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35% of American Adults Have Debt 'In Collections'

Posted by Soulskill on from the all-the-cool-kids-are-doing-it dept.

New submitter meeotch writes: According to a new study by the Urban Institute, 35% of U.S. adults with a credit history (91% of the adult population of the U.S.) have debt "in collections" — a status generally not acquired until payments are at least 180 days past due. Debt problems seem to be worse in the South, with states hovering in the 40%+ range, while the Northeast has it better, at less than 30%. The study's authors claim their findings actually underrepresent low-income consumers, because "adults without a credit file are more likely to be financially disadvantaged."

Oddly, only 5% of adults have debt 30-180 days past due. This latter fact is partially accounted for by the fact that a broader range of debt can enter "in collections" status than "past due" status (e.g. parking tickets)... But also perhaps demonstrates that as one falls far enough along the debt spiral, escape becomes impossible. Particularly in the case of high-interest debt such as credit cards — the issuers of which cluster in states such as South Dakota, following a 1978 Supreme Court ruling that found that states' usury laws did not apply to banks headquartered in other states.

Even taking into account the folks who lost a parking ticket under their passenger seat, 35% is a pretty shocking number. Anyone have other theories why this number is so much higher than the 5% of people who are just "late"? How about some napkin math on the debt spiral?

46 of 570 comments (clear)

  1. The American Dream by Anonymous Coward · · Score: 3, Insightful

    is a pyramid scheme.

    1. Re:The American Dream by Osgeld · · Score: 5, Insightful

      its cute that you people can take a large and complex problem with many angles and reasons and boil it down to a simple catch phrase you heard on talk radio

    2. Re:The American Dream by Noah+Haders · · Score: 3, Insightful

      Its only eroded as socialism has advanced.

      socialism stepped in as the american dream eroded.

    3. Re:The American Dream by Anonymous Coward · · Score: 4, Insightful

      What you're ignoring is that in many parts of the US you can't live on minimum wage. The minimum wage around here nets you $1492 a month before tax and the average apartment costs nearly $1300. So, it's a matter of food or shelter, unless you've got somebody else picking up the tab on some of the rent.

      What's more, thanks to Federal Reserve policies, the little bit of savings that people manage to save gets eroded constantly as the Fed purposefully keeps the interest rates below the rate of inflation. As a result, anybody who doesn't have enough money to keep their savings in the stockmarket falls further and further behind.

    4. Re:The American Dream by digsbo · · Score: 4, Insightful

      So share the apartment. You can certainly live on minimum wage. You just can't have your own place. You might not even have your own bedroom. But be clear: you're implicitly applying a standard of living that simply doesn't exist in most of the world, and has never existed in most of the world, in most of history.

    5. Re:The American Dream by ShanghaiBill · · Score: 5, Interesting

      its cute that you people can take a large and complex problem with many angles and reasons and boil it down to a simple catch phrase you heard on talk radio

      This is especially silly considering that actual socialist countries don't have consumer credit at all. Do you think Cuba has people in collections? I lived in the People's Republic of China for several years (which is nominally socialist) and everything was based on cash. I paid cash for my cell phone (I was not even asked for my name or ID) and paid cash for the minutes. I would buy token cards for my electric meter, and feed them in to pre-pay for home electricity. The electricity company neither asked, nor cared, who was living in the apartment, and certainly had no need to do a "credit check". I had electricity five minutes after I moved in.

      In America, I have been in collections several times. Usually when they send the bills to the wrong address, or I move and forget to shut off the trash service, but the bills still go to the old address. It was always for something that I would have preferred to pre-pay, if that option had been available.

    6. Re:The American Dream by Opportunist · · Score: 5, Insightful

      Socialism? What socialism? In the US?

      Do you know what the word means? Or just the "It's bad to take a cent from the rich" propaganda?

      --
      We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
    7. Re:The American Dream by Opportunist · · Score: 4, Insightful

      We must become more like India to stay competitive! We must be first! Even in the race to the bottom!

      Hell, even in communist countries, they didn't have much but at the very least they had an apartment for themselves!

      --
      We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
    8. Re:The American Dream by Opportunist · · Score: 4, Insightful

      People just finally saw through the lie that the "American Dream" is: Yes, anyone can win. But not everyone. It's like the lottery.

      Plus, the "rules" of the game have changed. It used to be "have an idea, work for it, follow it and in the end, with some luck and hard work, you will be successful!". That was the dream. And that even worked. Yes, for some. Not all. Of course, for every single one that succeeded, there were hundreds that failed. But that one success story kept the dream alive.

      Today, it's over. The internet managed to keep it rolling for a bit longer than it would have originally and you have a few more of those "rags-to-riches" stories... only that the successful ones were not in rags by any stretch of the word to begin with. But outside those few stories, there is no chance for anyone to succeed. Corporations have the field divided, and there is NO chance for you to become more than a bit player. Ever. The absolute best you may possibly hope for is that you found an area where it's cheaper to simply buy you away than to entangle you in enough red tape that you willingly hand over your stuff.

      The new american dream is simply playing the lottery. Same chance of success with less effort. And it's the same game: Anyone can win. Just not everyone.

      --
      We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
    9. Re:The American Dream by Baki · · Score: 4, Insightful

      You put it as if there is only a choice between all or nothing (communist versus totally unregulated capitalist).
      In addition, one would not be allowed to try to improve ones own country/system, but one should leave if you don't like it?

      I think that is rather absurd.

    10. Re:The American Dream by Sockatume · · Score: 4, Insightful

      So it's come down to a version of America where people pack themselves into slum housing to get by while the well-to-do reserve $100,000 suborbital joyrides? So much for a rising tide raising all boats.

      The sci-fi authors were more right than anyone suspected.

      --
      No kidding!!! What do you say at this point?
    11. Re:The American Dream by v1 · · Score: 3, Informative

      The minimum wage around here nets you $1492 a month before tax and the average apartment costs nearly $1300

      If you're making minimum wage and trying to live in your own apartment without roommates or gf/bf, you are an idiot. I can't even think of anyone I've known recently that's been naive enough to try to make that work. Two roommates and scratching for a job above minimum wage is the most common formula I see people use to build up momentum for independence. At that point even at minimum wage everyone can start accumulating some savings fairly quickly.

      That usually evolves into just gf/bf small apartments for awhile, then on to a larger apartment, or renting/buying a starter house, as both find better jobs.

      Also your 1300/mo apartment cost does vary from place to place, it's quite a bit cheaper here, $650 easily gets you 2 bedroom if you're not too picky, and minimum wage isn't lower here. If you're just getting started and on minimum wage, where the cost of living is high, roommates or moving to lower cost-of-living is essentail. None of this is difficult if you just use your head and don't get stupid or unreasonable.

      --
      I work for the Department of Redundancy Department.
    12. Re:The American Dream by AmiMoJo · · Score: 4, Insightful

      Even back when individuals could make it they would still mostly have been better off fighting to improve their current situation. A key part of the American Dream is supporting things like low taxation for the rich, because one day you too might be rich, and minimal employee rights because one day you might be the employer. People screw themselves in the hope that it will pay off later, but for 99.99% of people it never does.

      --
      const int one = 65536; (Silvermoon, Texture.cs)
      SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
  2. Past due not reported by companies by brokenin2 · · Score: 5, Insightful

    One reason that I'm sure is a factor in the difference, is that companies are less inclined to bother reporting the "past due" status. It's overhead for them to do it, and there's not really any benefit, but when someone hits the collections threshold, they'll go ahead and take the time to report it.

    1. Re:Past due not reported by companies by Anonymous Coward · · Score: 3, Informative

      Yeah. Collections usually get sold off to the highest bidder, and there may be reporting requirements which make that data more readily available.

      "Past due" is meaningless. Anybody who has run a business knows that nobody pays bills on time, neither yourself nor clients or customers. In fact, modern business relies upon it. Net-60 (due date + 60 days) is what everybody expects. Any "notice" that says something is 30-days past due gets summarily thrown in the garbage because I'm usually waiting on a check to come in from somebody else and damned if I'm going to float the cash unless I really have to.

      Thus anybody who reports a bill as past due before Net-60 or Net-90 has expired is just asking for trouble, because everybody will be like "WTF!?"

      Credit cards companies aren't so lenient, but then they're floating cold, hard cash which loses value by the hour, not a service or good that can be returned and resold at a markup. OTOH, they're charging a fat 3% transaction fee. You can actually get 10 year mortgages for 3%*, so they're making out like a bandit anyhow.

      * If you're rich enough, at least. The bank told me I needed $1m+ in assets to get a rate that low. But in any event they still make money on a 3%fixed rate 10-year loan.

    2. Re:Past due not reported by companies by Jane+Q.+Public · · Score: 5, Insightful

      One reason that I'm sure is a factor in the difference, is that companies are less inclined to bother reporting the "past due" status.

      There's another reason that people seem to be ignoring: something that is "past due" will change out of that status, one way or another, after a short time. Something "in collection", not so much. One has to consider why it went into collection in the first place.

      Another factor that is rather passed over in OP is that despite a few changes that were made for the better some years ago, they were actually pretty weak changes and credit reporting is still egregiously one-sided today.

      Most companies of any size have whole departments that regularly report "past due" debt to collection agencies. But a consumer has many time-consuming and often expensive hoops to jump through to get that back off their record. In many ways it's still guilty-until-proven-innocent.

      The fact that over generations people have become used to this travesty of justice just makes it all the more insidious.

    3. Re:Past due not reported by companies by PhoenixFlare · · Score: 3, Interesting

      Seriously, I moved to the US last year... and I'm shocked that I can't pay my bills electronically and automatically... WTF?
      I have never used a check before coming to the US, no wonder people end up in collections because of wrong addresses, etc.

      Please tell me you're trolling and not really this ignorant.

      I've lived in the US my whole life, currently reside in a town of about 20,000 people, and I haven't paid using a check for anything besides my rent for about 15 years now. My cable, electric, water, trash, phone, Netflix, credit cards, etc. can all be paid electronically, and set up to automatically pay what's due (or any amount of my choosing) every month, on-time, via their websites. Although I prefer to keep a few things on manual for better control, all the bills can still be seen online with all the pertinent information & due dates.

      They other day I just found out that I hadn't payed my electricity bill for 3 months, because apparent that's not what an ebill does...

      So you signed up for e-billing, which if it's like my local utility, sends you an email every month with an electronic copy of the bill basically saying "Hey, you have $xxx due, log in and pay it by this date". And then...what? Just ignored it or figured you were getting free power?

  3. looming American spring... by thieh · · Score: 4, Insightful

    Given the trend of income inequality it would be no surprise of any sort of abrupt riots to the magnitudes of some civil rights leader got killed

  4. Lies and statistics... by mythosaz · · Score: 5, Interesting

    This was discussed on Fatwallet today, and most of the sensationalism was debunked quickly.

    http://www.fatwallet.com/forum...

    A few juicy tidbits:

    More details: "An alarming 35 percent of people with credit files have debt in collections reported in these file s . This percentage is nearly identical to results from a 2004 analysis of credit bureau data by the Federal Reserve, which found that 36.5 percent of people with credit report s had debt in collections reported in their file s (Avery et al. 2004). Note that consumers themselves may not realize they have debt in collections. Some consumers report becoming aware of this debt only when they review their credit report (CFPB 2013)"

    ...and...

    The actual source: http://www.urban.org/publicati...

    Only 5.3% are currently past due on a bill. "5.3 percent of people with a credit file have a report of past due debt, indicating they are between 30 and 180 days late on a nonmortgage payment"

    So most of the people have old debts which could be up to 7 years old.

    So there you go. A lot of us have an outstanding medical bill on our credit reports, and we should check them more often.

    1. Re:Lies and statistics... by Austerity+Empowers · · Score: 5, Interesting

      The medical thing is important, more than once I've been told my debt is being sent to collections because the hospital and insurance were bickering over who pays what. My wife and I have adopted a policy of not paying until at least 6 months later, or after those two sort it out, since you can never get your money BACK once sent, but until they settle it out there's no way to know what is owed. There has also been a case where something was on my bill to the hospital that was not a rendered service, and having disputed it endlessly, the hospital would still not relent that my 6 yo son had required a breast pump for his treatment.

      I've also heard of, particularly gym memberships, being sent to collections because the company had constructed a labyrinth of obstacles to cancelling membership (e.g. Gold's Gym). So people would simply stop paying, and ultimately be sent to collections for non-payment of a service they didn't use. I suspect this form of collections will be on the rise, as the growing trend of writing mandatory recurring payments into contracts increases. I fully support anyone who cancels such things de facto (as long as they actually stop using the service), it's a horrible practice.

    2. Re:Lies and statistics... by mythosaz · · Score: 5, Interesting

      I actually suspect that's a lot of people's 35%.

      We've been fighting a small medical bill because the hospital couldn't bill insurance correctly. Bill trickle in after major events (doctors and other specialists bill separately, badly, incorrectly coded) and rarely are they all seamless. Even perfectly covered items might leave a hospital (or doctor, or...whatever) chasing you around the world for a co-pay. ...and knowing they'll rarely see it, they sell them for pennies on a dollar to debt collectors who'll ding your credit.

      If my wife wasn't a benefits specialist in a previous life, we'd drown in the things - all so badly handled by incompetent billers and insurers.

    3. Re:Lies and statistics... by Shakrai · · Score: 5, Insightful

      Yes, since the bills would be covered by insurance.

      After the deductibles and co-pays. I have a "platinum" plan through my employer; better insurance than anyone else I know and the co-pays still total up to a considerable amount. No deductibles for in-network on my plan, which makes me extremely fortunate. As a single guy I can afford the co-pays even with my modest salary but I can see how quickly they would bankrupt someone with a family, particularly if said family had one or more members with a chronic illness.

      Incidentally, I was just exposed to rabies a few months ago:

      Strike One: The only place to get the immunoglobulin is the ER, because it's very expensive (>$4,500) and has a short shelf-life. ER co-pay: $150
      Strike Two: There's a set schedule for the vaccine, Days 0, 3, 7, and 14. You can get the vaccine from your primary, in theory, but of course my primary has a months long waiting list because we're driving PCPs out of business. Bottom line, I can't get appointments with them for Days 3 or 7, so that's two more trips to the ER. Additional co-pay total: $300
      Strike Three: New York State ostensibly has a fund to pay for out of pocket expenses related to rabies exposures, but they only reimburse for the rabies vaccine and immunoglobulin. Since the ER decided to give me a tetanus shot on Day 0 NYS won't reimburse me, even though my out of pocket would have been $150 with or without this extra shot. Hooray for bureaucracy!

      Totaling all this up, that stupid bat that found its way into my apartment has personally cost me $465 ($450 of ER co-pays, $15 of PCP co-pay) while my insurance company is on the hook for close to $7,000. My annual premium is about $6,000. So this one incident wiped out every penny they made on me and then some. I'm an otherwise healthy 32 year old marathon runner that ought to be subsidizing those who are less fortunate. Now imagine a family of four that were all exposed to the same scenario I was.....

      --
      I want peace on earth and goodwill toward man.
      We are the United States Government! We don't do that sort of thing.
    4. Re:Lies and statistics... by mythosaz · · Score: 4, Insightful

      I suspect most medical collections (by volume, not dollar) fall into unpaid copays, and miscoded bills that are never correctly sent to insurance.

      I suspect most medical collections by dollar are catastrophic issues of some sort. Hospitalization for uninsured or underinsured.

    5. Re:Lies and statistics... by jxander · · Score: 3, Interesting

      Same thing happened to me with my ISP, Cox. The bank has no record of any canceled, refused, returned, failed, or otherwise erroneous attempted payments. As best I can tell, Cox just decided to stop my automatic monthly payments for no adequate reason.

      Luckily (luckily?) they just cut off my service before it went to collections. I called them up and payed the bill, but now face a different problem. They've blocked auto-payments by credit card, to include the automated phone system. I have to either mail out a physical check, or call them up every month, wait on hold for an hour or so, and fight with the phone rep to not charge the $10 service fee for speaking with a phone rep. Once they've canceled the bonus charge, I can just say, "Pay with the card on file" and that's fine. Till next month, when we do the dance all over again

      Gotta love a monopoly.

      --
      This signature is false.
  5. Not surprised. by gatfirls · · Score: 3, Insightful

    Once you have something go into collections it is always there until you pay it. (medical bills/school debt probably drives a lot of this)

    You're only 30-90 days lat for a short period.

    "Many consumers were burned for relatively small amounts -- about 10 percent of the debts were smaller than $125, Ratcliffe says"

    This kind of thing probably drives the numbers way up too. That late fee from blockbuster, etc.

    1. Re:Not surprised. by anagama · · Score: 5, Interesting

      I have a "debt" in collections right now. Comcast claims I owe $95 to them. Last winter I moved to a place where I could not only get other service, Comcast doesn't even serve (thankfully). So I told Comcast I'd be terminating my service effective Jan 15. Comcast had my credit card to auto-bill for it's "service".

      Then in March I started getting collection calls from companies Comcast hired to get this from me. Nobody will prove to me that I actually owe this money. And what's odd is the amount: $95 when my monthly bill for internet-only service was about $60 or $70. I just got another call yesterday on it.

      I could easily pay it and never even feel the hit. But fuck that! Comcast sucks beyond the ability of science to measure and I'm so sick of being taken by them, they're going to have to take me into small claims court and get a court order for this sum.

      And yeah, I get that this will harm my sterling credit rating, but what a great means of extortion. Bill people small amounts under the threat of losing their good credit rating and even when people don't actually owe the money, they'll pay up to save their rating.

      --
      What changed under Obama? Nothing Good
    2. Re:Not surprised. by mythosaz · · Score: 3, Informative

      I don't know why anyone has more than a couple quick interactions with a debt collector.

      A flowchart for 'ya.

      http://creditboards.com/forums...

    3. Re:Not surprised. by Anonymous Coward · · Score: 3, Informative

      Nobody will prove to me that I actually owe this money.

      Do a little googling people... first of all, it is your legal right to have collection agencies only contact you in writing, but you have to notify them to do so. If they still call you, they're legally liable. Then, you can demand that they prove you own the debt. If they cannot and still continue to harass you, you can sue. Heck I'd sue regardless, in small court, even if the debt was legitimate, chances are they don't have the paperwork in order or they won't bother to show up.

  6. So! The game is rigged! by s.petry · · Score: 5, Insightful

    The whole point of a "credit score" is horribly broken. In order to get approved for debt, you must have debt. If you have money in the bank and no monthly debt payments you have a reduced score. It's a SCAM! A scheme to make sure that you are constantly in debt, and yet it's perfectly legal. Living in debt constantly costs you money, and for what? So that you can have more debt? Wow!

    The fact that people don't get this, or simply don't care, is very telling.

    Personally I have almost no debt, just my car payment. I don't have a lot of debt so have a laughably low credit score. If I don't have cash I can wait to buy something. Actually since I manage my personal finances very well purchasing something I want is never an issue.

    --

    -The wise argue that there are few absolutes, the fool argues that there are no probabilities.

  7. The Rich got Richer over the past 30 years by WillAffleckUW · · Score: 3, Insightful

    The Middle Class didn't.

    The Poor got taken to the cleaners.

    Thank god my investments in Guillotine and Pitchfork franchises are proving to be fruitful.

    --
    -- Tigger warning: This post may contain tiggers! --
  8. Re:So! The game is rigged! by Obfuscant · · Score: 5, Informative

    In order to get approved for debt, you must have debt.

    No, to get approved for debt you need one of two things:

    1. A credit history. That's not necessarily debt, it is a history of handling small debts that you've paid off.

    2. Belong to a demographic that the credit companies are chasing.

    When I was in college, the stores were deluging me with offers of credit cards because of my age/college while the credit union followed rule 1 and repeatedly denied me a credit card. In recent years, the largest flood of credit card offers were when I had no debt at all, but had a paid-off car loan.

    It's a SCAM! A scheme to make sure that you are constantly in debt,

    Nobody can force you to go into debt.

  9. They Want you in Collections by zakkudo · · Score: 4, Insightful

    The simple fact of the matter is, if you are in collections, most companies get the ability to rape you. They will be as harsh as possible when talking to you so that you don't want to negotiate. This equals more money in interest.

    Student loans threatened me into work I couldn't physically do, and was relying on medicaid to keep my fake leg working. The threats forced my work over what I could do and pushed me into homelessness for a time.

    I tried calling the collectors with the last of my money and all they could do is tell me to pay $14,000 in student loans in 3 monthes. Despite their threats causing me $100k in medical bills, multiple suicide attempts, and lost work time.

    Since I have stabalized financially and I have been talking to them more, you soon realize the system was made to rape you from the beginning. It's a lot easier to face when you realize you aren't necessarily the evil one.

    You can ask specific questions, but the department of education will refuse to give any specifics. The best I had gotten was a letter that read, "We have investigated your claims [what was investigated specifically was not stated], and we have found no issues. We have no departments that can handle this matter and if you would like to pursuie this it will have to be through litigation."

    This is the US of A. I'll hang myself at a college before
    I'm threatened into [work I can't do] -> [homelessness]. I'll do my best, but when the interest is $700 a month, you know the company you were working with had no serious intension of helping to pay back any dept, but only to cause you new ones.

  10. Re:i blame my kids by TheGavster · · Score: 4, Insightful

    Children are simultaneously the most expensive and least liquid luxury you can get. If it's hard to make ends meet, maybe you should have gotten something more sensible and resalable, like a boat.

    --
    "Because Science" is one step from "Because old book". Try "Because of my experiment testing my falsifiable assertion".
  11. Is it a legitimate collection? by schwit1 · · Score: 4, Informative

    The Michigan teachers union sics bill collector on former members after they legally opted out of the union:
    http://poorrichardsnews.com/po...

  12. Re:You needn't charge anything by rmdingler · · Score: 3, Interesting
    Father here.

    Just accompanied my son to a credit union to begin to build his credit with a secured card... he wants a newer vehicle, has saved well, and was able to transfer the necessary security from his account with the financial institution for his pending secured credit line.

    His loan officer told him his credit score would reflect more positively if he used only about 60% of his available credit line each month, and left 15 or 20 dollars per month in carryover balance, instead of paying off the entire balance each month.

    Truth or bullshit?

    --
    Happiness in intelligent people is the rarest thing I know.

    Ernest Hemingway

  13. Lack of ability to challenge bad debt by asmkm22 · · Score: 4, Insightful

    I ran into this a few years ago. Basically, I got a random call saying I owed about $1k. After asking for the debt verification letter to be sent, I was able to figure out that the debt in question was for some daycare provider in 2009, 3 years before receiving my first collections call. Problem was, we had moved out of that area when this supposed debt occurred, meaning it shouldn't have been charged in the first place. The daycare provider couldn't produce any documentation to support their claim, saying that it happened 3 years ago and they can't find anything. I then called the debt collection agency back and asked for the debt to be discharged as a result, but they said the daycare center claims the debt is valid and won't reverse it. I then opened a ticket with TransUnion (where the collections was listed) and explained the situation. 30 days later I got a letter saying the looked into the debt and determined that it is valid, despite having no documentation to back the debt up, and my documentation showing I wasn't even living in that area. Best part is, I followed up with TansUnion to find out how they validated the debt, and was told they called the daycare center and simply asked them if it was valid; no proof or documentation or anything provided. The whole system is a racket, and there's basically no way to get collections reversed unless the debt involves identity theft. The original creditor has no interest in the truth because they already sold the debt. The collection agency has no interest in the truth because they have already bought the debt. The credit industry has no interest in the truth because it's their core business. The only reason this whole thing hasn't bothered me too much is because since I basically went 4 years before realizing the debt existed, I can just wait for it to fall off my report.

  14. Re:So! The game is rigged! by vux984 · · Score: 5, Insightful

    I pay for everything cash, so I have a low credit score. How the fuck does that work?

    Sure, you might be independantly wealthy and just buy everything with cash... or maybe you live day to day off the money you make turning in aluminum cans. In other words, your score is low because they can't tell you from hobo.

    I paid for my car cash, I pay my rent cash, I pay the cable company cash.
    I have over $30k in the bank and I have monthly paychecks.

    None of which is reported to a credit scoring agency.

    So I should have a much higher credit rating than someone who is constantly paying with credit cards in my opinion.

    You are probably more credit worthy, and probably deserve a higher score, but you aren't playing the game to get one.

    I wouldn't even mind so much, except that when renting a house they do a background check, and they expect to find a credit history, which I don't have.

    So get one. Apply for a card, buy some stuff you were planning to buy anyway, pay it off... costs you NOTHING. And you get a higher score on the credit rating game, for when you need it.

  15. Re:So! The game is rigged! by Loki_1929 · · Score: 3, Interesting

    The whole point of a "credit score" is horribly broken.

    The idea isn't bad. The implementation is okay, though it can be gamed to some degree. The biggest issue most people actually have with it comes down to a serious lack of financial education. It isn't the easiest or most intuitive system; it's the one that's worked well for a long time thanks to a lot of trial and error.

    In order to get approved for debt, you must have debt.

    Now that's just untrue. If it were true, you'd have a chicken and egg problem with debt. The reality is that certain types of credit/debt (e.g. student loans) don't care whether you have other credit/debts or not. Some types of credit/debt (e.g. credit cards) are rate-sensitive to whether you've demonstrated - through your behavior with previous credit/debts - the likelihood that you'll stick to the terms of the new credit vehicle. Some types of credit/debt (e.g. a mortgage) are much more difficult to get at all without a demonstrated ability to manage credit/debt responsibly. That's due to the fact that different types of credit have different risk profiles. A credit card company can set a ceiling on how much the issuer can lose if you're a high or unknown risk. When it comes to a mortgage, you're talking about tying yourself to the borrower for a very long time with an asset that could tank in value anywhere during that time. Since student loans survive everything up to and including the end of the world, they're easy to get.

    If you have money in the bank and no monthly debt payments you have a reduced score.

    The first part is another myth. The amount of money you have in the bank means absolutely zero to a FICO score. It means something to a mortgage company, but that's it. FICO scores are completely unaffected by money in the bank. The second is somewhat true, depending on circumstances. Cracking 800 is going to be very tough without some sort of installment loan (vehicle or mortgage). That said, you can hit top-tier rate scores (740+, even 760+) without either of those. You can have credit cards you pay off every single month and hit the scores you need to secure the best available rates. No debt required. It's just tougher.

    It's a SCAM! A scheme to make sure that you are constantly in debt, and yet it's perfectly legal.

    Wait, what? People with the highest FICO scores typically have little to no debt, aside from perhaps a mortgage, maybe a car loan. It's rare that they'll have any serious credit card debt or other revolving accounts with any substantial balances. In fact, having substantial balances on your revolving credit accounts hurts your score. The point isn't to keep anyone in debt, it's to provide a score that tells potential lenders how likely it is that an individual they've never met before will stick to the terms of their agreement if they're granted credit.

    I don't have a lot of debt so have a laughably low credit score.

    If your credit score is "laughably low", it isn't because you don't have enough debt. In reality, what drives your score is 5 simple things. The largest component is payment history. Don't pay back debts? Bad history, bad score. A perfect score here is no delinquencies or bankruptcies. Any accounts listed should be "paid as agreed" or something to that effect. If you have no debts, pay your utilities and medical bills (things that report delinquencies to the credit reporting companies), and pay that car loan on time, you should have a perfect score here. The second is the balance of all your revolving accounts. No balances on credit cards? Low balances relative to total available credit? Perfect or near perfect score. That's 65% of the total score right there. More info here: http://www.myfico.com/credited... (bank balance isn't listed because it doesn't apply).

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    -- "Government is the great fiction through which everybody endeavors to live at the expense of everybody else."
  16. Re:i blame my kids by Snotnose · · Score: 3, Insightful

    Children are something like 80% water. Sounds pretty liquid to me.

  17. Re:um yea... by pla · · Score: 5, Insightful

    And that's the problem with the publics modern perception of credit. Because I do not have a credit card and suggest that you shouldn't either, I'm considered a quack. I buy just as much useless garbage as anyone that modded me down does. I go on vacations, I order things online, I buy soda at the gas station. The only difference is I don't pay a 7% to 30% fee to do all of those things. And that is exactly what a credit card does. It doesn't help your credit. That's a lie driven by marketing campaigns of credit card companies.

    You no doubt got modded down because you have virtually every fact you mention entirely wrong. Having a credit card doesn't mean carrying a balance month-to-month, and you don't pay a single penny extra if you don't carry a balance (unless you stupidly sign up for a card with an an annual fee). I actually get 1.5 to 6% back on all my purchases, depending on how they categorize it. Now, you could argue that we pay 3%-ish more for everything as a result of stores passing on the transaction fees to their customers, but then, so do you, and you don't even get the benefits as a result.

    And as for your credit rating, sorry, but yes, having a small number of regularly-paid cards most certainly does improve your credit, compared with having no credit history. I could provide you with an hundred links discussing the optimal number of cards and how much to cycle through them monthly, but you could already have done so and apparently chose not to.

    Yes, we have a sick view of what "credit" means as a society. That doesn't invalidate the concept itself, just points a damning finger at how badly we tend to misuse it. Kudos to you for at least living within your means (and I mean that sincerely), but you massively overstate the case-for-cash while remaining blissfully ignorant of how credit cards really work in the modern world.

  18. Re:medical services need a billing time limit by ewibble · · Score: 4, Insightful

    Medical bills need to be communicated up front, not after the fact.

    I once went to a US hospital, I asked how much would it cost, they wouldn't tell me. I asked will it in the range of $100, or $1000, or $10,000 still wouldn't tell me.

    How is any sane person meant to go into a contract without actually knowing even an approximate price. They should say would you like Xrays with that for $X.

    how can there be a meeting of minds http://en.wikipedia.org/wiki/M... to form a valid contract

  19. Re:So! The game is rigged! by AaronW · · Score: 3, Insightful

    By paying off a credit card every month I am not paying any fee to use my money. In this case the seller is paying the fee and I collect on the benefits. On one card I earn cash back and on the other I earn airline miles which I have used to fly all over the country with very little out of pocket for the tickets (mostly various airline fees and taxes). I don't pay one cent for the use of my credit card. I don't pay interest or fees. In my case, the sellers are paying the credit card fees, not me. I'm basically getting all of the benefits at no cost to me being paid by the companies I purchase from.

    The scam is when you end up paying fees to use a credit card or when you don't pay it off and pay obscene interest rates. I could see someone doing that on a rare occasion like an emergency, but it should be paid off as soon as possible. Carrying debt for the sake of carrying debt on a credit card is stupid. I have never done this and always had a very high credit score.

    All of my regular banking is through my credit union where I do not pay any fees to use my money. I don't pay ATM fees at any other credit union (and they'll reimburse me for any). The more I hear about banking through the big banks the more disgusted I am.

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  20. Re:medical services need a billing time limit by AthanasiusKircher · · Score: 4, Interesting

    I once went to a US hospital, I asked how much would it cost, they wouldn't tell me. I asked will it in the range of $100, or $1000, or $10,000 still wouldn't tell me.

    How is any sane person meant to go into a contract without actually knowing even an approximate price.

    THIS. With all the complaints about health care costs and clarity about insurance plans, the most fair and straightforward thing they could do is force doctors to give an estimate, like you'd get from any mechanic or painter or tradesman. Obviously this wouldn't quite be possible for complex procedures where quick decisions to do additional things are needed. But a general estimate or range, or maybe a list of "potentially necessary add-ons during complications" would make things so much clearer.

    But that kind of reform would never pass, and not just because of the complexity -- doing this would reveal the true cost of care, it would show the gross disparities among charges at different hospitals, and it would make clear that all the "discounts" granted large insurers is just some weird kind of game where hospitals nominally charge often twice or three times as much as they actually expect to get paid, and the amounts are "adjusted" down by the insurance companies.

    Healthcare costs are spiralling out of control in the US partly because we have a system where the true cost is hardly ever seen or paid by anyone, making it impossible for consumers to make choices or comparison shop in ways that could actually improve care and make the whole system more efficient.

  21. Medical services need total billing clarity by Pfhorrest · · Score: 5, Insightful

    Even worse, there are sometimes even deceptive statements made about how much you will have to pay, and business arrangements you enter into without even knowing that the other party exists, much less that you're getting their services.

    I didn't see a doctor for ten years because I couldn't afford insurance, and when I finally got covered through a decent job and went to get my first general checkup in my adult life, there was a big sign up front saying "ALL CO-PAYS DUE AT TIME OF VISIT". I figured that meant what it said: anything I owed, that was not getting billed to my insurance, was going to be billed to me before I left. When they let me walk out without paying anything, I figured that meant I must not have had a co-pay, which made sense to me as it was just a general physical exam, and a blood draw for some basic general-health lab tests (cholesterol, blood sugar, STDs, etc).

    Then I got a bill in the mail a month later. Called and complained, why am I getting billed, didn't my insurance cover this, and THEN they tell me that that bill is for the remainder that's left after what my insurance paid (IOW my copay). I argued about the sign saying all co-pays were due at time of visit and they said... I don't even remember what now, exactly, but something to the extent that that's no excuse and I have to pay the bill. Not knowing what else to do, I did.

    A month later I got a different bill for the blood tests, from a different company. I called and complained that I already got a bill for that visit and paid it and even that was unexpected and what the hell is with two different companies trying to collect for the same fucking service. They explained that they are the lab that my doctor sent the blood off to for the tests, and they they bill separately, and that paying my doctor for their service doesn't get me off the hook for the lab service. I had no knowledge that I was even buying services from this lab company: the only entity I interfaced with was my doctor, they hired the fucking lab, let them pay the lab and roll the cost into their bill, I figured. But no, and lab insisted I owed them money, and not knowing what to do, I paid up.

    A year later, my second doctor's visit in my adult life, different doctor in a different town as I had since moved. They at least had the decency to say up front how their billing works (without me even asking), and that they will send me a bill for the copay after they process it through my insurance. And they don't do in-house blood draws and send out to a lab, they send you to the lab of your choice with orders for what tests to run. So that's better, much more clear. But the lab itself also has a "ALL CO-PAYS DUE AT TIME OF SERVICES" sign... and this time, they actually billed me at time of services! Awesome. So far, I was liking the medical establishments in this new town a lot better.

    Until a month or two later I got a bill from the lab. When I called to complain that I already paid them at the time of services as their sign said, they told me then that that was only an estimated copay, and that after they put the bill through insurance, there was still a balance remaining on my copay, which is what that bill was for. Again, no idea on what grounds to dispute it, so I paid up... but ugh, what the hell

    For emergency services where the patient may not have the time or awareness to evaluate the costs and benefits, I can understand you just do the service and bill later. But for a motherfucking general checkup and routine bloodwork? Jesus fucking christ, how can you not just say what it will cost up front and bill before I accept your services?

    It's only one step removed from the homeless guy who washes your windows without your consent and then demands you owe him money. "Hey man you need some medical services?" "Yeah uh I guess how much?" "Can't tell you yet now turn your head and cough." "Uh... [cough]" "Aight you cool man, that'll be $100." "WTF no you didn't say it would be that much" "Too late you got the work now you pay the bill man... don't make me go get my collections posse to shake down yo ass, pay up sucka."

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  22. US centric discussion by dr.Flake · · Score: 3, Informative

    The debt discussion quickly moved to a health insurance discussion, as that is clearly one of the major contributors of this issue.

    Slashdot has always been a mostly US centric site, but also has a significant world wide group.

    As a European reading this discussion, but i recon it is so for Canadians and some larger parts of Asia as well: I'm laughing my ass off!

    Oh man, you guys have seriously fu****ed up your system.
    All this spastic anti-socialism, american dream, Obamacare and your corporate controlled democracy have made you end up with this monster.

    Believe me, our systems are also far from perfect, but no where near the level of idiocy described here.

    for me, 500 $ max own risk, rest 100% insured. no limit. 98% of the population is insured. regardless of income, age or job. I worry over other stuff. Not my health bill.

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  23. Why the 35%? by gorzek · · Score: 3, Informative

    I skimmed a lot of comments and didn't see one directly addressing the question posed in the summary.

    Basically, 35% of Americans have debts in collection status because it's easy to have an account go to collections and then linger there forever. You can imagine people's "debt responsiveness" as being exponentially bound to the time since the last payment. A debt that recently had a payment made is almost certain to have its next payment made. A debt that's a few months late has a decent chance of getting a payment made soon. A debt that is 6 months (or more) late has a very low chance of ever being paid again. This is why debt collectors buy/pursue old debts. The original creditor will likely accept pennies on the dollar just to get something out of it, while the collector wants to obtain the whole amount. If they can even get half, they come out way ahead. It's a profitable business.

    I used to work in this industry (wrote software) so I could tell you some things about it.

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