Check your credit report for unpaid medical bills

We expect a late car payment to bring down a credit score a few notches. We accept that a maxed-out credit card won't look good on a credit report. But what a shock to find medical bills sent to collection on your credit report, especially if it's the first time you've seen them.

An estimated 14 million Americans are dealing with medical bills they believe have been sent to collection agencies in error (The New York Times Dec. 17).

Darryle Watson of Willow Park, Texas, first learned of his outstanding bills when he and his wife attempted to refinance their mortgage. Despite a solid record of paying back credit on time, their low credit scores would cost them more than $9,000 in closing costs. Four unpaid medical bills, the largest only $400, had gone directly to collection.

Hospitals, labs, and physicians are more likely to sell unpaid medical bills to collection agencies for just pennies on the dollar, avoiding the rules and regulations of creditors who report unpaid debts.

"Collections are weighted more heavily than other unpaid or late bills," said Rod Griffin, director of public education at credit reporting agency Experian. "They will have a more serious effect on your credit score. This can stain a credit report for seven years, even after the bill is paid. Pending federal legislation would require paid medical debt to be removed from credit reports after 45 days.

Follow this prescription to monitor the effect of medical bills on your credit score:

• Order a free credit report. Medical bills are sometimes sent months after service; it can be difficult to decipher what portion is still unpaid. Play it safe and review your credit report at least annually. You can get a free report from each of the three major reporting agencies at annualcreditreport.com. Order from one agency in January, another in May, and the third in September for thorough monitoring.
• Dispute errors in writing. If you find an unpaid medical bill on your credit report, send documentation showing payment to all three major bureaus. The Federal Trade Commission's website offers guidelines for disputing errors.
• Negotiate payment. Even if it's the first time you've seen the bill, work with the collection agency. If it's a legitimate charge for which you are responsible, secure a promise in writing to remove the bill from your credit report if you pay.

In the same region, shepherds were staying out in the fields and keeping watch at night over their flock. Then an angel of the Lord stood before them, and the glory of the Lord shone around them, and they were terrified. But the angel said to them, "Don't be afraid, for look, I proclaim to you good news of great joy that will be for all the people: today a Savior, who is Messiah the Lord, was born for you in the city of David.

Luke 2:8-11 (HCSB)

Merry Christmas and Happy New Year from the staff of LifeWay Credit Union.

Get breaking news from the IRS

As tax laws change in this uncertain economic climate, you can get reliable federal tax news directly from the Internal Revenue Service (IRS) (MSNBC Dec. 8).

Congress is rushing to finalize a $900 billion tax deal that will affect all Americans, and you can arm yourself with information in a variety of ways (The New York Times Dec. 6):

• Twitter: The newest route is via the Twitter news feed, @IRSnews. Twitter's feed will provide tax tips, law changes, information about the Earned Income Tax Credit, "Where's My Refund," and how-to sections such as "how to e-file." You can even sign up for text messages from this site. If you're not familiar with Twitter, sign up and log in to Twitter.com. Then go to IRSnews and click on "follow."
• YouTube: If video is your favorite way to get information, subscribe to the IRS tax information channel on YouTube to get tax tips and help about filing for free. Click on "subscribe." You can set up a YouTube account at the link. Then go to IRSvideos and choose how you want to be notified of new material.
• iTunes: You can download free MP3 files with answers to typical tax questions from iTunes. If you aren't familiar with using an iTunes account, you can hear the same podcasts on the IRS website.
• E-mail: Sign up to receive tax tips from the IRS via e-mail--every business day during the tax-filing season and periodically throughout the year.

More consumers consider strategic default viable

More and more consumers are thinking the previously unthinkable: that a strategic default--when a borrower who can afford to pay walks away from an underwater mortgage--is a viable tactic.

In a survey of 2,034 homeowners and renters conducted in November, RealtyTrac and Trulia found that 48% of homeowners with a mortgage said a strategic default is an option they would consider if they owned more on their home than what it was worth (The Palm Beach Post Dec. 7). That was a seven percentage point increase from a study earlier this year.

That backs up results of a study by researchers from the European University Institute, Northwestern University, and the University of Chicago in July that reported the strategic default trend among homeowners with an equity shortfall of at least $100,000 was "large and rising." As of March 2010, the study concluded, strategic defaults accounted for 35.6% of all foreclosures, compared with 23.6% in 2009 (The New York Times Dec. 2).

"It's one thing when consumers default because they lost their jobs or suffered some other hardship and could not afford to make their payments," notes Jim Hanson, of the Credit Union National Association's center for personal finance. But The New York Times reported that affluent homeowners have been walking away from second homes and investment properties even though they can afford to make their payments.

"Some money advisers say this is just good business strategy. And there has also been speculation that more consumers are reacting to the robosigning underwriting that went on among many mortgage lenders," Hanson continued. "These individuals are saying, 'If banks don't have to play by the rules, why should I?'

"What's that old adage, two wrongs don't make a right?" Hanson said. "Keep in mind the effect a strategic default will have on your credit rating and your ability to get credit in the future." Such a move may make short-term economic sense but likely will keep you from getting a loan of any other kind for seven to 10 years.

In June, Fannie Mae announced several new penalties for strategic defaults, including a ban for at least seven years from qualifying for a Fannie Mae loan.

And walking away doesn't mean lenders have no recourse. In some states, lenders can sue borrowers who had the capacity to pay and did not complete a workout agreement with their lender. In nonrecourse states, lenders can sometimes go after borrowers who strategically default on a previously refinanced property if the mortgage was not for a first purchase.

Charitable giving: Be wise this holiday season

'Tis the season for giving to family and friends, and donating to charity. But before you donate, make sure you're giving to an organization that will put your money to good use and that you're donating wisely and safely (USAToday.com Nov. 30).

The Charities Review Council, St. Paul, Minn., recommends taking these steps before making a contribution:

• Verify the charity. Research the organization at the Charities Review Council website (smartgivers.org) to confirm that it's legitimate. Look at the online giving guide to find more about the organization, its mission and programs to know what your donation supports. Don't just give to an organization because it has a heart-warming story on TV.
• Beware of phony sites. Scammers often use Web addresses that are similar to official addresses of legit organizations to trick users.
• Review the organization's privacy policy. Check the website or ask the organization for its policy to learn how it will use and safeguard your information.
• Protect confidential information. Look for "https" in the browser to make sure you're on a secure site. Never click on links in unsolicited e-mail appeals asking for confidential information such as passwords, credit card numbers, or financial account numbers. Also beware of attachments--they may contain viruses that can harm your computer.
• Observe check donation safety. If you're donating through the mail and not online, make your check payable to the charity, not to the individual collecting the donation, recommends the Better Business Bureau. Never send cash.

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