PayDay Loans & Their Affect On You

We all may have been tempted at one time or another to get a payday loan but can they really harm of the chances of obtaining a home loan later on? The weight payday loan works is that you would write a check for a certain amount and get a lesser amount back in cash for a set amount of time. The payday company holds onto the check until your payday and then they will cash the check. The bad thing is some of these types of loans have a nearly 400% interest rate.Can PayDay Loans and Medical Bills Mess Up Your Home Loan Chances?

I bet you also did know that in 15 states these types of loans are illegal. These types of loans can also affect your credit score. Imagine this: what happens if your postdated check you provided to the lender does not clear the bank and then you default on the loan?  You are credit could take a hit unless you have another source of funds available to cover the balance. Default thing on any type of loan could result in the debt being sold to a collection agency and from there, it goes on your credit history.

 If you can’t repay the payday loan prior to the due date you have to contact the lender immediately to request a payment plan or to make other arrangements. This will add more interest and fees to the balance making it even harder to pay off. It is a risk that a lot of people choose to take every single day but there are other alternatives.

If you really need funds right away it’s best not to take out any type of loan including putting those fees on a credit card. You can make cuts to different expenses in your budget, borrow money from friends or family, negotiate due dates for debt obligations or speak to your credit union or bank about a direct loan. These are much more reputable, carry far less interest rates and could help you build your credit for the future.

So many things can affect your credit history and if you want the best type of loan for the future whether your home buying, refinancing or getting a home equity line of credit, you want to have the best score in the best report possible.

What about Medical Bills?

Most any kind of debt can affect your credit history and your credit score to some degree. Medical bills are usually the most common type of collection account, representing nearly half of all reported collections. One in six credit reports contain a medical debt collection and about two in five Americans reported a lower credit rating due to unpaid medical bills.

Any type of collection agency can lower a person’s FICO  credit score as much as 100 points. If you have a higher credit score, a negative item will hurt more than if you had a lower score. The only good news is that the latest version of the credit score will ignore all collection items less than $100, which accounts for more than a third of all medical debt.

It can be very difficult when you have a large medical bill looming and it can be extremely overwhelming when those medical bills start pouring in. Your credit report could suffer for years if those bills are not paid on time. However, unlike a bank, most medical facilities do not have direct relationship with the three major credit bureaus, Experian, Trans Union and Equifax. This means that they may not regularly be reporting payment information unless it goes unpaid. Once it goes to collections, it’s already reported on your credit history.

One thing to note is there is a huge discrepancy in medical billing mistakes. Mistakes are found and about 20% of medical claims could be inaccurate. Clients may be charged or over billed for things they did not receive or an insurance coverage did not get paid. This is why each person must be in their own medical and financial advocate. Keep track of all the services and items you receive in the hospital and the doctors who treat you.  These two can be separate bills. It’s always best to pay the bill before the claim hits the credit report and then go after your insurance for reimbursement. It’s easier to keep something from going into collections than getting it taken off your credit report later on.

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