid debt, then you know what a hassle this process can be. Collection agencies are often aggressive and resort to harassing phone calls and manipulative debt collection tactics.
In most circumstances, you can work something out with your creditors, deal with the delinquency, and move on. But what if you’ve dealt with your delinquency and your creditors are not moving on?
Then you’re dealing with a problem commonly referred to as zombie debt.
What is zombie debt?
Zombie debt is any debt that has long been erased from your credit report yet debt collectors still keep trying to collect on it. It could be that the debt is past the statute of limitations, it’s already been paid off, or it may not even be yours.
The original creditor is likely done with it and has moved on. But just when you think it isn’t an issue anymore, the debt is bought by another debt collection agency. Then you start receiving the harassing phone calls and letters all over again.
Not only is zombie debt frustrating, but you continue to suffer financially for a mistake that you’ve either already dealt with or were never responsible for in the first place. Even if a debt collection agency cannot legally collect on the debt, it can still show up on your credit report and hurt your credit score.
Common Case of Zombie Debt
Let’s look at some common cases of zombie debt:
Time-barred debt that is past the statute of limitations: If you default on a loan, the debt collector has a certain length of time that they can collect on that debt and take you to court. Once you’re past the statute of limitations, you’re no longer liable for the debt. However, debt collectors will often purchase the old debt and try to collect it anyway.
Debt that was discharged in bankruptcy: Sometimes, debt collection agencies will try to revive debt that has been dealt with and discharged through bankruptcy.
Debt that isn’t yours: If you’ve been the victim of identity theft, then a debt collector may be harassing you about debt that isn’t even yours. This is the most frustrating kind of zombie debt since you never did anything wrong.
What kind of tactics do debt collectors use?
A debt collector’s only goal is to convince you to make a payment on the debt they claim you owe. And many debt collectors are willing to resort to questionable or even illegal practices to get you to pay up.
That’s because the minute you make a payment on the debt, it gives the debt collector an opening to sue you for the remaining balance. If the debt is beyond the statute of limitations, even a small payment resets the clock entirely.
Knowing some of the common tactics that a debt collection agency uses is the best way to know how to handle them. Here are a few examples to watch out for:
Threaten to sue you: Many debt collectors will threaten to take you to court, even if they can’t legally collect on the debt and are not allowed to sue you. The goal is simply to scare you into making a payment.
Verbally harass you: According to the Fair Debt Collection Practices Act, debt collectors are not allowed to harass borrowers. But unfortunately, many debt collectors do it anyway.
Try to get information out of you: Debt collectors will try to learn anything about you that they can so they can use the information against you.
Lie to you: Many debt collectors will promise to stop bothering you if you make a payment. They may also promise to remove negative items from your credit report in exchange for a payment. This is usually just a manipulation tactic to get you to make a payment.
See also: How to Deal with Debt Collectors
How to Get Rid of Zombie Debt for Good
If you’re constantly being contacted about zombie debt, it may feel like there is no end in sight. Let’s look at a few ways you can finally kill that zombie debt for good.
1. Monitor your credit score
Information is your best defense against debt collectors who will lie to you to get you to make a payment. Make sure you monitor your credit report closely and watch out for any new items affecting your credit score. And if a debt collection agency is trying to drag up a debt you’ve already paid, look for any receipts and bank statements that verify that fact.
2. Don’t let a debt collector pressure you into making a payment
People often feel embarrassed by their old debt, which gives a debt collector an opening to manipulate you into paying. But you shouldn’t make any payments until you have more information.
The minute you make even a small payment, it becomes much harder for you to get rid of that zombie debt. If you’re past the statute of limitations, making a payment resets the clock on that debt.
If the debt isn’t yours, it becomes much harder to prove that fact if you’ve made a payment. So no matter how much a debt collector tries to pressure you or embarrass you, refuse to make even a small payment on the debt.
3. Ask the creditor to verify the debt
Send the debt collector a debt validation letter. This is a letter requesting that a debt collector proves you owe the debt and that they have a right to collect on that debt.
If the debt collector is unable to validate the debt, then they cannot legally try to collect on it. And if they’re unable to validate the debt, they must remove the item from your credit report.
4. Seek out additional help
And finally, if this problem doesn’t seem to be getting any better then it may be time to seek out the help of an attorney. Stop communicating with the debt collector. You don’t have to respond to them. An attorney will inform you about what your rights are and what the best course of action is.
Bottom Line
Zombie debt can be challenging to deal with and it may feel like a problem that will never go away. But by being aware of some of the common tactics debt collectors use and seeking help from an attorney, you’ll be prepared to deal with them. And once you’ve resolved the debt for good, you can begin taking steps to repair your credit and build a better financial future.
Millions of Americans unable to pay their rent during the pandemic face a snowballing financial burden that threatens to deplete their savings, ruin their credit and drive them from their homes.
A patchwork of government action is protecting many of the most financially strapped tenants for now. But it could take these renters — especially low-income ones — years to recover, even as the rest of the economy begins to rebound.
“Even if they say we can pay [missed rent] back in two or three years — that’s money we don’t have,” said Kelly Wise, a 32-year-old resident of L.A.’s Westlake neighborhood. After losing jobs selling merchandise at concerts and cutting fabric for Hollywood sets, she is more than $10,000 behind on rent.
Debt threatens to hit renters in several ways. Some have kept up with their rent payments but have turned to credit cards and high-interest loans. Others owe mounting bills directly to landlords that must be paid back when eviction moratoriums expire, opening the possibility — if the debt goes unpaid — for evictions and court orders for back rent. That could erode credit scores and lead to wage garnishments and more.
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“We are setting up millions of people for long-term harm and a cycle of economic and housing instability,” said Emily Benfer, chair of the American Bar Assn.’s COVID-19 Task Force Committee on eviction.
Renters across the nation are dipping into 401(k)s, taking on higher-interest debt, and scrambling for risky, essential-worker jobs to pay the rent. Research from Moody’s Analytics and the Urban Institute estimates 9.4 million U.S. renter households owed an average of $5,586 in back rent, utilities and related late fees as of January, for a total burden of $52.6 billion.
Other estimates show a smaller but still significant amount of rent debt. The full scope of the problem isn’t clear because the situation is fluid, and estimates so far are based on surveys and models, rather than hard data.
“[Bad] debt affects your credit score, and credit scores affect everything in your life,” said Yuval Yossefy, a manager at the Legal Aid Foundation of Los Angeles, a nonprofit law firm.
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Federal, state and local officials are grappling with how best to help people stay afloat — including keeping them housed — amid job losses, slashed incomes and pervasive disease. A second year of the COVID-19 pandemic has brought little reprieve, with new variants of the coronavirus threatening to accelerate the virus’ spread and cause longer disruptions to the economy and everyday life.
States are planning to get federal aid funds, which have begun to flow, into the hands of landlords to reduce the debt load on tenants. California, where median rent is 50% higher than in the nation at large, has passed what state leaders characterize as the strongest statewide measures to address the crisis, providing a potential model for how states could distribute rent funds.
The California measures, approved by the Legislature last week, extend a statewide moratorium on evictions for people with pandemic hardships through June. Significantly, they bar landlords from using rent debt accrued between March 2020 and June of this year to deny future housing — a nod to fears that unpaid rent may affect people’s housing for years to come.
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And to protect the most vulnerable, they establish a program that uses federal stimulus money to encourage landlords to forgive debt accrued by low-income tenants over the span of a year: April 2020 to March of this year.
Whether California landlords opt in, exactly how the program will be implemented, and if it will make a significant difference for those most in debt are still open questions. Nonprofit groups that work with low-income renters say the measures could be hard to enforce and, in terms of altogether forgiving some debt, rely precariously on optional landlord participation.
Eviction and debt can make it difficult to find new housing, take out loans, get some types of jobs or budget for necessities like food. In California, where rent was unaffordable for most tenants to begin with, the debt pile-on compounds a long-brewing problem.
Eviction and debt can make it difficult to find new housing, take out loans and get some types of jobs.
(Nicole Vas / Los Angeles Times)
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“A family that makes less than $30,000 a year, they are going to be on the verge of homelessness for the next 10 to 15 years because of this huge debt,” said Ana Grande, associate executive director of the nonprofit Bresee Foundation in Los Angeles, which provides assistance to low-income families.
Making matters worse: Studies show those with debt are least likely to afford it — even if they regain their old incomes. Compared with all L.A. County renters, households that earned less than $25,000 in 2019 were more than twice as likely as all renters to not pay their rent during the pandemic, according to a joint USC-UCLA survey. Households that earned between $25,000 and $50,000 were the second most common group to report not paying.
Nonpayment was also highest among Latino and Black Americans who, compared with white Americans, have been hit harder by the health and economic effects of the virus. They are also less likely to have family who can lend financial help given the country’s long-running racial wealth gap.
An eviction ‘changes the trajectory of a life’
Across the country, a series of problems can unfurl from a single eviction.
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Some landlords refuse to take tenants with an eviction on their record, while those who do are likely to charge more, fail to keep up their properties and have units located in dangerous neighborhoods, according to housing attorneys and other experts.
Studies have found people who are evicted are more likely to experience depression and to die of any cause. People move far from their support networks, or miss work while trying to find new housing and lose their jobs. Kids fall behind at school.
“An eviction is not a single event in a person’s life,” Benfer said. “It actually changes the trajectory of a life, because it has such catastrophic implications for fiscal and mental health.”
In a pandemic, experts say an eviction is particularly dangerous, leading a person to double up with friends and family in crowded housing situations that accelerate the virus’ spread.
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Absent an eviction on a person’s record, debt and poor credit scores can impede the ability to find housing, often leaving people to live in lower-quality conditions, said Ariel Nelson, an attorney with the National Consumer Law Center.
Poor credit scores also limit the ability to take out car, home and other loans at reasonable interest rates, putting homeownership further out of reach.
Past-due debts on a credit report may lead some employers to turn down a candidate for jobs that involve handling money, such as a bank teller or a cashier at a restaurant, said Bruce McClary, spokesperson for the National Foundation for Credit Counseling.
If debts continue to go unpaid, creditors can garnish wages, though restrictions exist on how much disposable income creditors can take.
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To preempt this, people might dip into savings or cut back on food. They may take out the only loans available to them: sky-high-interest products that critics say are nearly impossible to pay back.
Some tenants have already headed down the debt spiral. The USC-UCLA study found 8.5% of surveyed tenants paid some rent with a credit card in July, compared with 3% normally. Nearly 8%used a payday or other emergency loan.
An out-of-work graduate student in Lakewood told The Times she requested and got a budget increase for her student loan to pay rent, adding to her total student loan load. A laid-off worker in the concert industry said they used a 401(k) loan. Some people interviewed said they had already dipped into their savings.
Lamonte Goode, a 44-year-old dancer, says he may tap his savings to begin paying the roughly $10,000 in back rent he owes. With COVID-19 restrictions halting TV shows and theater performances, Goode said he hadn’t found steady work since March and was looking for a job outside his field to pay bills. Unemployment hasn’t been enough to cover expenses, including the $1,800-a-month rent on his one-bedroom in West Hollywood, he said.
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Asked if he thought he would be able to repay the debt, Goode said he didn’t know and that he was trying hard to come up with the money. He also raised the question: Should the burden fall on him? “I am not the reason COVID is happening. Yet I still have to pay the debt for something I am not in control over.”
“The fact that someone lost their job and couldn’t keep up on rent is a very unique and extreme circumstance and does not and should not have a bearing on their creditworthiness for this next almost-decade,” said Nisha Kashyap, a staff attorney at the pro bono law firm Public Counsel, citing how long bad debts typically stay on a credit report.
“This is a global pandemic that came out of nowhere.”
Sid Lakireddy of the California Rental Housing Assn., which represents landlords in the state, says he believes fears of mass evictions and long-term harm to credit are overblown. Most landlords would rather work with their tenants on repayment plans than fight in court over an eviction or debt, he said, particularly since vacancies have risen in many cities. “The last thing we want is to put a good tenant out on the street.”
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The federal government and state and local officials say they are trying to help both tenants and small landlords, who are also struggling.
Then-President Trump signed a bipartisan stimulus bill in December that approved $25 billion in rent and utility relief funds nationwide. President Biden extended the national eviction moratorium for people with pandemic hardships until the end of March, though critics say that ban is weak.
The new California law is stronger and contains provisions to reduce the likelihood that pandemic debt will have wide ripple effects.
Under the law, landlords cannot sell or assign any rent debt accrued during the pandemic until July 2021.
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Russ Heimerich, a spokesman for the state’s Business, Consumer Services and Housing Agency, said the law goes even further for low-income tenants with pandemic hardships: It forever bars landlords from selling rent debt accrued through June.
That would prevent a primary way credit scores could take a hit, since it’s usually debt collectors rather than landlords who report to the credit bureaus, said Nelson, the attorney. Heimerich said the law also included several incentives for landlords to participate in the rent relief program for low-income tenants, and that making it mandatory would have been legally impractical.
Still, critics of the law say it relies too much on tenants knowing their rights and having the means to exercise them, putting the least-resourced in a weak position to benefit.
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Some tenants have already been evicted, said Stephano Medina, an attorney with the Eviction Defense Network, during a recent news conference held online by tenant advocates on their concerns about the law. Moratoriums don’t stop landlords from filing cases, and tenants sometimes don’t realize they need to show up in court to defend themselves, Medina said.
One part of the law that is likely to be particularly hard to enforce is a clause that prohibits landlords from denying housing based on rent debt accrued during the pandemic, said Leah Simon-Weisberg, legal director with Alliance of Californians for Community Empowerment, an organizing group that advocates for low-income households. Prospective landlords often screen tenant candidates through their former landlords, allowing them to learn of debts they aren’t supposed to base decisions on.
It’s also unclear how many landlords will participate in the state’s rent relief program, which will pay landlords 80% of what they are owed if they forgive the remaining 20%. Lakireddy said that’s a good deal, and many landlords are likely to accept it.
California’s rent-control laws may complicate the landlord’s decision, said Tina Rosales, a lobbyist with the Western Center on Law and Poverty. Under state law, landlords can charge as much as they can get for a rent-controlled unit once it becomes vacant. So it could be more lucrative to pursue an eventual eviction and not forgive debts if a tenant is paying significantly below market rates.
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“It has the potential for landlords to pick and choose which tenants they will participate in the program with,” Rosales said, potentially affecting the most vulnerable.
Another outstanding question is how far California’s rental relief funds will go, given the range of estimates of how much rent people owe. Some tenants, for example, might miss out on debt forgiveness — not because their landlord won’t participate butbecause the pool of money runs out.
For many who can’t work from home, the cost of staying housed becomes a choice between incurring debt or accepting the risk of contracting COVID-19 on the job.
One family’s hard choices
The Buenos, a family of five in Los Angeles’ Koreatown neighborhood, were like many of the country’s hardworking households. Fernando prepped fish for a sushi chain. His wife, Maribel, cooked at a downtown L.A. brunch spot.
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Maria, 23, the eldest of three sisters, worked at a big-box retailer and helped out with the family bills. She set a goal to own her own home by 30.
The Buenos are now scattered. A promotion sent Maria’s father to New Jersey before the pandemic, but his hours were soon cut as lockdowns were put in place. Her mother lost her job and moved across the country with her youngest daughter to join Fernando.
At home in Koreatown, the bills fell on Maria, who stayed behind with her 18-year-old sister, Pamela. Their parents send money, but even coupled with Maria’s $20-an-hour wage, it’s not enough to cover the $2,500 in monthly rent. She exhausted her $3,000 in savings and is still $15,000 behind on rent.
Maria worries about how she’ll protect her younger sister and keep both of them from becoming homeless.
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James Engel, a principal with the company that manages Bueno’s building, said the company planned to work with residents on multiyear repayment plans when rent protections expire, rather than pursue evictions and collections. He wouldn’t comment on individual tenants’ cases.
Maria says she doesn’t want to risk having the debt over her head and is looking for a second job during the pandemic.
The possibility of getting sick is a sacrifice she’s willing to make.
Will there be a third round of stimulus checks? If so, when will they arrive? How much will they be? Will I get one? These are just a few of the many questions people are asking about third stimulus checks. Why so many questions? It’s partly because there have been so many different third stimulus check proposals coming out of Washington, D.C., lately. Some proposals called for $2,000 checks, while others were for $1,400 payments. Under some plans, everyone who received a first- or second-round stimulus check would also get a third one. But other plans are more “targeted” and would stiff some people who received an earlier payment.
Fortunately, a single third stimulus check plan is now moving its way through Congress. It was already approved by the House Ways and Means Committee and will be included in the House budget reconciliation bill – the legislation being used by Congressional Democrats to push through President Biden’s COVID-relief package. The reconciliation bill is expected to be passed by the House before the end of February. And the overall goal is for the House and Senate to agree on a final bill before March 14.
There could be changes to the current stimulus check plan before a final reconciliation bill is signed, sealed, and delivered. But the general framework is likely to remain the same. That means we can start providing probable answers to some of the questions Americans have about the next round of stimulus checks. We’re also able to offer a handy Third Stimulus Check Calculator that lets you see how much money you would get if the current proposal is ultimately enacted (everyone’s payment will be different). Having this information in advance can help you prepare your finances for the future if this current plan makes it to the finish line with little or no changes.
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When Will Third Stimulus Checks Arrive?
Congressional Democrats have vowed to pass a new COVID-relief package before extended unemployment benefits run out on March 14. If they meet that goal, it will still take the IRS some time before it’s able to begin sending out payments.
The tax agency started delivering second-round stimulus checks less than a week after they were authorized, but that was in December. The IRS has more on its plate now. Tax return filing season began on February 12, so the IRS is busy processing tax returns – which could very well slow down the processing of stimulus checks. As a result, assuming a third stimulus check plan is enacted by mid-March, don’t expect the first round of payments until later in the month – perhaps even early April if there are any problems.
How Much Money Will People Get?
The current proposal being considered in Congress calls for a base amount of $1,400 per eligible person ($2,800 for married couples filing a joint return), plus an additional $1,400 for each dependent in your family. However, as with the two previous stimulus payments, the total amount would be reduced – potentially to zero – depending on the filing status used and the adjusted gross income (AGI) reported on your most recent tax return.
Under the current proposal, stimulus checks would not be reduced for single Americans earning up to $75,000, head-of-household filers making up to $112,500, and married couples with a combined income up to $150,000. As with previous stimulus checks, they would get a full payment. But for singles with an AGI above $75,000, stimulus checks would be gradually phased-out until they reach zero for anyone making $100,000 or more. For head-of-household filers, the phaseout range would be from $112,500 to $150,000. For married couples filing a joint return, the phase-out range would be $150,000 to $200,000. Plus, the phase-out range’s ceiling would be a hard cap that applies to all people, regardless of how many dependents they have. As a result, third stimulus checks would be reduced to zero for all taxpayers at or above the $100,000, $150,000, and $200,000 AGI levels (depending on your filing status).
Again, we have a handy Third Stimulus Check Calculator that will spit out a customized estimated payment amount for you. All you have to do is answer three easy questions.
How Will Third Stimulus Checks be Calculated?
Under the current proposal being considered in Congress, eligibility for and the amount of a third stimulus check would be based on either your 2019 or 2020 return. If your 2020 tax return isn’t filed and processed by the IRS by the time the tax agency starts processing your third stimulus payment, the IRS would use information from your 2019 tax return. If your 2020 return is already filed and processed when the IRS is ready to send your payment, then your stimulus check eligibility and amount would be based on information from your 2020 return. If your 2020 return is filed and/or processed after the IRS sends you a stimulus check, but before July 15, 2021 (or September 1 if the April 15 filing deadline is pushed back), the IRS would send you a second payment for the difference between what your payment should have been if based on your 2020 return and the payment actually sent based on your 2019 return.
As with first-round stimulus payments, this would create some opportunities to “game” the system if you don’t file your 2020 return early. For instance, if you’ll get a larger check based on your 2020 tax return, than you might be able to quickly file your 2020 return electronically and have your third stimulus check based on that return. If you’ll get a bigger check if it’s based on your 2019 return, then just wait until after your payment is sent to file your 2020 return. For more on this, see How Filing Your Tax Return Early (or Late) Could Boost Your Third Stimulus Check.
How Will Third Stimulus Check Payments Be Made?
The IRS would send payments electronically to as many people as possible. That’s the fastest and easiest way to deliver the money. The plan under consideration says that the IRS can directly deposit third-round stimulus payments to any bank account used to receive a recent tax refund or make a tax payment. The IRS could also make a third stimulus payment to a Direct Express debit card account, a U.S. Debit Card account, or other existing Treasury-sponsored account. Otherwise, you’ll get a paper check or a prepaid debit card in the mail.
If you already have a prepaid debit card from the IRS (e.g., for a first- or second-round stimulus check), you would get a new card if the IRS decides to send your third stimulus payment to you in that form. (But just because you received a debit card for an earlier stimulus payment doesn’t mean you’ll automatically get one for the third payment.)
Who Won’t Get a Third Stimulus Check?
In addition to people with higher incomes, nonresident aliens and anyone who can be claimed as a dependent on someone else’s tax return would not get a third stimulus check under the plan currently being considered by Congress.
Generally, a nonresident alien is not a U.S. citizen, doesn’t have a green card, and isn’t physically present in the U.S. for the required amount of time. For more information on nonresident alien status, see IRS Publication 519.
In most cases, you would also need to a Social Security number to receive a third stimulus check. Generally, your spouse and any dependent you’re claiming to get the additional $1,400 would also need a social security number. An individual taxpayer identification number (ITIN) wouldn’t count.
There would be a few exceptions to this rule:
An adopted child with an adoption taxpayer identification number (ATIN) would still qualify for the extra payment for dependents if he or she doesn’t have a Social Security number;
For married members of the U.S. armed forces, only one spouse would need to have a Social Security number; and
If your spouse doesn’t have a Social Security number, you could still receive a third stimulus check, plus any extra money for qualifying dependents, if you have a Social Security number.
Will All Dependents Qualify for the Extra $1,400 Payment?
One important difference between the current third stimulus check proposal and the previous stimulus payments is that all dependents would qualify for the extra $1,400 payment under the current plan – regardless of their age. (Note: The person claiming the dependent on his or her tax return would actually get the additional $1,400 – it would not go to the dependent, since dependents are not eligible for stimulus payments.)
For both the first- and second-round stimulus payments, families received an additional $500 or $600, respectively, only for dependent children age 16 or younger. Families with older children, including college students age 23 or younger, or with elderly parents living with them, didn’t get the bonus money added to their earlier stimulus payments. That would change under the third stimulus check plan that’s being considered by Congress right now.
Will Dead People Get a Third Stimulus Check?
Under the current proposal, anyone who died before January 1, 2021, would not be eligible for a third stimulus check. They would be treated as if they don’t have a Social Security number.
If a person who died before 2021 was married and a member of the U.S. military, the surviving spouse could still receive a third stimulus check even if he or she doesn’t have a Social Security number.
However, the extra $1,400 per dependent won’t be available if a single parent died before 2021 or, in the case of a joint return, both parents died before then.
Will Third Stimulus Checks Be Taken to Pay Child Support or Other Debts?
The proposal currently before Congress would protect your third stimulus check from reduction or offset to pay back taxes, child support, or other debts owed to the federal or a state government. (If you owed child support, the IRS could use first-round stimulus check money to pay arrears.)
However, at this point, the plan doesn’t include additional protections that were included in the legislation authorizing the second round of stimulus checks. For example, second-round stimulus checks weren’t subject to garnishment by creditors or debt collectors. They couldn’t be lost in bankruptcy proceedings, either. The IRS also had to encode direct deposit payments so that banks knew they couldn’t be garnished.
This is an area where it’s easy to envision changes being made to the current plan to add more protections before a final reconciliation bill is adopted.
Will Third Stimulus Checks Be Taxed?
As with the first two stimulus payments, your third stimulus check under the current proposal would be an advance payment of the recovery rebate tax credit for the 2021 tax year. As such, it wouldn’t be included in your taxable income.
You also wouldn’t be required to repay any stimulus check payments when filing your 2021 tax return — even if your third stimulus check is greater than your 2021 credit. If your third stimulus check is less than your 2021 credit, you would get the difference when you file your 2021 return next year.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
In October 2020, the Consumer Financial Protection Bureau (CFPB) announced a new rule for the Fair Debt Collection Practices Act (FDCPA), which is in place to stop debt collectors from engaging in unfair practices. Consumers must understand the new debt collector rules under the FDCPA to know their rights and protect themselves.
Your rights under the FDCPA
Approximately 28 percent of Americans with a credit report have had debt in collections, according to a 2019 report by the CFPB. Having a debt collector contact you repeatedly can feel overwhelming and intimidating. The government protects consumers by placing explicit restrictions on debt collectors under the FDCPA. By having a clear understanding of your rights, you’ll know when a debt collector is violating the law.
The FDCPA outlines the methods a debt collector can and cannot use to contact you. Some of the previously existing rules included:
A debt collector cannot contact you at inconvenient times and places, including at work if they are told you’re not allowed to receive calls there. If a debt collector does contact you at work, you have the right to tell them to stop and they cannot continue calling your workplace. Additionally, debt collectors cannot call before 8 a.m. or past 9 p.m. unless you specifically say these times are okay.
Debt collectors generally cannot tell others about your debt. They can only disclose your debt to yourself, your spouse, and your attorney.
However, a debt collector can contact other people in an attempt to find your address, phone number or place of work. They can usually only contact these people one time.
Debt collectors aren’t allowed to threaten you, use obscene language or harass you with phone calls.
Debt collectors can’t tell you lies about your debt or the consequences of not paying your debt.
Debt collectors are not allowed to collect more than the original debt owed (like interest, fees, or other charges) unless the original contract or state law allows it.
If you don’t believe the debt is correct, you’re allowed to ask for a debt verification letter. After making this request, the debt collector cannot continue to pursue you until they have shown you written verification of the debt.
It’s important to note that these rules only apply to third-party debt collectors—when a debt has been sold to another party—not the original creditor. If you have a debt outstanding with your creditor, it’s best to start discussions with them before the debt is sent off to collections.
Updates to the FDCPA
The FDCPA has had many amendments since its original enactment in 1978. The rule was released in October 2020 and will likely go into effect in fall of 2021.
New methods of communication
Since the FDCPA was originally created before electronic communications existed, no parameters had been set for contacting consumers via texting and social media apps. The October 2020 ruling clarified this gray area, officially allowing debt collectors to reach consumers via electronic messaging.
Debt collectors can officially send:
Text messages
Emails
Direct messages on social media sites
The CFPB doesn’t limit how frequently debt collectors can send messages but “excessive” communication is prohibited. Excessive communication would violate the FDCPA, which prohibits harassment, oppression and abuse by debt collectors.
Debt collectors that use electronic messaging to contact consumers must provide a straightforward and easy way for consumers to opt out. Consumers should most definitely use this opt-out feature if they wish to.
Additionally, public comments on posts aren’t allowed, and debt collectors have to disclose that they’re debt collectors before sending friend requests.
A representative for Facebook stated, “We are in the process of reviewing this new rule and will work with the Consumer Financial Protection Bureau over the coming months to understand its effect on people who use our services.”
Lack of verification
Another rule update is that debt collectors no longer have to confirm they have accurate details of a debt before attempting to collect. Previously, collectors had to verify the amount owed and the identity of the consumer before pursuing collection. This decision has met a lot of pushback as debt collectors have a history of pursuing debts that are already paid off, and this new rule will do nothing to stop that behavior.
New limits on collectors
The new provisions also set some limitations on debt collectors. Now, when the debt collector initially makes contact with the consumer, they must:
Provide relevant information about the debt
State the consumer’s rights about the collection process
Provide clear instructions on how the consumer can respond to the collector
The consumer has the right to receive all this information before their debt is reported to a credit reporting agency.
Additionally, debt collectors cannot threaten to sue for debt that is past the statute of limitations. They can, however, still attempt to collect an old debt.
If a debt collector is verbally asked to stop calling, this now holds the same power as a written request and they must stop calling. However, this request doesn’t mean the debt collector has to stop all forms of communication. And a request to stop calls does not mean the debt collector has to (or will) stop attempting to collect on the debts.
Defining “harassment”
Collectors can’t call on an account more than seven times in a week, and once they have a conversation with someone on an account, they can’t call them for seven days after that. But this doesn’t help if you have multiple accounts with a collector.
This new rule also doesn’t apply to other communication methods, and voicemails don’t count against the seven-attempts limit.
Again, you need to be proactive about requesting that a collector stop contacting you. You should make this request in writing and keep a copy so you have a record. (And remember that the new amendments state that debt collectors must obey a verbal request to stop a particular form of contact).
Know when your rights are being violated
These new rules were originally proposed in 2019, were approved in October 2020 and will likely go into effect in November 2021. The new rules have received a mixed response, as some rules seem to protect consumers while other rules give debt collectors more leeway.
A debt collector has the right to collect an outstanding debt, but there are limitations in place to protect consumers. Understanding what these limitations are can help you protect yourself. Unfortunately, just because these rules are in place doesn’t mean every debt collector abides by them. The 2019 CFPB report on consumer complaints about debt collection revealed that 81,500 complaints were filed in 2018.
If your rights are being violated under the FDCPA, you can potentially sue the debt collector for damages (lost wages, medical bills, etc.). And if you can’t prove damages, you may still be awarded up to $1,000 in statutory damages plus coverage of your legal fees.
Ultimately, the vital step is for you to take action and stop further illegal harassment against you.
Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.
Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
In October 2020, the Consumer Financial Protection Bureau (CFPB) announced a new rule for the Fair Debt Collection Practices Act (FDCPA), which is in place to stop debt collectors from engaging in unfair practices. Consumers must understand the new debt collector rules under the FDCPA to know their rights and protect themselves.
Your rights under the FDCPA
Approximately 28 percent of Americans with a credit report have had debt in collections, according to a 2019 report by the CFPB. Having a debt collector contact you repeatedly can feel overwhelming and intimidating. The government protects consumers by placing explicit restrictions on debt collectors under the FDCPA. By having a clear understanding of your rights, you’ll know when a debt collector is violating the law.
The FDCPA outlines the methods a debt collector can and cannot use to contact you. Some of the previously existing rules included:
A debt collector cannot contact you at inconvenient times and places, including at work if they are told you’re not allowed to receive calls there. If a debt collector does contact you at work, you have the right to tell them to stop and they cannot continue calling your workplace. Additionally, debt collectors cannot call before 8 a.m. or past 9 p.m. unless you specifically say these times are okay.
Debt collectors generally cannot tell others about your debt. They can only disclose your debt to yourself, your spouse, and your attorney.
However, a debt collector can contact other people in an attempt to find your address, phone number or place of work. They can usually only contact these people one time.
Debt collectors aren’t allowed to threaten you, use obscene language or harass you with phone calls.
Debt collectors can’t tell you lies about your debt or the consequences of not paying your debt.
Debt collectors are not allowed to collect more than the original debt owed (like interest, fees, or other charges) unless the original contract or state law allows it.
If you don’t believe the debt is correct, you’re allowed to ask for a debt verification letter. After making this request, the debt collector cannot continue to pursue you until they have shown you written verification of the debt.
It’s important to note that these rules only apply to third-party debt collectors—when a debt has been sold to another party—not the original creditor. If you have a debt outstanding with your creditor, it’s best to start discussions with them before the debt is sent off to collections.
Updates to the FDCPA
The FDCPA has had many amendments since its original enactment in 1978. The rule was released in October 2020 and will likely go into effect in fall of 2021.
New methods of communication
Since the FDCPA was originally created before electronic communications existed, no parameters had been set for contacting consumers via texting and social media apps. The October 2020 ruling clarified this gray area, officially allowing debt collectors to reach consumers via electronic messaging.
Debt collectors can officially send:
Text messages
Emails
Direct messages on social media sites
The CFPB doesn’t limit how frequently debt collectors can send messages but “excessive” communication is prohibited. Excessive communication would violate the FDCPA, which prohibits harassment, oppression and abuse by debt collectors.
Debt collectors that use electronic messaging to contact consumers must provide a straightforward and easy way for consumers to opt out. Consumers should most definitely use this opt-out feature if they wish to.
Additionally, public comments on posts aren’t allowed, and debt collectors have to disclose that they’re debt collectors before sending friend requests.
A representative for Facebook stated, “We are in the process of reviewing this new rule and will work with the Consumer Financial Protection Bureau over the coming months to understand its effect on people who use our services.”
Lack of verification
Another rule update is that debt collectors no longer have to confirm they have accurate details of a debt before attempting to collect. Previously, collectors had to verify the amount owed and the identity of the consumer before pursuing collection. This decision has met a lot of pushback as debt collectors have a history of pursuing debts that are already paid off, and this new rule will do nothing to stop that behavior.
New limits on collectors
The new provisions also set some limitations on debt collectors. Now, when the debt collector initially makes contact with the consumer, they must:
Provide relevant information about the debt
State the consumer’s rights about the collection process
Provide clear instructions on how the consumer can respond to the collector
The consumer has the right to receive all this information before their debt is reported to a credit reporting agency.
Additionally, debt collectors cannot threaten to sue for debt that is past the statute of limitations. They can, however, still attempt to collect an old debt.
If a debt collector is verbally asked to stop calling, this now holds the same power as a written request and they must stop calling. However, this request doesn’t mean the debt collector has to stop all forms of communication. And a request to stop calls does not mean the debt collector has to (or will) stop attempting to collect on the debts.
Defining “harassment”
Collectors can’t call on an account more than seven times in a week, and once they have a conversation with someone on an account, they can’t call them for seven days after that. But this doesn’t help if you have multiple accounts with a collector.
This new rule also doesn’t apply to other communication methods, and voicemails don’t count against the seven-attempts limit.
Again, you need to be proactive about requesting that a collector stop contacting you. You should make this request in writing and keep a copy so you have a record. (And remember that the new amendments state that debt collectors must obey a verbal request to stop a particular form of contact).
Know when your rights are being violated
These new rules were originally proposed in 2019, were approved in October 2020 and will likely go into effect in November 2021. The new rules have received a mixed response, as some rules seem to protect consumers while other rules give debt collectors more leeway.
A debt collector has the right to collect an outstanding debt, but there are limitations in place to protect consumers. Understanding what these limitations are can help you protect yourself. Unfortunately, just because these rules are in place doesn’t mean every debt collector abides by them. The 2019 CFPB report on consumer complaints about debt collection revealed that 81,500 complaints were filed in 2018.
If your rights are being violated under the FDCPA, you can potentially sue the debt collector for damages (lost wages, medical bills, etc.). And if you can’t prove damages, you may still be awarded up to $1,000 in statutory damages plus coverage of your legal fees.
Ultimately, the vital step is for you to take action and stop further illegal harassment against you.
Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.
Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
When it comes to managing medical expenses, seniors often face significant financial challenges. Since retirement usually means living off of a fixed income, dealing with medical bills not covered by insurance can easily put seniors at risk of landing in debt.
According to the Consumer Financial Protection Bureau, nearly a third of American consumers have debt that’s been turned over to collections, with over half of that from medical bills. Even having a comprehensive retirement plan doesn’t guarantee that you’ll be able to avoid unforeseen (and expensive) health problems.
Thankfully, there are strategies to handle daunting medical debt and to prevent debt incurred from hurting your credit. This detailed guide offers helpful information and advice for navigating healthcare costs as a senior and dealing with medical bills and debt that can harm your credit score. Read on to learn more, or click through the menu below to find the information you need.
How to budget for senior healthcare costs
Why budgeting for medical costs matters
According to the Bureau of Labor Statistics, an average of $6,833 a year is spent on healthcare in households led by an individual who is 65 years or older. Underestimating potential medical expenses in retirement is the main mistake that leads to credit-damaging debt and the need for credit repair. The snowball effect of medical expenses is a large part of the reason why they’re important to keep under control as a senior.
Delaying healthcare bills without a plan and ignoring medical debt are surefire ways to cause financial distress, especially when you’re 65+ years old. Creating a budget for healthcare costs is the first step to minimizing the shock of medical expenses that can lead to crippling debt and a ruined credit score. There are plenty of steps you can take to keep your medical expenses under control before you have to negotiate with debt collectors and utilize credit repair software.
What to know when budgeting for senior healthcare
When it comes to routine healthcare expenses, seniors should take into account insurance premiums, out-of-pocket costs and possible expenses associated with paid long-term care. Developing the right medical budget as a senior doesn’t have to be a grueling task.
The key is to be realistic about the different types of costs you need to prepare for and being proactive about asking for help when needed. Account for everything (income, debt, benefits, etc.) and document every financial move so there is a paper trail that eliminates second-guessing and family conflicts.
Navigating the details of health insurance, medical bills, prescription costs and more can be overwhelming for anyone. As a senior preparing for your financial future, it’s wise to involve a trusted advocate who understands your situation and can help you make important decisions regarding medical expenses.
You may choose to give authority to trusted family members who are helping you, and remember you can still oversee all account activity. It’s recommended that you communicate often with your family about your finances and look into professional financial consulting and/or the need for a Power of Attorney.
How to choose the right medical insurance option
The best practices for deciding between the various insurance options as a senior aren’t always obvious. The average American Medicare beneficiary still spent well over $5,000 out-of-pocket per year for medical expenses according to one Kaiser Family Foundation study from 2019. How can you choose the coverage option that is the least likely to land you in debt?
When it comes to covering medical expenses, seniors in the United States have some options, including:
Medicare: The federal health insurance program for 65+ individuals who have worked full-time for at least 10 years.
Medicaid: The health insurance program run by states and partially funded by the federal government to help low-income families and individuals.
Private insurance: Insurance not federally or state run—it can be purchased from either your employer, a state or federal marketplace or a private marketplace.
What to know about the cost of Medicare
To understand what expenses you need to cover yourself as a senior, it helps to know your two coverage options under Medicare, the most popular type of insurance for 65+ individuals.
There is original Medicare, which consists of parts A and B. Medicare part C, which is also known as Medicare Advantage plans, is offered by a private company that has a contract with Medicare.
Parts A and B of Medicare include:
Inpatient care
Home healthcare
Clinical research
Ambulance services
Hospice care
Skilled nursing facility care
Prescription drugs (limited)
Medical supplies and equipment
Part C includes all of the following in addition to parts A and B:
Special needs plans
Private fee-for-service plans
Preferred provider organizations
Health maintenance organizations
Medicare medical savings account plans
While Medicare covers a substantial amount, there are still quite a few common services among retirees that are not covered, including:
Dentures
Most dental care
Acupuncture
Routine foot care
Cosmetic surgery
Hearing aids and fitting exams
Eye exams related to prescription glasses
Long-term care
Ultimately, what seniors 65 and over will spend on healthcare each year will differ depending on age, gender and health status. Although there are countless scenarios that could increase or decrease an individual senior’s healthcare spending, the general trend remains that their healthcare costs are much greater than their younger counterparts.
Year after year, the US Department of Health and Human Services continues to show the drastic spike in medical expenses for the 65+ age group.
There are plenty of resources available for seniors looking for assistance in understanding the best insurance coverage for their situation. It’s important to keep in mind that senior advocacy centers offer helpful services when you aren’t sure how to make the best decision.
How to pay medical bills
When dealing with medical bills not covered by insurance, there are a few steps you can take to make sure you aren’t overcharged and to prioritize your payments. By following the steps below, you’ll prevent a bill from winding up in collections, which can ultimately hurt your credit score.
1) Don’t pay until you fully verify the bill
Sometimes the way that medical services are billed is confusing. Don’t rush to pay a bill before you thoroughly check it for errors. Educate yourself on how to identify and address the most common medical billing mistakes to save yourself headaches in the future.
2) Make sure insurance was applied to the bill
Ask for an itemized bill from your provider to make sure your bill is adjusted. If you don’t see an insurance payment or discount reflected on the bill, there is probably a mistake. Also, it’s helpful to have a second set of eyes to catch inaccuracies.
3) Check that the explanation of benefits matches the bill
Expect an Explanation of Benefits (EOB) document to arrive at about the same time as the corresponding medical bill. Confirm that there aren’t any discrepancies to avoid being overcharged.
4) Follow up and negotiate until an issue is resolved
A large component of ensuring you’re paying the right amount for your medical bills is persistence. Don’t shy away from calling your healthcare provider and your insurance company multiple times to clarify or negotiate, and record the names of the individuals you’re speaking with and the time. Your wallet will thank you.
5) Request a payment plan
If you can’t tackle medical bills in full, there are often opportunities for interest-free payment plans if you simply ask.
If you’ve done everything in your power to reduce and spread out the cost of medical bills and you’re still struggling, it’s time to ask for support. Reach out to trusted family members or consider enlisting the help of medical billing advocates.
If your medical debt has already been sent to a collection agency, don’t report the bill to credit agencies right away. You may be able to protect your credit score if you’re able to resolve your bill quickly, and it might not even appear on your credit report.
Take a look at the resources below to learn more about how to best manage your insurance costs when you’re 65+:
How to maximize deductible medical expenses
When you’re a senior, it’s important to understand best practices for advocating for yourself to get as much money back on medical expenses via tax deductions as possible. Seniors can benefit from deductible medical expenses that can help them avoid detrimental debt.
If you itemize your deductions, medical and dental expenses are deductible from your income taxes on Schedule A of your tax return as a senior. The limit is 7.5 percent of a taxpayer’s adjusted gross income (AGI) for 2019 and 2020—only expenses that exceed 7.5 percent of a taxpayer’s AGI are deductible.
For example, if someone’s AGI is $50,000, only medical and dental expenses above $3,750 (7.5% x $50,000 = $3,750) would be deductible.
There are clear guidelines laid out by the IRS when it comes to figuring out which costs do and don’t qualify for a tax deduction. Take a look at a quick overview of deductible medical expenses below.
Deductible medical expenses
Premiums for health insurance and qualified long-term care insurance
Medical fees from doctors, laboratories, dentists, assisted living residences, home healthcare and hospitals
Cost of transportation to receive medical care, including ambulance service
Home modifications costs, such as wheelchair ramps, porch lifts, grab bars and handrails
Entrance fees for assisted living
Room and board for assisted living if the resident is certified chronically ill by a healthcare professional and is following a prescribed plan of care
Personal care items, such as disposable briefs, and foods/nutritional supplements for a special diet, as prescribed by a doctor to treat a medical condition
Cost of prescription drugs
Expenses not eligible for deduction
Medical expenses that are reimbursed by health insurance, Medicare or any other program
Payments or distributions out of health savings accounts
Life insurance premiums
Non-medical care to enable the tax filer to be gainfully employed
Although deductible medical expenses shouldn’t be relied on as a primary source of funds for senior healthcare, they can still help cover the cost of care and limit potential debt. A reduced tax burden from medical and dental tax deductions can help retirees reallocate their resources where they matter the most.
Along with other strategies to lower your overall healthcare tab, these deductions might help make the difference in being able to afford home care without going into debt, which can hurt your credit.
Be cognizant of the fact that deductible medical expenses should not be confused with Dependent Care Tax Credit—which is meant for dependent care expenses the primary taxpayer incurs to enable them to work, or look for work, rather than caring for their dependent.
How to minimize the negative effects of debt on credit
Not only can seniors’ credit scores suffer the damage of debt, but their health can be compromised by delaying medical care they need. According to one Consumer Reports survey, 41 percent of people said they put off a doctor’s visit because of cost.
It’s important for seniors to realize that not only are there medical debt forgiveness programs, like RIP Medical Debt, but there are also several encouraging changes occurring.
For example, one recent development is that major credit reporting agencies have agreed not to report medical debts until 180 days after they were incurred in order to give patients more time to resolve them. Here are a couple additional new developments that can prove hopeful for seniors grappling with medical expenses:
FICO released a new scoring model, FICO 9, which gives medical debt less weight than ever before.
Overdue or delinquent bills that have gone to medical collection accounts no longer count as unpaid bills once they’ve been settled.
VantageScore 3.0 has followed suit with a credit scoring model that is more forgiving of unpaid medical bills than it has been in the past.
Here are three main ways seniors can reduce the impact of medical debt on their credit:
1) Finalize payment arrangements right away
Start asking about payment arrangements as soon as you receive medical bills you know you can’t cover. Being proactive to figure out if your provider can give you a payment schedule option will help you minimize the detrimental effects or discount portions of your bill if you pay in advance.
2) Request to make monthly payments on medical bills
As long as you have documented proof that your healthcare provider or collector has agreed to this payment plan, you could buy yourself time by asking to make monthly payments. If they report a negative item on your credit report, you can dispute it by showing they agreed to the payments you’re making.
3) Avoid paying medical debt with credit cards
Think twice before paying for a huge bill with your credit card. Keep in mind that you lose new protections offered by credit scoring companies if you pay your medical costs with a credit card and then can’t pay off the credit card. This type of credit card debt from medical expenses will be treated like any other debt. As a result, it will hurt your payment history and your credit utilization ratio regardless.
When you’re 65+ years of age and struggling to cover medical expenses, it’s easy to feel overburdened. Thankfully, the tactics we’ve shared and the changes in the credit scoring and credit reporting industries can give hope to seniors dealing with outstanding medical bills.
High healthcare costs coupled with a relatively low fixed income could lead to seniors getting into debt and struggling with credit. Even if medical bills compromise your progress, there are plenty of ways to get back on the right track to reach your financial goals in retirement.
Whether you ask a family member for help or consider using a professional service, prioritizing your financial well-being pays off in the end. If you’re concerned about your credit health while handling medical expenses, reach out to the credit consultants at Lexington Law. Our team can help you learn more about your credit report and strategize ways to improve your credit.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
When it comes to managing medical expenses, seniors often face significant financial challenges. Since retirement usually means living off of a fixed income, dealing with medical bills not covered by insurance can easily put seniors at risk of landing in debt.
According to the Consumer Financial Protection Bureau, nearly a third of American consumers have debt that’s been turned over to collections, with over half of that from medical bills. Even having a comprehensive retirement plan doesn’t guarantee that you’ll be able to avoid unforeseen (and expensive) health problems.
Thankfully, there are strategies to handle daunting medical debt and to prevent debt incurred from hurting your credit. This detailed guide offers helpful information and advice for navigating healthcare costs as a senior and dealing with medical bills and debt that can harm your credit score. Read on to learn more, or click through the menu below to find the information you need.
How to Budget for Senior Healthcare Costs
How to Choose the Right Medical Insurance Option
How to Pay Medical Bills
How to Maximize Deductible Medical Expenses
How to Minimize the Negative Effects of Debt on Credit
How to budget for senior healthcare costs
Why budgeting for medical costs matters
According to the Bureau of Labor Statistics, an average of $6,833 a year is spent on healthcare in households led by an individual who is 65 years or older. Underestimating potential medical expenses in retirement is the main mistake that leads to credit-damaging debt and the need for credit repair. The snowball effect of medical expenses is a large part of the reason why they’re important to keep under control as a senior.
Delaying healthcare bills without a plan and ignoring medical debt are surefire ways to cause financial distress, especially when you’re 65+ years old. Creating a budget for healthcare costs is the first step to minimizing the shock of medical expenses that can lead to crippling debt and a ruined credit score. There are plenty of steps you can take to keep your medical expenses under control before you have to negotiate with debt collectors and utilize credit repair software.
What to know when budgeting for senior healthcare
When it comes to routine healthcare expenses, seniors should take into account insurance premiums, out-of-pocket costs and possible expenses associated with paid long-term care. Developing the right medical budget as a senior doesn’t have to be a grueling task.
The key is to be realistic about the different types of costs you need to prepare for and being proactive about asking for help when needed. Account for everything (income, debt, benefits, etc.) and document every financial move so there is a paper trail that eliminates second-guessing and family conflicts.
Navigating the details of health insurance, medical bills, prescription costs and more can be overwhelming for anyone. As a senior preparing for your financial future, it’s wise to involve a trusted advocate who understands your situation and can help you make important decisions regarding medical expenses.
You may choose to give authority to trusted family members who are helping you, and remember you can still oversee all account activity. It’s recommended that you communicate often with your family about your finances and look into professional financial consulting and/or the need for a Power of Attorney.
How to choose the right medical insurance option
The best practices for deciding between the various insurance options as a senior aren’t always obvious. The average American Medicare beneficiary still spent well over $5,000 out-of-pocket per year for medical expenses according to one Kaiser Family Foundation study from 2019. How can you choose the coverage option that is the least likely to land you in debt?
When it comes to covering medical expenses, seniors in the United States have some options, including:
Medicare: The federal health insurance program for 65+ individuals who have worked full-time for at least 10 years.
Medicaid: The health insurance program run by states and partially funded by the federal government to help low-income families and individuals.
Private insurance: Insurance not federally or state run—it can be purchased from either your employer, a state or federal marketplace or a private marketplace.
What to know about the cost of Medicare
To understand what expenses you need to cover yourself as a senior, it helps to know your two coverage options under Medicare, the most popular type of insurance for 65+ individuals.
There is original Medicare, which consists of parts A and B. Medicare part C, which is also known as Medicare Advantage plans, is offered by a private company that has a contract with Medicare.
Parts A and B of Medicare include:
Inpatient care
Home healthcare
Clinical research
Ambulance services
Hospice care
Skilled nursing facility care
Prescription drugs (limited)
Medical supplies and equipment
Part C includes all of the following in addition to parts A and B:
Special needs plans
Private fee-for-service plans
Preferred provider organizations
Health maintenance organizations
Medicare medical savings account plans
While Medicare covers a substantial amount, there are still quite a few common services among retirees that are not covered, including:
Dentures
Most dental care
Acupuncture
Routine foot care
Cosmetic surgery
Hearing aids and fitting exams
Eye exams related to prescription glasses
Long-term care
Ultimately, what seniors 65 and over will spend on healthcare each year will differ depending on age, gender and health status. Although there are countless scenarios that could increase or decrease an individual senior’s healthcare spending, the general trend remains that their healthcare costs are much greater than their younger counterparts.
Year after year, the US Department of Health and Human Services continues to show the drastic spike in medical expenses for the 65+ age group.
There are plenty of resources available for seniors looking for assistance in understanding the best insurance coverage for their situation. It’s important to keep in mind that senior advocacy centers offer helpful services when you aren’t sure how to make the best decision.
How to pay medical bills
When dealing with medical bills not covered by insurance, there are a few steps you can take to make sure you aren’t overcharged and to prioritize your payments. By following the steps below, you’ll prevent a bill from winding up in collections, which can ultimately hurt your credit score.
1) Don’t pay until you fully verify the bill
Sometimes the way that medical services are billed is confusing. Don’t rush to pay a bill before you thoroughly check it for errors. Educate yourself on how to identify and address the most common medical billing mistakes to save yourself headaches in the future.
2) Make sure insurance was applied to the bill
Ask for an itemized bill from your provider to make sure your bill is adjusted. If you don’t see an insurance payment or discount reflected on the bill, there is probably a mistake. Also, it’s helpful to have a second set of eyes to catch inaccuracies.
3) Check that the explanation of benefits matches the bill
Expect an Explanation of Benefits (EOB) document to arrive at about the same time as the corresponding medical bill. Confirm that there aren’t any discrepancies to avoid being overcharged.
4) Follow up and negotiate until an issue is resolved
A large component of ensuring you’re paying the right amount for your medical bills is persistence. Don’t shy away from calling your healthcare provider and your insurance company multiple times to clarify or negotiate, and record the names of the individuals you’re speaking with and the time. Your wallet will thank you.
5) Request a payment plan
If you can’t tackle medical bills in full, there are often opportunities for interest-free payment plans if you simply ask.
If you’ve done everything in your power to reduce and spread out the cost of medical bills and you’re still struggling, it’s time to ask for support. Reach out to trusted family members or consider enlisting the help of medical billing advocates.
If your medical debt has already been sent to a collection agency, don’t report the bill to credit agencies right away. You may be able to protect your credit score if you’re able to resolve your bill quickly, and it might not even appear on your credit report.
Take a look at the resources below to learn more about how to best manage your insurance costs when you’re 65+:
How to maximize deductible medical expenses
When you’re a senior, it’s important to understand best practices for advocating for yourself to get as much money back on medical expenses via tax deductions as possible. Seniors can benefit from deductible medical expenses that can help them avoid detrimental debt.
If you itemize your deductions, medical and dental expenses are deductible from your income taxes on Schedule A of your tax return as a senior. The limit is 7.5 percent of a taxpayer’s adjusted gross income (AGI) for 2019 and 2020—only expenses that exceed 7.5 percent of a taxpayer’s AGI are deductible.
For example, if someone’s AGI is $50,000, only medical and dental expenses above $3,750 (7.5% x $50,000 = $3,750) would be deductible.
There are clear guidelines laid out by the IRS when it comes to figuring out which costs do and don’t qualify for a tax deduction. Take a look at a quick overview of deductible medical expenses below.
Deductible medical expenses
Premiums for health insurance and qualified long-term care insurance
Medical fees from doctors, laboratories, dentists, assisted living residences, home healthcare and hospitals
Cost of transportation to receive medical care, including ambulance service
Home modifications costs, such as wheelchair ramps, porch lifts, grab bars and handrails
Entrance fees for assisted living
Room and board for assisted living if the resident is certified chronically ill by a healthcare professional and is following a prescribed plan of care
Personal care items, such as disposable briefs, and foods/nutritional supplements for a special diet, as prescribed by a doctor to treat a medical condition
Cost of prescription drugs
Expenses not eligible for deduction
Medical expenses that are reimbursed by health insurance, Medicare or any other program
Payments or distributions out of health savings accounts
Life insurance premiums
Non-medical care to enable the tax filer to be gainfully employed
Although deductible medical expenses shouldn’t be relied on as a primary source of funds for senior healthcare, they can still help cover the cost of care and limit potential debt. A reduced tax burden from medical and dental tax deductions can help retirees reallocate their resources where they matter the most.
Along with other strategies to lower your overall healthcare tab, these deductions might help make the difference in being able to afford home care without going into debt, which can hurt your credit.
Be cognizant of the fact that deductible medical expenses should not be confused with Dependent Care Tax Credit—which is meant for dependent care expenses the primary taxpayer incurs to enable them to work, or look for work, rather than caring for their dependent.
How to minimize the negative effects of debt on credit
Not only can seniors’ credit scores suffer the damage of debt, but their health can be compromised by delaying medical care they need. According to one Consumer Reports survey, 41 percent of people said they put off a doctor’s visit because of cost.
It’s important for seniors to realize that not only are there medical debt forgiveness programs, like RIP Medical Debt, but there are also several encouraging changes occurring.
For example, one recent development is that major credit reporting agencies have agreed not to report medical debts until 180 days after they were incurred in order to give patients more time to resolve them. Here are a couple additional new developments that can prove hopeful for seniors grappling with medical expenses:
FICO released a new scoring model, FICO 9, which gives medical debt less weight than ever before.
Overdue or delinquent bills that have gone to medical collection accounts no longer count as unpaid bills once they’ve been settled.
VantageScore 3.0 has followed suit with a credit scoring model that is more forgiving of unpaid medical bills than it has been in the past.
Here are three main ways seniors can reduce the impact of medical debt on their credit:
1) Finalize payment arrangements right away
Start asking about payment arrangements as soon as you receive medical bills you know you can’t cover. Being proactive to figure out if your provider can give you a payment schedule option will help you minimize the detrimental effects or discount portions of your bill if you pay in advance.
2) Request to make monthly payments on medical bills
As long as you have documented proof that your healthcare provider or collector has agreed to this payment plan, you could buy yourself time by asking to make monthly payments. If they report a negative item on your credit report, you can dispute it by showing they agreed to the payments you’re making.
3) Avoid paying medical debt with credit cards
Think twice before paying for a huge bill with your credit card. Keep in mind that you lose new protections offered by credit scoring companies if you pay your medical costs with a credit card and then can’t pay off the credit card. This type of credit card debt from medical expenses will be treated like any other debt. As a result, it will hurt your payment history and your credit utilization ratio regardless.
When you’re 65+ years of age and struggling to cover medical expenses, it’s easy to feel overburdened. Thankfully, the tactics we’ve shared and the changes in the credit scoring and credit reporting industries can give hope to seniors dealing with outstanding medical bills.
High healthcare costs coupled with a relatively low fixed income could lead to seniors getting into debt and struggling with credit. Even if medical bills compromise your progress, there are plenty of ways to get back on the right track to reach your financial goals in retirement.
Whether you ask a family member for help or consider using a professional service, prioritizing your financial well-being pays off in the end. If you’re concerned about your credit health while handling medical expenses, reach out to the credit consultants at Lexington Law. Our team can help you learn more about your credit report and strategize ways to improve your credit.
When you have a longstanding, overdue debt with a creditor, whether it’s an unpaid credit card balance, medical bills, or anything else, at a certain point the account will likely be handed over to a debt collector.
You usually receive a notice in the mail that the debt is changing hands, but if you’re unsure, try calling the original creditor to find out who holds the account.
A lot of things can happen when trying to settle your debt, so it’s important to understand your rights as well as some of the worst-case scenarios — and how to avoid them.
Lawsuits
Unfortunately, when you’re dealing with delinquent debt, either the creditor or collection agency may file a lawsuit if you refuse to pay the money you owe.
However, a lawsuit can be a lengthy and expensive process, so many debt collectors don’t think it’s worth the effort, especially if you appear savvy and demonstrate that you understand your legal rights.
Bankruptcy
Filing for bankruptcy is a huge decision that can affect your life for years to come. While there are certainly some situations where it’s a good choice, you should put in a lot of thought and research about the benefits and consequences before making your decision.
You should also consult with a financial expert or credit counselor before you file for bankruptcy. Also, consider the type of debt you have. Student loans, for example, typically don’t go away even when you file for bankruptcy.
State exemption laws also vary depending on where you live. Those are important because they determine whether or not your personal property, such as your house or car, can be repossessed to compensate for the debt you owe.
Bankruptcies stay on your credit report for ten years, so it should always be considered a last resort. Before you even get to the possibility of a lawsuit or bankruptcy, check out the way to settle your debts so you don’t have to go down a litigious path.
Settling Your Debts
Now we know the two worst-case scenarios to avoid: lawsuits and bankruptcies. To do this, you can employ several strategies to settle your debts with debt collectors. Read each one carefully to find out which ones might work best for your personal situation.
They might take a little time and effort, but if you’re already this far down the path of debt, it’s time to take action so you can avoid more serious consequences like the ones we talked about above.
Best Type of Debt for Settling
There are two types of debt you can have: secured and unsecured. Secured debt means that personal property is associated with the money you owe, such as a house or a car.
Typically, this is not a good type of debt to settle because the creditor can simply foreclose your house or repossess the vehicle if you don’t pay.
Credit card debt, personal loans, medical bills, and other unsecured debt offers a little more wiggle room in the negotiation process. If you don’t pay or file for bankruptcy, the debt collector stands no chance of receiving any money from the debt. So it’s really in their best interest to work with you on a solution.
Debt Validation
Your very first step in settling your balance should be to send a debt validation request.
Send it as soon as you receive notice that your debt has gone to a collection agency, although you technically have 30 days to do so. Upon receiving the request, the debt collector is legally required to send you proof that they have the right to collect the debt from you.
Acceptable documents include a copy of the contract between the collection agency and the original creditor, a copy of the creditor’s original statement, or a copy of your original credit card application or loan agreement. If they can’t provide any of this information, you’re not legally required to pay them anything.
Statute of Limitations
Another basic strategy for settling your debt is checking the statute of limitations in your state. After a certain point, your debt may be too old to even collect on anymore. Because the timeline varies depending on where you live, check specifically for where you live.
You’re in luck if the statute of limitations has passed because then you can inform the debt collector that they have no right to take you to court to pay the money — the debt has become uncollectable.
How to Negotiate with Debt Collectors
Even if your debt is within the statute of limitations and the debt collector has verified that it does indeed own your debt, you still have several ways to negotiate. Start by offering a lump sum payment of an amount you can afford to pay for the debt.
Always make your requests in writing so you can keep records of all your communication with the debt collector. Don’t be put off if they refuse your request at first. When you negotiate with debt collectors, it’s a several step process, so make sure they give in before you do.
Debt collectors stand to make huge margins on the amount you owe, so don’t be afraid to offer less than 25% of what you owe. Why? Because the debt collector probably only paid 6 or 7% of your unpaid balance, so even if you offer to pay 25%, they’ll be making at least a 19% profit.
Think of it this way. Say your outstanding debt is $5,000. The debt collector paid about $300 for the privilege of collecting on it. If you offer to pay 25%, or $1,250, they still make out with $950 in profit.
The older your debt is, the less you can offer, especially if you’re inching closer towards the statute of limitations. That’s why it never hurts to start low in the negotiation process — it’s a completely different ballgame than working with the original creditor.
Best Practices When Settling Debts
Follow these best practices when dealing with debt collectors.
1. Only Communicate with Debt Collectors in Writing & Keep Records
We already mentioned sending all communication in writing, and we can’t stress this enough. Keep detailed records of everything you send and that the debt collector sends back. Also, send everything via certified mail so that you can confirm the letter was received. Leave no room for the debt collector to claim you didn’t send something to them.
2. Avoid Talking to Debt Collectors on the Phone
Only talk to a debt collector on the phone if you’re confident in your abilities to stay calm. Debt collectors are known for being harsh and evoking strong emotional responses. If you do want to give it a try and talk to someone on the phone, just remember that you can hang up at any time.
When you do talk to someone, get their full name and any other identifying information. Take comprehensive notes so that you have records of everything that was said or agreed on. You can then send a copy of your notes to the debt collector via mail.
3. Offer a Lump Sum Payment
When negotiating a payment amount, only offer a lump sum rather than regular payments. The debt collector may try to tack on fees and interest that will make your amount owed higher than what you agreed upon.
If you don’t have enough cash on hand to make a payment or at least a partial payment, you will need to start saving up for one. You can also try to negotiate a payment plan with them.
4. Be Familiar with Your State’s Laws
If the debt collector attempts to charge you fees or interest, check your state usury laws. These laws put limits on how much interest a creditor may charge.
Make sure the debt collector is in line with state law. Otherwise, it’s time to let them know that you’re aware of your rights and that the agency is violating them.
5. Be Indifferent
During the negotiation process, never look desperate for a debt settlement and be prepared for a lengthy process. If they realize you need to settle, they’ll have the upper hand in the negotiation process and very likely demand that you pay the full amount.
The best-case scenario is when the debt collector initiates the debt settlement process, but even if you’re the one making the first offer, stay calm and collected throughout the process.
Keep in mind that settling your debt isn’t just about reaching an agreement on the payment. You can also negotiate how the debt is reported to the credit bureaus.
This is important because that dictates what shows up on your credit report and affects your credit score. Make sure they remove the item completely. Otherwise, your credit score will take a nosedive, even if it’s listed as “paid as agreed” or “paid in full.”
6. Get Everything in Writing
Once you do reach a settlement agreement, get all of the details in writing to ensure they don’t try to change anything at the last minute. Keep a detailed list of what you’ve negotiated and ensure the contract reflects everything accurately. If not, it’s time to follow up once more.
As long as you keep diligent records and handle the debt settlement process patiently, you have good odds of only paying a fraction of your original balance.
7. Understand Your Rights
The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from harassing or deceiving you. They can’t harass you, lie to you, threaten you, or use profane language. Debt collectors also can’t call you before 8 a.m. or after 9 p.m.
Become familiar with the FDCPA as it can provide you with valuable leverage when negotiating with debt collectors. If you are being harassed, you can report it to the Consumer Financial Protection Bureau (CFPB), Better Business Bureau (BBB), or your state’s attorney general. You may also want to consider working with an attorney, a debt settlement company, or a credit repair company.
When you owe a large amount of debt, you run the risk of becoming a target for untrustworthy creditors and debt collectors.
Both the Fair Credit Reporting Act (FCRA) and the Fair Debt Collection Practices Act (FDCPA) provide a legal framework for your rights and responsibilities as a borrower in debt.
However, it’s important not only to fully understand these two laws but also to recognize potential illegal debt collection activities before they affect you.
Re-aging an account can be a confusing process because in some instances it’s legal and beneficial to you, while in other instances it can be extremely detrimental, not to mention illegal.
We’ll walk you through the ups and downs of re-aged accounts and also help you identify other common tricks debt collectors may try to pull on you.
What is Debt Re-aging?
What does it mean when a debt is re-aged? For credit reporting purposes, a debt is considered re-aged when the date of delinquency is moved forward. For example, a debt that was originally past-due in August 2015 may be “re-aged” to show that it was originally past-due in August of 2016, or even later.
This process can also be known as “curing” or a “rollback.” Sometimes this can help your credit while other times it’s simply a way for collection agencies to gain more time in collecting payments from you. Let’s break down the details into two different categories: positive re-aging and negative re-aging.
Positive Re-aging
Positive re-aging occurs when you work directly with a creditor to make payments and minimize the damage done to your credit reports. This typically comes as part of a debt repayment plan.
That’s because your delinquent debt can still be reported as late each and every month, even if you’re making payments and trying to catch up. Each of these rolling late payments works against your credit score.
“Paid On Time”
As part of a repayment plan, your creditor may agree to re-age the account so that it is reported as “paid on time.” They can either bring past payments up to date or re-age all your payments going forward.
This is an extremely useful and helpful way to get yourself out of a cycle of debt. You might also consider enrolling in a debt management plan so that your credit counselor can help negotiate the specifics of your agreement.
In many situations, the creditor will agree to re-age your accounts once you’ve made a few consecutive months of on-time payments. It’s a good incentive for both parties to actively get your debt under control.
Negative Re-aging
Unfortunately, there is another type of “re-aged” debt. When your past-due bills are charged-off by the original creditor, they are oftentimes sold to debt collectors.
These collection agencies pay mere pennies on the dollar to acquire these debts, and then attempt to collect and make a profit. Sometimes, unscrupulous collection agencies will “re-age” this newly purchased debt. This is a major problem for two reasons:
It makes the debt look like a new debt that is delinquent, rather than the same old debt simply owned by a new creditor.
It gives the debt collector additional time to attempt to collect the debt, even if the debt is too old to legally collect.
The additional delinquency will cause your credit scores to take another hit, and the revised delinquency date gives them a longer time to pursue the debt.
Illegal Debt Re-aging
While this type of “re-aging” is illegal, there is no simple way for the average consumer to get immediate relief from this type of unfair practice. But you can take steps to prevent further damage to your score and avoid reopening the statute of limitations.
If you’ve made a payment on one of these “re-aged” debts, it can be almost impossible to have the matter corrected. This is because the payment automatically renews the time that the debt remains on your credit report!
This means a payment to a collection agency can leave you with a delinquent debt that cannot be removed for another 7 to 10 years if it is not paid off.
It also reopens the statute of limitations on the amount of time they may pursue repayment from you. The timeframe varies from state to state, but generally, lasts between three and seven years. Clearly, it’s in your best interest to monitor your credit report and fight back against illegally re-aged accounts.
How to Dispute Re-aged Accounts
Unscrupulous practices like these are why it is crucial to carefully monitor your credit report. It’s also important to avoid dealing with any collection agency that uses high-pressure, unfair tactics to try to get you to pay. Most importantly, if the debt in question is too old to collect based upon the laws of your state, do not offer to pay.
It is in your best interest to state that the debt is past the statute of limitations for collections. You will want to send a certified “cease and desist” letter to any agency attempting to collect.
Credit Bureau Disputes
You can also petition the credit bureau directly. Start off by requesting relevant documentation from one or all of the credit bureaus. According to the FCRA, you have the right to view any information in your consumer file.
Once you receive this information, you can compare the date of first delinquency from the original creditor to the new delinquency date provided by the collection agency.
Assuming these documents show proof that your account has been illegally re-aged, you can open a dispute with the credit bureau to have the account completely removed from your credit report.
Potential Legal Action
Just note that if you’re still within your state’s statute of limitations, the collection agency may turn around and try to sue you for the amount owed.
In addition to disputing the re-aged account with the credit bureau, you should also file a complaint with the FTC, your state’s attorney general, and the Consumer Financial Protection Bureau.
If the collection agency states that the falsely re-aged debt is legitimate, you may be able to sue in a small claims court for violating your rights. Don’t let “re-aged” debt ruin your credit scores or your chances of having good credit.
Other Illegal Debt Collection Practices
Re-aging is definitely a shady tactic to keep an eye out for, but there are many other illegal practices to be aware of. Understand the most common ones so you can avoid being taking advantage of when you’re in debt.
Collection agencies should not contact anyone besides yourself about your amounts owed, with just a few exceptions allowed. Those include your attorney, the credit bureaus, and the original creditor.
They can also contact your spouse and your co-debtors unless you have already sent a letter with a request that they stop contacting you.
If the agency does contact another third party, it can only be to try and find your whereabouts. But even this comes with a number of restrictions. Most notably, they cannot state that you owe any debt and may only identify their employer when asked.
There are also legal restrictions on when and where a debt collector may contact you. Usually, any time before 8:00 a.m. or after 9:00 p.m. is off-limits.
They also can’t call you if they know you are being represented by a lawyer. Calls at your place of work are also forbidden once you tell them your employer prohibits personal phone calls on the job.
Exhibiting Inappropriate Behavior
Some debt collectors are known to get nasty, but luckily there is a legal line drawn in the sand to indicate when they’ve gone too far. They cannot lie to you, like pretending they’re from a law enforcement agency or refusing to say anything about who they are.
Additionally, a debt collector may not use profane language or threaten you with violence. They also can’t publicly list your debt for sale or publish your name in relation to your debt. If you experience any of this type of behavior, it’s time to contact the authorities.
Using Unfair Collection Methods
A collection agency may not add any unauthorized fees or interest that weren’t included in the original credit agreement.
Moreover, they can’t threaten to take your property if they’re not legally allowed to do so, or if they actually have no intention of doing so. They’re also required to handle postdated checks in a very specific manner.
Know your rights and debt collectors’ rights so you understand when is the time to stand up for yourself. Once you know where the line is drawn and whom to contact, you’ll feel much more empowered as you work your way out of debt.
The next time you check your credit score, you might discover it has taken a tumble because of a seemingly small mishap on your part.
This happened to me once because I misplaced a bill for a whopping $12.70. My nonpayment ended up being reported to credit bureaus, also known as credit-reporting agencies.
The result was an 80-point decrease in my credit score and several months of regret. My credit score rebounded, but this small oversight still haunts me.
With my precautionary tale in mind, here are some other types of mishaps that can damage your credit score.
1. Car rental reservations
Planning to rent a car? If you use a debit card to make the reservation, the rental car company might require a credit screening. That can ding your credit score, as we detail in “9 Things You Should Never Pay For With a Debit Card.”
Here’s a better option: Confirm the reservation with your credit card to avoid the unnecessary credit inquiry. Then, settle the final bill with your debit card upon returning the vehicle.
2. Closing credit cards
Closing a credit card account sounds smart, but it actually can hurt your credit score. In fact, we cite it in “10 Common and Costly Credit Missteps.”
Closing an account affects what’s known as your credit utilization ratio. That is the percentage of your available credit that you are using.
This ratio affects both FICO credit scores and VantageScore credit scores. The lower your ratio — meaning the least of your available credit that you’re using — the better your credit score will be.
Closing a credit card account you’re not using decreases your available credit, however. That increases your credit utilization ratio, hurting your credit score.
3. Past-due rent payments
Fail to pay the rent on time, and the landlord might report your delinquency to credit bureaus.
If you’re having trouble with the rent, meet with your landlord and propose an alternative payment plan until you’re caught up. That way, you can salvage your good name and credit.
4. Defaulting on recurring bills
If you are even slightly past due on a bill from a cellphone or utility company or other provider of recurring services, chances are you’ll receive several notices before services are terminated.
But once the provider has had enough, expect to be turned over to debt collectors and subsequently reported to the three main nationwide credit-reporting companies — Equifax, Experian and TransUnion. Don’t ignore correspondence or fail to settle outstanding obligations.
5. Breached gym membership contracts
Even if you are tired of forking over hard-earned cash each month for a gym membership you aren’t using, don’t just walk away.
Properly close the account, or it could cost you in the form of early termination penalties and a damaged credit score.
6. Outstanding medical bills
If you’re having trouble paying medical bills, make sure you tend to the matter promptly. Request a payment plan, for example.
Ignoring collectors by muting the ringer on your phone or sending their calls to voicemail can eventually result in a blemish — in the form of a collection account — on your credit report.
Due to credit industry changes announced several years ago, medical debts are reported only after a 180-day waiting period designed to allow enough time for insurance payments to be applied. And in general, credit-reporting agencies are placing less weight on outstanding medical debt.
Still, tending to medical bills promptly can help you avoid a credit blemish in the first place.
7. Too many credit card applications
Ten percent of your FICO credit score is determined by how you shop for credit. According to Fair Isaac Corp., or FICO, the company behind FICO scores:
“People tend to have more credit today and shop for new credit more frequently than ever. FICO Scores reflect this reality. However, research shows that opening several new credit accounts in a short period of time represents greater risk — especially for people who don’t have a long credit history.”
So, remember this the next time you’re offered a store credit card at the checkout counter as part of a deal that could save you some significant cash on the purchase. The price of that one-time savings might be a lower credit score.
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