by: Huffington Post
Are you carrying debt because of doctor’s bills or medicine costs? If so, you’re not alone.
Many low-and middle-income Americans are paying for medical bills with their credit cards, according to a recent survey conducted by a research and policy center called Demos. The survey sampled 997 adults in February and March who had carried credit card for at least three months to find an average debt of $7,145 with $1,678 attributable to medical costs. Almost 50 percent of American households bought out of pocket medical expenses on credit, the survey found. (h/t Bucks)
The survey results reflect the tremendous burden that rising medical expenses are inflicting on American families. Healthcare costs, which rose almost 6 percent in the past year, are forcing many Americans to go without needed medical care. More people are also living without any health insurance. Over 25 percent of Americans ages 16 to 64 went without health coverage for at least some part of last year.
Medical expenses are even taking their toll on families with comprehensive insurance plans. Insurance premiums are increasing, but offering less coverage. An ordinary family under a job-based health plan will spend more $20,000in healthcare costs this year. That’s about 40 percent of the average household’s income.
All this is exacerbated by an economy, in which wages haven’t kept pace with rising prices. While the recession changed peoples’ attitudes toward debt, making them more careful about spending and less likely to borrow money, many Americans don’t have enough in their checking or savings accounts to pay for essentials.
Even though the average credit card debt reported this year decreased from its $9,887 level in the 2008, the percent of American families taking on credit card debt for spending related to necessities remains about the same as during the financial crisis. About two in five households used their credit cards for basic living expenses such as groceries and rent, according to the Demos survey.
Lenders Still Want Great Credit Scores for Mortgages
These days, many consumers are likely finding it easier to obtain many types of credit, as lenders have significantly slackened requirements for most loans and credit cards. However, the qualifications to obtain a good mortgage rate remain stubbornly high across the country.
Even as credit conditions improve significantly nationwide and many financial institutions are once again broadening lending efforts, many are still being extremely tight with financing for mortgages, according to a report from the New York Times. In fact, even as subprime lending for credit cards opens up considerably, many consumers with low credit scores will find themselves extremely unlikely to even be considered for a home loan approval.
A recent study by the Federal Reserve Board indicated that consumers with a credit score of 620 willing to make a 10 percent down payment are now less likely to be approved for a mortgage than they were in 2006, the report said. Further, some were even reticent to extend financing to borrowers making a similar down payment when their credit rating was 720.
This is because most lenders are still extremely gun-shy about lending large sums of money to anyone but the most qualified borrowers, the report said. In many cases, those who are approved for a home loan will also pay far higher rates on the mortgage than those who have top-notch credit scores, even as the average interest rate has hovered below 4 percent for some time now.
“If you don’t have good credit, you’re not going to get that crazy low rate,” Deborah MacKenzie, the director of counseling at the Stamford, Conn., nonprofit the Housing Development Fund, told the newspaper.
Typically, the only way consumers can improve their credit ratings so that they can qualify for a home loan is by being smarter about managing their various lines of credit, including keeping credit card balances low and making all payments on time and in full. These are the two biggest factors comprised in a credit score. However, consumers can also be hurt by applying for too many new lines of credit within a short period of time, so avoiding this ahead of shopping around for a mortgage can be crucial to maintaining good credit health as well.
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The rate at which consumers fell behind on their home loans declined considerably in the first quarter of the year, and now stand at levels not seen in years.
The delinquency rate on home loans for properties of between one and four units fell to 7.4 percent of all outstanding loans in the first quarter of the year, down from 7.58 percent in the fourth quarter of 2011, and 8.32 percent in the same period last year, according to the latest statistics from the Mortgage Bankers Association. While declines are traditionally viewed in the first quarter of every year, the MBA’s data shows that the drops this year were more significant than traditional adjustments would have predicted, showing that the declines are real, rather than the result of seasonal norms.
“Newer delinquencies, loans one payment past due as of March 31, are down to the lowest level since the middle of 2007, indicating fewer new problems we will need to deal with in the future,” said Michael Fratantoni, the MBA’s vice president of research and economics. “The percentage of loans three payments or more past due, the loans that represent the backlog of problems that still need to be handled, is down to the lowest level since the end of 2008. Foreclosure starts are at their lowest level since the end of 2007.”
Delinquency fell for all types of mortgages except VA loans on a quarter-over-quarter basis, the report said. Prime fixed rate loan delinquency now stands at 4.07 percent, and late payments for prime adjustable-rate mortgages dropped to 9.05 percent, down from 9.22 percent in the fourth quarter. Further, loans backed by the Federal Housing Administration also saw drops in delinquency, falling to 12 percent from 12.36 percent a quarter earlier. The rate of homes that were in foreclosure increased on a quarterly basis, however, rising to 4.39 percent.
As the economy continues to generally improve, consumers are finding themselves in a better position to pay off all their outstanding debts on time. Factors such as declining unemployment rates and rising salaries have contributed to Americans feeling better about their personal financial situations. Experts believe that these trends will likely continue for some time, meaning that the housing industry may continue to improve, encouraging more qualified buyers to enter the market.
In the last year or more, many consumers have made conscientious efforts to reduce their reliance on credit cards and increase the timeliness of their payments, leading instances of delinquency and default to slip to at or near all-time historic lows.
But lenders will likely see their net charge-off rates slip for one more quarter before expanding again by the end of the year, finishing 2012 with higher rates of defaulted accounts than they began with, according to the latest report from analysis firm Fitch Ratings, entitled “Credit Cards: Asset Quality Review.” At the end of the first quarter, the net charge-off rate observed by the nation’s seven largest credit card lenders stood at 4.02 percent, down from 4.2 percent at the end of 2011, and 6.39 percent in the first quarter of that year.
Further, charge-offs are well below the five-year average of 6.51 percent observed between 2007 and 2011, the report said. And because of trends in 30-day credit card delinquencies, which itself is well below the five-year average, it’s likely that the current charge-off rate will decline once again in the second quarter of this year.
However, the trend may soon reverse because consumers are once again feeling better about their finances in general, the report said. Portfolio contraction among major lenders more or less held steady in the first quarter of the year, and smaller card issuers actually saw more consumers opening new accounts.
As a consequence of this trend, which may also be the result of expanding credit standards that are allowing subprime borrowers to once again access lines of credit they were unable to tap just a year ago, it’s likely that defaults will begin expanding once again, trending back toward historical averages from the current levels. Many had long projected that there must be a logical point at which charge-offs bottomed out, and we could soon see that point.
Millions of accounts were written off by lenders as uncollectable during and immediately following the recent recession as card issuers tried to shield themselves from significant loan losses as a result of consumers who could no longer afford to pay their bills. However, the improving economy has emboldened most major lenders to once again extend credit to those who previously defaulted on their accounts.
Children are not supposed to have a credit report in their name, but new studies have found that the number of those who do is growing considerably, which can pose major problems for affected kids.
People under the age of 18 who have a credit report in their name are almost certainly the victims of identity theft, and this is a large and growing problem nationwide, according to a report from the Columbus Dispatch. Some studies have found that large amounts of kids have been a0ffected by identity theft, in which the crooks open large amounts of credit in their name and steal tens of thousands of dollars or more, and leave their young victims to carry the blame.
Often, this type of crime is carried out when a thief gains access to a kid’s Social Security number, the report said. Sometimes this can happen as a result of data breaches at hospitals or schools, and other times, their relatives may steal their identity. These youngsters are usually targeted because they will have no credit history and, since parents wouldn’t normally even think to make sure their son or daughter has a credit report in their name, the crime is unlikely to be discovered for a long time.
“These kids’ Social Security numbers are particularly valuable to thieves because they can go years without detection,” Bo Holland, chief executive of AllClearID, told the newspaper. “Because of privacy restrictions, the credit bureaus can’t share with parents what they find in their (child’s) files. So they don’t know who is using the Social number or what accounts were opened.”
The most common way a child who has been victimized by this type of crime discovers the problem is when they turn 18—sometimes even older—and apply for a line of credit, the report said. To their dismay, they may learn that they’re saddled with significant debts, such as those for auto loans, credit cards and sometimes even mortgages, that have gone long periods of time without payment.
One thing parents who are concerned about this type of crime can do is contact the credit reporting agencies and ask them to put a freeze on their kids’ credit until they turn 18 and are capable of obtaining some types of loans on their own.