Bad Credit Cards – During Covid-19, Even People With Good Credit Feel Squeezed By Health Care Costs | Zoom Fintech

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Bad Credit Cards – During Covid-19, Even People With Good Credit Feel Overwhelmed By Health Care Costs

Grace Alexander only learned that her husband had spent years writing bad checks to her name when she was arrested on outstanding warrants while renewing her driver’s license almost 14 years ago.

After divorcing her husband and moving to several states, Alexander discovered the full extent of how he had abused his credit. In 2014, Care Credit refused her request for funding of $ 1,800 to have her wisdom teeth removed. Her credit score was in the 500s. She hadn’t realized until then that her ex-husband had rented items – which she thought they owned – using her social security number.

Alexander is one of 160 million Americans with unsuitable credit – defined as a credit score of less than 700 – who often face financial hardship due to health care costs.

During the pandemic, unprivileged consumers aren’t the only ones struggling to cover healthcare costs. These difficulties have worsened for everyone, including people with better credit (“privileged consumers”), according to a report released today by the Center for the New Middle Class.

Direct healthcare costs caused financial hardship for 49% of primary and non-privileged consumers before Covid-19. During the pandemic, that figure rose to 54% and 53%, respectively.

When it comes to health insurance costs, however, the financial pressure is worse for major consumers. Before Covid-19, 41% of unprivileged consumers and 47% of primary consumers reported some level of financial strain due to health insurance costs. Today, 44% of unprivileged consumers and 54% of privileged consumers feel rushed.

According to Jonathan Walker, executive director of the Center for the New Middle Class, insurance costs haven’t necessarily increased for privileged consumers, but they stand out more because many privileged consumers have seen their income, their access to credit. and their savings decrease.

Health care costs are a common reason people fall into the category of the unprivileged. In a 2019 study, a quarter of Americans reported that medical bills coincided with a credit break that led to their unprivileged status. Widespread unemployment and financial hardship during the pandemic will likely accelerate this phenomenon.

Walker described a man whose wife had breast cancer. She recovered but their finances took a hit. They had $ 1,000 in savings, but needed $ 5,000 to pay their share of his medical bills. Their financial difficulties “started to snowball,” Walker said.

“There is this cascading effect that can often reverberate in people’s lives. ”

Who are the unprivileged consumers?

A common perception of unprivileged borrowers is that they are very poor, unemployed, and openly struggling. This is a profound misunderstanding, according to Walker.

“The secondary consumer is really the American middle class,” he said. “They look a lot like any you would see walking down Main Street. ”

They are significantly less likely to have employer-sponsored health insurance: only 47% of non-privileged consumers have health insurance through an employer, compared to 80% of privileged consumers.

But many earn a decent living. The average income of unprivileged consumers is comparable to the overall US average, and 10-15% earn more than $ 100,000. They often own homes and hold “regular jobs” – as teachers, bank tellers and entrepreneurs. Or they are temporarily unemployed, but this employment gap is enough to damage their credit.

“Once you’re out of the bounty it’s a long way back,” Walker said.

Many do not identify as struggling.

“I encounter a lot more optimism than pessimism,” Walker said. People think they can overcome their financial difficulties. They are used to dealing with it. They just need a fair shake.

Exit non-prime status

While it can be a slow process, rebuilding credit is possible and worth the effort. Unprivileged consumers do not have consistent access to standard financing options such as credit cards or bad credit payday loans They pay more to borrow money if they can borrow at all. They can be denied loans, jobs and places to live, which can limit economic mobility for generations.

To build better credit, Walker says it’s important to face financial problems head-on to avoid digging deeper financial holes. ” It’s easy to say. It’s harder to do, but don’t just ignore the issues.

He suggests negotiating medical bills in advance if possible, or after the fact if not, rather than letting them go to collections. Medical debt can affect credit scores once it is recovered.

In Walker’s Group 2019 study, 29% of unprivileged consumers had medical bills to collect, compared to 8% of primary consumers.

Debt collection does not have to be inevitable. “Most hospitals will work with you because they realize that fighting with you isn’t really making them money,” Walker said.

If the medical bills go to the collections, it is still possible to negotiate.

“One of the powerful tools a consumer has once a debt is collected is to recognize that the collection agency bought that debt for much less than face value,” Walker said. As a result, consumers may be able to bargain aggressively.

While medical debt cancellation erodes credit, the sooner you get the hang of it, the sooner you can get back to on-time payments, which can almost immediately improve credit, according to Walker.

Living the dream

Alexander felt that rebuilding his credit in the US financial system would be nearly impossible. “Once you make a mistake, you can never fix it,” she said.

She solved her problem not by meticulously improving her credit, but by leaving the country entirely. She moved to Uruguay where her income as a freelance writer allows her not to depend on credit as much as she would in the United States. She bought land, built a house and hopes to retire and leave a legacy for her children.

His health costs are no longer a problem and his ability to obtain health care is no longer dependent on his solvency.

For $ 100 per month, she and her family are covered by a “mutualista”, a hospital membership with no deductible or hidden costs. Due to health issues and accidents, hospital stays and medical tests, Alexander’s family received no additional medical bills. Once they have finalized Uruguayan citizenship, monthly membership will be free.

“I will have a future here,” she said.

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Bad Credit Cards – During Covid-19, Even People With Good Credit Feel Overwhelmed By Health Care Costs

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