Debt and credit scores

[mstateglfr]

This is an interesting synopsis(with interactive maps!) of credit scores in the US and theories as to why they are the way they are.

https://webcache.googleusercontent....siness/2023/02/17/bad-southern-credit-scores/

[/URL]

Some excerpts of the really long article...

The region’s poor credit means Southerners are paying more to borrow money, assuming they can qualify for loans at all. That sets them back in everything from car and home purchases to credit card rewards. Yes, even credit card rewards.
...rewards programs such as American Express Gold effectively siphon billions of dollars a year from lower-income counties, many of them in the South, and transfer the cash to well-heeled enclaves loaded with professionals who tend to take advantage of such programs.

But when we ran the numbers, the Blackest parts of the South had roughly the same credit scores as the least-Black areas. And their scores were far lower than places with similar Black populations outside the South. So while race may play a role, it’s probably not the defining factor.

Next, we wondered about poverty. After all, the South has the highest poverty, lowest income and lowest education rates of any region in the country...Within every income bracket, the typical Southerner has a lower credit score than someone who lives in the Northeast, Midwest or West.

Of the 100 counties with the highest share of adults struggling to pay their medical debt, 92 are in the South, and the other eight are in neighboring Oklahoma and Missouri...

So where did it all come from? And why is it concentrated in the South?
One answer is that the South is simply less healthy than any other region...And poor health tends to go hand in hand with people having overdue medical debt and poor credit scores. But health alone does not solve the puzzle: Several Northeastern states struggle with chronic health conditions and have good credit.
...medical debt “became more concentrated in lower-income communities in states that did not expand Medicaid” after key provisions of the Affordable Care Act took effect in 2014.
...Of the 11 states that have yet to expand Medicaid, eight sit in the South...Southerners were more likely to be behind on medical debt even before the ACA, but the reluctance among the region’s mostly Republican governors to participate in the Medicaid expansion has increased the gaps between the South and the rest of the country.

In states that immediately expanded Medicaid, medical debt was slashed nearly in half between 2013 and 2020. In states that didn’t expand Medicaid, medical debt fell just 10 percent, the JAMA team found. And in low-income communities in those states, debt levels actually rose.

Last year, the federal Consumer Financial Protection Bureau (CFPB) issued a scathing report finding that medical debt is “an unexpected, unwanted, and financially devastating expense” that is “far less reliable and predictive of people’s ability to pay their bills” than other kinds of borrowing.

Within weeks, the big three credit-reporting bureaus (Experian, TransUnion and Equifax) announced steps to further reduce medical debt’s influence on credit scores...

Starting this year, medical bills under $500 will no longer affect your credit report — even after they’re sent to collections. That should wipe an estimated two-thirds of medical-debt collections from credit reports.
However, that move could push the South even further behind. According to the CFPB, “people living in the north and east are more likely to benefit” from the change, as they have debts that are more likely to fall below the $500 threshold.

This is a pretty significant issue as it impacts everyone since even the fat-shamers among us use medical care in some manner.
Its great to see that medical debt under $500 will no longer negatively impact credit score since the correlation between the ability to pay regular bills and pay off some medical debt is a weak one.
Improved credit scores means lower interest rates on borrowed money, which means more household income can be either saved or spent on other household needs.
Perhaps the threshold should increase to $1000 before medical debt can be reported to credit agencies.

 

[jethreauxdawg]

Improved credit scores means lower interest rates on borrowed money, which means more household income can be either saved or spent on other household needs.

I like your optimism, but extra money will be spent on wants not needs, because rich and poor view needs differently. Po folk got po ways.
I didn’t read all of what you posted, but I think I agree with what I did read. Poverty, obesity, bad credit, etc. are often found in the same areas because they all come from bad decisions, most of the time. It’s sad. I’ve tried to help two different coworkers make smarter financial decisions. Was a heartbreaking waste of time. We were looking at the same info, but clearly seeing different things.

Medical debt is a load of crap. I don’t know what the solution is, but no where else do you agree to pay for something before knowing the cost and the seller is allowed to charge whatever they want after you agree to pay. Pharma and hospitals need to make a profit, but we’re so far past profit into uncontrolled greed. There are smart decisions you can do to prevent some of it, but some is unavoidable. Another coworker just had an outpatient surgery. She went to a surgeon that was not covered by our insurance because she had used this surgeon years ago and liked him. Insurance plans change. I told her that would probably be expensive, but she didn’t care. “He’s a good Dr”. Well, she gets hit with a $100,000 bill that insurance isn’t touching. She’s upset with the insurance company but she made the decision to go out of network. I hate that for her. She probably makes $45-$50k/year. That is financially crippling. She made that decision, but it shouldn’t have cost that much.

And I probably just one-upped you for word count. Take that.

 

[Cantdoitsal]

Been in this game for over 3 decades and seen tons of changes. Think of it as the same as the Stock Market where risk and return are weighed. Higher Scores have lower default rates therefore risk is reduced but the higher risk loans with the lower scores have higher default rates therefore the higher rates have to cover the losses from that block / portfolio of loans. A lot of problems happen when a guy's got his self employed bidness stuff mixed in with his personal credit report. Having a lot of open debts with the High Credit Amount or Original Amount Borrowed being close to what's presently owed is the killer. Bad Debt, collections and judgements are just as bad as well. I've saved people a ton of money in my 30 years of being a mortgage loan officer by working their way to a higher score without them having to pay anyone to do it for them.
ETA: I've learned quite a few tricks on getting bad debts to settle for a fraction. LOL

 

[PooPopsBaldHead]

Been in this game for over 3 decades and seen tons of changes. Think of it as the same as the Stock Market where risk and return are weighed. Higher Scores have lower default rates therefore risk is reduced but the higher risk loans with the lower scores have higher default rates therefore the higher rates have to cover the losses from that block / portfolio of loans. A lot of problems happen when a guy's got his self employed bidness stuff mixed in with his personal credit report. Having a lot of open debts with the High Credit Amount or Original Amount Borrowed being close to what's presently owed is the killer. Bad Debt, collections and judgements are just as bad as well. I've saved people a ton of money in my 30 years of being a mortgage loan officer by working their way to a higher score without them having to pay anyone to do it for them.

Since you are in that world in that part of the world... I remember a mortgage guy named Rodney Anderson always on sports radio in DFW about 10-15 years ago talking about getting a law passed in Congress that medical debt can only stay on your credit report for 30 days after its resolved (paid in full, written off, whatever..)

Did that ever get passed? I remember thinking that was one hell of a good bill because not paying a medical bill is not really a sign of a deadbeat in my opinion... Just someone without good health insurance or got 17ed by the system in most cases.

 

[Cantdoitsal]

Since you are in that world in that part of the world... I remember a mortgage guy named Rodney Anderson always on sports radio in DFW about 10-15 years ago talking about getting a law passed in Congress that medical debt can only stay on your credit report for 30 days after its resolved (paid in full, written off, whatever..)

Did that ever get passed? I remember thinking that was one hell of a good bill because not paying a medical bill is not really a sign of a deadbeat in my opinion... Just someone without good health insurance or got 17ed by the system in most cases.

I can tell you from my experience that medical collections have the least impact on credit scores and are the least relevant regarding qualification purposes than other bad debts with Fannie, Freddie, VA & FHA.

 

[paindonthurt]

I like your optimism, but extra money will be spent on wants not needs, because rich and poor view needs differently. Po folk got po ways.

This. It amazes me at the people who complain about income inequality and rich people and wanting their student loans paid for but drive newer cars, buy houses they can’t afford, have new phones, new clothes, new clothes and new sunglasses. Etc.

Building credit is really easy. Get a credit card with a $50 limit.
Use it for gas only.
Pay it off the day you fill up your tank.
Increase the limit every chance you get but don’t ever use the limit.

I blame school systems. We are focused on getting everyone to college but we can’t teach people basic home economics.

 

[horshack.sixpack]

This is an interesting synopsis(with interactive maps!) of credit scores in the US and theories as to why they are the way they are.

https://webcache.googleusercontent....siness/2023/02/17/bad-southern-credit-scores/

[/URL]

Some excerpts of the really long article...









This is a pretty significant issue as it impacts everyone since even the fat-shamers among us use medical care in some manner.
Its great to see that medical debt under $500 will no longer negatively impact credit score since the correlation between the ability to pay regular bills and pay off some medical debt is a weak one.
Improved credit scores means lower interest rates on borrowed money, which means more household income can be either saved or spent on other household needs.
Perhaps the threshold should increase to $1000 before medical debt can be reported to credit agencies.

Seems oddly inverted or I'm looking at it wrong. I'm more likely to be able to pay off <$500, but give me a huge medical bill and I may be ignoring it because it is impossible but paying all my normal debt. What am I missing?

 

[mstateglfr]

Seems oddly inverted or I'm looking at it wrong. I'm more likely to be able to pay off <$500, but give me a huge medical bill and I may be ignoring it because it is impossible but paying all my normal debt. What am I missing?

You aren't missing anything, I just think a $500 limit is too low.
It's easy to exceed $500 at this point and I think $1000 would capture more instances where someone is a reliable repayer of debt in normal circumstances, and therefore shouldn't be negatively impacted just because there is old medical debt.


I'm not even in the medical insurance repayment industry though, so my view on this is likely totally unreasonable and I am missing key info that would easily sjow why my idea is bad.

 

[jethreauxdawg]

I blame school systems. We are focused on getting everyone to college but we can’t teach people basic home economics.

I think you’re close, but basic home economics should be taught in the home. Maybe the lack of a stable home leads to other problems. Just a hypothesis.

 

[paindonthurt]

I think you’re close, but basic home economics should be taught in the home. Maybe the lack of a stable home leads to other problems. Just a hypothesis.

There are some things that should be taught in school. Some at home.

Time value of money, interest costs, etc should be taught at school. I know “smart” adults who don’t get it.

 

[The Cooterpoot]

Since you are in that world in that part of the world... I remember a mortgage guy named Rodney Anderson always on sports radio in DFW about 10-15 years ago talking about getting a law passed in Congress that medical debt can only stay on your credit report for 30 days after its resolved (paid in full, written off, whatever..)

Did that ever get passed? I remember thinking that was one hell of a good bill because not paying a medical bill is not really a sign of a deadbeat in my opinion... Just someone without good health insurance or got 17ed by the system in most cases.

Medical isn't on credit reports anymore. Feds passed that I believe.

 

[WilCoDawg]

I think you’re close, but basic home economics should be taught in the home. Maybe the lack of a stable home leads to other problems. Just a hypothesis.

It can’t be taught at home if there’s no one there to teach it (whether that be no one actually there or no one who knows it themselves).

 

[GloryDawg]

Are you from the South or did you just come down to take advantage of our cheap education?

 

[paindonthurt]

Are you from the South or did you just come down to take advantage of our cheap education?

He’s simply trying to say we are racist and rich companies are taking advantage of poor minorities.

He just didn’t want to come out and say that.

 

[3407Dewey]

I like your optimism, but extra money will be spent on wants not needs, because rich and poor view needs differently. Po folk got po ways.
I didn’t read all of what you posted, but I think I agree with what I did read. Poverty, obesity, bad credit, etc. are often found in the same areas because they all come from bad decisions, most of the time. It’s sad. I’ve tried to help two different coworkers make smarter financial decisions. Was a heartbreaking waste of time. We were looking at the same info, but clearly seeing different things.

Medical debt is a load of crap. I don’t know what the solution is, but no where else do you agree to pay for something before knowing the cost and the seller is allowed to charge whatever they want after you agree to pay. Pharma and hospitals need to make a profit, but we’re so far past profit into uncontrolled greed. There are smart decisions you can do to prevent some of it, but some is unavoidable. Another coworker just had an outpatient surgery. She went to a surgeon that was not covered by our insurance because she had used this surgeon years ago and liked him. Insurance plans change. I told her that would probably be expensive, but she didn’t care. “He’s a good Dr”. Well, she gets hit with a $100,000 bill that insurance isn’t touching. She’s upset with the insurance company but she made the decision to go out of network. I hate that for her. She probably makes $45-$50k/year. That is financially crippling. She made that decision, but it shouldn’t have cost that much.

And I probably just one-upped you for word count. Take that.

Maybe not the perfect place for it, but I’d like to put in a plug for RIP Medical Debt (https://ripmedicaldebt.org/) if anyone is looking for a charity that can make a life changing difference for someone.

 

[Cantdoitsal]

Medical isn't on credit reports anymore. Feds passed that I believe.

I'm between jobs now so I look forward to verifying that once back to work, Thanks for the tip.

 

[mstateglfr]

Are you from the South or did you just come down to take advantage of our cheap education?

Is this directed at me? I can't tell with this new board format.

If it's directed at me, I am not from the South. I did not come to the South specifically for the cost of college, but qualifying for in-state tuition was a really nice benefit.

Why?

 

[mstateglfr]

He’s simply trying to say we are racist and rich companies are taking advantage of poor minorities.

He just didn’t want to come out and say that.

No, I am not trying to say that. Furthermore, the article clearly states the findings don't point to race(minorities).

Did you even read what you are commenting on?

 

[paindonthurt]

No, I am not trying to say that. Furthermore, the article clearly states the findings don't point to race(minorities).

Did you even read what you are commenting on?

Nah. Im just regurgitating your normal stances.

30 years ago the left complained bc “poor” people couldn’t get loans and credit cards.

Now they claim companies take advantage of them bc they can get loans/credit but the interest is taking advantage of them.

Should I loan my money to someone and not charge interest? Should anyone do that?

 

[mstateglfr]

Nah. Im just regurgitating your normal stances.

30 years ago the left complained bc “poor” people couldn’t get loans and credit cards.

Now they claim companies take advantage of them bc they can get loans/credit but the interest is taking advantage of them.

Should I loan my money to someone and not charge interest? Should anyone do that?

OK, so you are participating in yet another conversation where you don't even know the topic.
You should add that disclaimer to your first post in threads where you are just popping off with stereotypes and guesses. That way everyone knows and can ignore the bitter and often inaccurate ramblings.

 

[paindonthurt]

OK, so you are participating in yet another conversation where you don't even know the topic.
You should add that disclaimer to your first post in threads where you are just popping off with stereotypes and guesses. That way everyone knows and can ignore the bitter and often inaccurate ramblings.

Name the inaccuracies. I’ll wait.

Speaking of bitter and stereotypes, you should do the same.

 

[Yeti]

What I would like to know is the correlation between credit scores and single parent homes of any race. Bet the problem is more about family or lack there of than obesity. I will tell you I’ve had plenty of employees that couldn’t mange money and were broke when healthy. Common theme grew up single family parent and were single family. Blast away its true

 

[mstateglfr]

Name the inaccuracies. I’ll wait.

This to start with.

He’s simply trying to say we are racist and rich companies are taking advantage of poor minorities

I didn't start this thread with that intent, I haven't suggested that within the thread, and I specifically quoted the section of article that says this is an issue rear less of race.
Further, I don't mention rich companies or hint at them being bad. Other people did though.

Ll

 

[paindonthurt]

This to start with.

I didn't start this thread with that intent, I haven't suggested that within the thread, and I specifically quoted the section of article that says this is an issue rear less of race.
Further, I don't mention rich companies or hint at them being bad. Other people did though.

Ll

But you’ve mentioned all of those things plenty of times before.

What’s dwag61 up to these days besides cruising the left lane?

 

[Boosh]

A lot of my relatives and myself do not care what our credit score is. We've paid off everything as fast as we could. I haven't owed money in 20 years. Besides a few credit cards, which we pay off every month we have no credit. A banking friend said my credit is terrible with no recent history. I wonder how many people figured into those numbers with bad credit but are really doing quite well.

 

[mstateglfr]

But you’ve mentioned all of those things plenty of times before.

What’s dwag61 up to these days besides cruising the left lane?

Follow me here, I willl type slowly so you can keep up.
We are talking about the article I linked and not talking about some version of what you interpreted a post of mine from years ago to mean.
Here is something wild too- continually learning and being open to new information can lead to a change in view. Wild, right?

Try to post about the info in the article since that's what is being discussed.

With all that said, I do not believe I have ever posted my views on credit score as it relates to race. I don't think I have done that because I really haven't bothered to learn about it.
So you claiming I have posted about it is...questionable.


I don't know what dawg61 is up to. Is he not on this board?

 

[mstateglfr]

A lot of my relatives and myself do not care what our credit score is. We've paid off everything as fast as we could. I haven't owed money in 20 years. Besides a few credit cards, which we pay off every month we have no credit. A banking friend said my credit is terrible with no recent history. I wonder how many people figured into those numbers with bad credit but are really doing quite well.

I would be surprised if people who are 'really doing quite well' are unable to pay their medical bills.
So it would seem there aren't many.

 

[jethreauxdawg]

A lot of my relatives and myself do not care what our credit score is. We've paid off everything as fast as we could. I haven't owed money in 20 years. Besides a few credit cards, which we pay off every month we have no credit. A banking friend said my credit is terrible with no recent history. I wonder how many people figured into those numbers with bad credit but are really doing quite well.

I would wager there aren’t many like you and yours. Being out of debt is very un-American. We’re trying to get there.

 

[Irondawg]

So let’s say medical is the answer for the regional difference then it becomes what is driving that?

First place is look is birth rate. The South has a higher birth rate to teens compared to the rest of the US and while I couldn’t find it quickly, I’d guess the same holds true for those at the poverty level.

next guess would be obesity related issues (heart, diabetes, etc).

 

[Fritz!]

 

[paindonthurt]

Follow me here, I willl type slowly so you can keep up.
We are talking about the article I linked and not talking about some version of what you interpreted a post of mine from years ago to mean.
Here is something wild too- continually learning and being open to new information can lead to a change in view. Wild, right?

Try to post about the info in the article since that's what is being discussed.

With all that said, I do not believe I have ever posted my views on credit score as it relates to race. I don't think I have done that because I really haven't bothered to learn about it.
So you claiming I have posted about it is...questionable.


I don't know what dawg61 is up to. Is he not on this board?

 

[Mobile Bay]

Go back to Reddit with this liberal claptrap. Nobody want to read your bullschmidt.

 

[mstateglfr]

Go back to Reddit with this liberal claptrap. Nobody want to read your bullschmidt.

Its an analysis of the reasons behind current household debt. That isnt 'liberal claptrap bullschmidt'.
Sorry for offending your sensitive ears- its SPS, I should have known better than to post something that impacts us all, and makes people face reality.

 

[The Peeper]

I would wager there aren’t many like you and yours. Being out of debt is very un-American. We’re trying to get there.

Wife and I ended all debt about a dozen or so years ago and its awesome to be un-American in that context. Only thing we owe is our mortgage and we have the money to pay it off today but people keep telling me to leave that in investments and let that $$ continue (hopefully) to earn more % wise than the mortgage is costing me (fixed 3%) . Sure is tempting to tell the bank to "go pound sand" as Joe Moorhead would say and be done with it though

 

[johnson86-1]

Seems oddly inverted or I'm looking at it wrong. I'm more likely to be able to pay off <$500, but give me a huge medical bill and I may be ignoring it because it is impossible but paying all my normal debt. What am I missing?

The whole thing seems divorced from the purpose of credit scores, which is to be predictive of the likelihood of default in the future. If the medical facility is still attempting to collect on the debt, it seems like any amount should be a significant hit to your credit score. Not paying current debt is a good indicator that you're not going to pay new debt. If it's been written off and is just hanging on there for however many years, then if it's $500 or less, that seems to indicate somebody that's just not paying that could have and should have, and should be a hit. If it's a large bill, then it seems more likely somebody that otherwise was a good credit risk had an unexpected expense they can't handle, and it wouldn't be particularly predictive except to the extent the health event is going to be an ongoing problem.

Of course all that ignores the problem with medical billing in the first place and how often providers just throw codes together and submit a bill knowing it's hard to dispute. That would be a good reason to ignore bills under $500, as there's probably a decent chance those are people not paying out of principle. I've dealt with those before and spent way more time fighting over them than it was worth.

 

[BingleCocktail]

There are some things that should be taught in school. Some at home.

Time value of money, interest costs, etc should be taught at school. I know “smart” adults who don’t get it.

DONUT START GETTING FREAKY WITH yOUR ECONOMICS**

 

[Seinfeld]

It’s an interesting view on things, and I have little doubt that medical debt is a factor for some. However, it also does seem like the author jumped to a sweeping conclusion that medical debt is the major smoking gun that we’ve all been overlooking for years when the data indicates it’s just one of many factors.

Clicking on the medical debt link he provided, it shows that roughly 10-20% of southerners had medical debt in collections during 2019. A big number, no doubt, but if only 10-20% of these low credit scores had this level of medical debt, then what is impacting the scores for the other 80-90%?

 

[Cantdoitsal]

Wife and I ended all debt about a dozen or so years ago and its awesome to be un-American in that context. Only thing we owe is our mortgage and we have the money to pay it off today but people keep telling me to leave that in investments and let that $$ continue (hopefully) to earn more % wise than the mortgage is costing me (fixed 3%) . Sure is tempting to tell the bank to "go pound sand" as Joe Moorhead would say and be done with it though

Good position to be in for sure. You'd be wise to hang on to your nest egg and continue those monthly mortgage payments is what most all financial planners would tell you however everybody's got a unique circumstance. Made lots of home loans for millionaires who almost always put 'em on a 30 year.

 

[Mobile Bay]

Wife and I ended all debt about a dozen or so years ago and its awesome to be un-American in that context. Only thing we owe is our mortgage and we have the money to pay it off today but people keep telling me to leave that in investments and let that $$ continue (hopefully) to earn more % wise than the mortgage is costing me (fixed 3%) . Sure is tempting to tell the bank to "go pound sand" as Joe Moorhead would say and be done with it though

I am debt free including my house. It's so nice. I have zero money worries because of this. No way in hell I would borrow money at 3% to make 8%. It's not worth it in my book. If I were you I would pay off the house today.

 

[paindonthurt]

I would be surprised if people who are 'really doing quite well' are unable to pay their medical bills.
So it would seem there aren't many.

You can have bad credit and still pay your medical bills.

But I guess i

It’s an interesting view on things, and I have little doubt that medical debt is a factor for some. However, it also does seem like the author jumped to a sweeping conclusion that medical debt is the major smoking gun that we’ve all been overlooking for years when the data indicates it’s just one of many factors.

Clicking on the medical debt link he provided, it shows that roughly 10-20% of southerners had medical debt in collections during 2019. A big number, no doubt, but if only 10-20% of these low credit scores had this level of medical debt, then what is impacting the scores for the other 80-90%?

@mstateglfr