It has been 10 years since the real estate market crash of 2008, and the market has never fully returned to its pre-crash glory. Home ownership was at an all-time high in 2004, just four years before the worst economic recession since the Great Depression, to which a volatile real estate market contributed. The oldest among the millennial crowd were only moderately affected by the real estate bubble, as many of them were not financially prepared for home ownership at the time of the recession anyway.
When you get right down to it, any way you go about paying off debt is going to be a positive thing. So, do not let confusion over specific debt-reduction strategies get in the way of taking action. But, there are nearly as many different ways to get out of debt as there are to get into it, so it makes sense to consider the various alternatives and determine which method makes the most sense for you.
Medical bills are a big-ticket expense for many Americans. Even those covered by health insurance stand to pay huge amounts out-of-pocket in the event of a medical emergency or ongoing treatment. In fact, one study found that 1.7 million Americans live in households that declared bankruptcy due to medical costs.
It might seem silly, or outright unfair, that something as fundamental as medical expenses might result in destitution, but that’s the world we live in today, and many Americans struggle to cope. When faced with a hefty medical bill, sometimes you’re left without options — maybe the less-than-ideal, high interest credit card in your wallet is your only respite. But does it make sense to pay for medical bills with a credit card?
Medical bill payment options
In the wake of a costly medical procedure, you should always look to pay the bill outright. Paying with cash, check or debit card will satisfy the bill from the outset, and therefore costs will not plague you down the line. But, of course, this isn’t always realistic. Very few of us have tens, or even sometimes hundreds, of thousands of dollars in savings to cover medical costs.
The next best option is a payment plan. In many cases, you can set up a payment plan with the billing department, and as long as you stick to it and make minimum payments, your bill won’t go to collections. This is a very popular payment method for those with the overall means to pay medical bills but without the upfront capital to cover it in the moment.
Paying for medical bills with a credit card should be a final resort. This method of payment will incur interest payments and make your payment that much more costly. A large enough medical bill can loom over your finances, and potentially ding your credit, for years to come. This is a tough position to be in because not only will it drain your bank account, but also necessitate credit restoration down the road.
There are credit cards specially designed for medical costs, but these are also a slippery slope. Medical credit cards usually offer a 1 – 2 year long promotional, low financing period, but if the balance extends past that window, you’re likely to take on huge interest payments.
The primary advantage to charging a medical bill to a credit card is obvious: you’re able to pay your bill. While your logical brain recognizes that this might not be the most sound financial decision, when faced with a health crisis you might not have a choice. The alternative — not paying your bill at all — could be much worse for you financial future.
What happens if medical bills go unpaid
Recently, the major credit bureaus instituted a change in the way that medical bills are reported. A 180-day waiting period is now required before reporting a medical debt to the bureaus. If medical bills go unpaid for a prolonged period of time they will be handed over to collections. However, FICO’s newest scoring model, FICO Score 9, ignores paid collection accounts. That means that if you pay your medical collection, it won’t negatively impact your score.
If you have any account in collections — medical or not — you will likely see a negative effect on your credit. The degree of damage is usually correlated with how high your score is, how long the account has gone unpaid, and how much you owe. If the debt is not handled after that, you run the risk of repossession of property, wage garnishment, and other dire financial consequences. This is where credit repair can help.
Don’t let large medical bills, or any other kind of debt, weigh down your financial goals. As a distinguished leader in the credit repair industry, Lexington Law has helped consumers improve their understanding of credit more than 20 years. Contact Lexington Law today if poor credit is inhibiting your ability to pay off debt.
Now that we’re almost into March, we all have our W-2s from our employers and are well on our way to being ready to file. Some well-prepared individuals have already done so. However, if you still have yet to file, beware: there are many ways to find yourself at the wrong end of a stolen identity this tax season. There are many different ways to protect yourself and maintain your good credit standing or your journey through the credit repair process. Here are some things to keep in mind as you make your way through tax season.
The IRS Doesn’t Call
Every year, we hear the same story and the same warnings are issued by the IRS. Scammers have been using the same tactics for a while now. They call someone’s home or cell phone claiming to be from the IRS and inform the call recipient that they owe thousands of dollars in back or overdue taxes. They even go so far as to provide fake badge numbers, names, and more. They will then ask for a credit card number. Never give out your credit card number to someone claiming to be from the IRS. If you aren’t sure if the person calling you is legitimate, simply call the IRS to find out if you owe taxes, and if so, how much.
Shred Documents with Your SSN on Them
Since most of us wouldn’t rifle through other people’s trash bins looking for documents to steal, it’s easy to think that no one does. Unfortunately, that is not true. Many people have fallen victim to monetary or identity theft simply through carelessness with their refuse. Any piece of paper with your personal information on it — especially your social security number — should be shredded immediately and placed in the trash. Shredders today do a fine job of turning sensitive documents into paper confetti and are relatively inexpensive. It’s definitely worth your investment.
Keep an Eye on Data Breaches in the News
If you find yourself involved in one of the major data breaches (such as the Target breach in 2013) then you’ll need to do some investigating to find out to what extent your information has been compromised. In some cases, victims of data breaches may need to contact the IRS to request an IP PIN, or a six-digit identification number that helps identity theft victims ensure their tax returns are processed safely and accurately.
All of these tips can help you further protect your identity from fraud and theft this tax season, which helps keep you on the right track with credit repair. To learn more, speak with the experts at Lexington Law. Contact us today to get started.
Bitcoin, Litecoin, Ethereum, Dash, Ripple, Monero. No, they’re not movie superheroes from another galaxy. They’re cryptocurrencies. And these days, it seems like they’re all anyone is talking about.
Cryptocurrency is defined as a digital currency that uses encryption techniques to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. If you have gotten into the world of Bitcoin, or you’re considering investing in cryptocurrency in general, you may be wondering how using it for payments might affect your credit score.
The short answer is that in its current format, it really won’t make much of an impact. To explain, let’s take a look at how credit and cryptocurrency transactions differ.
Understanding cryptocurrency transactions
Whenever a transaction is not conducted in person via cash — which is most of the time — some extension of credit is required. Even when we’re making payments using services like Venmo and PayPal, credit is extended until those payments go through a clearinghouse. These services cannot offer instant clearing due to the technological limitations of international money. In this way, paying through Venmo or PayPal isn’t all that different than paying with a credit cards like Visa or MasterCard.
Cryptocurrency payments, specifically Bitcoin, are comparable to a wire transfer or cash transaction, where payments are sent directly between parties, without going through another financial institution. Instead, payments are processed through a private network of computers, and each transaction is recorded in a blockchain, which is public. Blockchain is essentially a digital ledger where transactions made in cryptocurrency are recorded chronologically and publicly.
Credit card transactions require the buyer to authorize a payment to be taken from their account by the seller. With cryptocurrency payments, however, no personal identification information is required and the transactions are made via an alphanumeric address that changes with every transaction, and a private key.
So what does this mean for your credit?
Cryptocurrency essentially adds anonymity to payments, by removing the financial institution and the buyer’s personal information from the process. Furthermore, its value is not tied to a nationalized currency and it has no value as a commodity or asset.
Unlike credit cards, cryptocurrency transactions are sent to and from electronic wallets that are stored on your computer, smartphone, or in the cloud.
Aside from the anonymity factor, even if cryptocurrency were tied to your personal information, it is still a very new form of currency and not widely used or accepted. However, there are compelling reasons for merchants to accept Bitcoin and other cryptocurrencies in terms of the potential savings on credit card fees, which that can range anywhere from 0.5 percent to 5 percent, plus up to 30 cents per transaction. Cryptocurrency payments, on the other hand, are based on the amount of data sent and can therefore be sent and received for a much lower cost, or no cost at all.
And many of the companies in this space are working for its expansion. In fact, one of the more well-known cryptocurrencies, Ripple, recently announced that it is working with more than 100 banks to overhaul how it handles payments for its clients.
Ripple is based on a digital token called XRP, which has seen more growth in value that its counterparts, including Bitcoin. XRP’s claim to fame is that it can help banks move cash faster than other cryptocurrencies. Still, banks have been slow to take the bait.
The big picture
Even if cryptocurrency could make an impact on your credit, most Americans would be hard pressed to find ways to use it in their day-to-day lives, considering that relatively few companies and retailers accept it as a form of payment.
Credit-based exchanges are irrelevant for cryptocurrency because it largely removes the role of the financial institution, thereby removing the need for trust or creditworthiness, as well as the need for clearinghouses.
For the time being, the use of cryptocurrency will be more akin to cash transactions for those using it, and therefore the only impact it will have on credit scores is that using cryptocurrency does not help to build positive credit like paying a credit card on time every month would. Nevertheless, cryptocurrency will continue to combine the advantages of cash transactions with the convenience of digital payment technology.
Where cryptocurrency could impact a consumer’s credit would be in terms of smart investing and making enough money to pay off other credit cards or high-interest debts. To date, approximately 7 percent of Americans own some form of cryptocurrency. Those who have been fortunate to get in and out at the right time have reaped some big financial gains. It remains to be seen if there may be future implications for the lending and repayment of cryptocurrencies.
If you’d like to learn more about what impacts your credit score, or how you can build or improve your credit standing in the traditional credit economy, Lexington Law can help. Contact us today for a free credit report summary and credit repair consultation.
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