Ask Dr. Per Cap

Dear Dr. Per Cap: 

What’s the status on medical debts and credit bureaus?  I heard all medical debts will soon be deleted from credit reports.

Signed, 

Can’t Wait

---

Dear Can’t Wait:

What you’ve heard is partially true.  The three credit bureaus Equifax, Experian, and Transunion will begin removing about 70% of medical debts currently listed on their consumer credit reports beginning in summer 2022.

This follows a trend over the last few years of the bureaus and lenders taking a more lenient view towards medical debt.  Due in part to large numbers of Americans who’ve been unfairly saddled with debts due to medical billing and insurance hang ups beyond their control.  The situation has been even worse in some parts of Indian Country where bills from referrals and hospital visits to non-Indian Health Service providers have had a less than stellar track record of prompt payment.

The Covid-19 pandemic further underscored many of these problems and the bureaus have all finally agreed to make sweeping changes.  However, not all medical debts will be deleted.  Instead we’re mostly talking about medical debts that went into collections but were eventually paid off.  In the past those paid collection accounts stayed on a person’s credit report for up to seven years and did damage to credit scores.

This is good news for many folks.  However, if you’ve got current medical debts (in collections or held by another party) on your credit report that haven’t been paid off, chances are they aren’t going anywhere until that happens.

So if those debts are the responsibility of a third party, like an insurance company, Indian Health Service, or a tribal health provider, make sure to contact those organizations to get them paid off as soon as possible. 

Another change relates to when unpaid medical collections are first listed on a credit report.  That time frame will now be one year from when those accounts are sent to collections.  This is six months longer than the previous policy which will hopefully give consumers more time to work through red tape.

Remember collection companies buy old debts from creditors for a fraction of their original outstanding balance.  Whatever they manage to collect from the consumer above that amount is money in their pockets.

Also on the horizon will be the handling of small dollar medical collection debts.  Those less than $500 won’t be listed on credit reports.  I can’t tell you how many people I’ve worked with over the years that have been denied credit due to unpaid bills for x-rays, lab tests, and other medical costs under $500 that show up on credit reports.

Here’s to good health in the years to come – both physical and financial!

Dear Dr. Per Cap: 

The other day a friend sent me a Zoom invite for a meeting that was advertised as a “financial opportunity”.  What unfolded was something that appeared to be a pitch to get me to sign on as a financial services agent.  Everyone in the meeting was Native and many said they’ve made a lot of money helping other Native people realize their financial dreams using indexed accounts.  It all felt really sketch.  Is this a scam?

Signed, 

Tired of Zoom

I don’t know off hand but it sounds shady as an oak tree.  What you experienced was most likely a solicitation from a multi-level marketing business aka MLM.

Dear Tired of Zoom:

MLM’s have been around for years.  You’re probably familiar with companies like Avon, Mary Kay, Amway, Scentsy, and Herbalife that sell their products directly to consumers through sales agents or associates.  Usually the associate relies on a personal network of friends, relatives, and acquaintances as customers.  Often the products are legit but nothing special.  Like cosmetics, household products, and vitamins that you can just as easily buy in a store or online, often at a lower price too.

However, what makes an MLM very different from a traditional distributor or retail business is the sales model.  MLM’s make most of their profits by recruiting as many sales associates as possible.

So there’s always a push for MLM associates to not only sell products but also sign other people up to become associates too.  That’s why MLM’s have a reputation for being pushy to the point of predatory. For every new associate that signs up, the associate who signed them up and everyone else up the chain gets a cut of the newbie’s sales.

Think of a pyramid with a bunch of sales people at different levels.  Those on top can make money, but sadly many people who join an MLM don’t make much money for the amount of work required.  Or worse yet they lose money on all of the products they might have to buy upfront as well as fees and expenses.

Financial services are sometimes sold using an MLM model. One product they might offer is something called a variable life annuity which can be referred to as an indexed account.  What they are is a type of life insurance that can also be used as a way to save for retirement.  Unfortunately, how variable annuities actually work is often difficult to understand.   They can also be very expensive and not well suited for an average person’s insurance or investing needs.

Adding to the confusion is the fact that it’s very easy in many states to become licensed to sell life insurance.  In New Mexico for example, a person just needs to pass a test, submit fingerprints, and pay some pretty light fees.  That’s it – no actual experience working with insurance required.

Dear Dr. Per Cap: 

I come from a family with a lot of women, but our dad made sure we learned some “guy skills”.  However one skill we’re lacking is how to price used vehicles.  My father walked on a few years ago and left a 1999 International Ryder truck that he bought for our family business. 

We’re thinking of selling it now. The rebuilt motor has only 3,000 miles. The truck also has a custom welded storage cabinet with locking doors. However, the truck hasn’t been driven in three years and has become Native yard art.  We have no idea how to price it.  Can you help us know how to make a small profit while being fair? 

Signed, 

Ryder Truck Family

Dear Ryder Truck Family:

My condolences – It sounds like your father was a very good man and a wonderful parent.

Commercial grade trucks, even older models like yours, are usually pretty valuable as long as they are in decent condition.  There are always small businesses needing solid trucks to haul equipment, freight, and supplies.  Often they don’t want to spend extra money buying brand new.

Ryder is a large corporate transit company that’s famous for its large fleet of commercial rental trucks.  They also have a sales division that sells many of its light and medium duty rental trucks once they reach a certain mileage.  I’m guessing that’s how your dad purchased the International.

I took a quick peak at Ryder’s website and their current inventory of Navistar International 4300’s which I’m thinking are pretty similar in size to your truck.  You can’t touch one newer than five years old for less than $80,000.  And almost all of them have odometers showing well over 200,000 miles.  But, remember higher mileage isn’t as big a deal for a commercial truck as it would be for a personal vehicle.  

Obviously, this isn’t an apples-to-apples comparison but it does help you gain some perspective.  Next try typing your truck’s exact model and year into a Google search and see what comes up.  That will give you a better idea of how much similar trucks are selling for.  The rebuilt engine and custom fabrication work should also fetch a premium, although exactly how much is tough to say.

If possible you also want to get the truck running if it isn’t already.  A buyer who needs to tow a truck has a lot room to negotiate because of the inconvenience.  Remember it doesn’t have to run super cherry either, just well enough to get the buyer down the road without any drama.  And don’t worry about washing or detailing the vehicle because that only matters to folks shopping at CarMax. 

Once you have a general idea of what the truck might be worth it’s time to advertise.  I recommend picking a reputable online classified marketplace or just go old school and stick a for-sale sign in the window while parked in a highly visible location.  But here’s the kicker, since pricing the vehicle is your biggest challenge don’t lock yourselves into a sale price.  Just list a high ball number along with “or best offer” and see what happens.  If the truck is solid buyers will show up and set the price.  Then just pick the best one.

As a final precaution take care when the time comes to actually sell the truck because fraud is not uncommon with private vehicle sales.  In fact some private sellers only accept cash to avoid check scams, but an envelope full of Benjamins is not always practical.  I recommend meeting the buyer at their bank and have them authorize a direct transfer into your bank account.  Then wait to sign over the vehicle title until you’ve confirmed the payment.

Hope your Native yard art makes a fair profit!

Dear Dr. Per Cap: 

Our first child is due soon and we went shopping the other day.  Cribs, strollers, and diaper bags aren’t cheap.  Any tips so our baby doesn’t break the bank?

Signed, 

Expecting Parents

Dear Expecting Parents,

Congratulations!! Here’s to lots of health, wealth, and happiness.

Now let’s get to business. Yeah, baby supplies are insanely expensive.  In fact here’s something many parents don’t know. New or expecting parents are gold mines to stores and retailers. A survey conducted about ten years ago revealed the average parent spends almost $7,000 on baby items before a child turns one-year-old.

Businesses are also keen to the fact that major life changes are a great time to win new customers. A little lifestyle disruption allows people to be more easily influenced by advertising and marketing. Of all life changes bringing a cute little bundle of joy into the world is the biggest one for most of us.

That’s why businesses spend tons of money and resources tracking purchase histories and other shopper data to identify and market to pregnant consumers. For example, Target knows if a person starts loading up on vitamins like calcium and zinc, unscented soap, cotton swaps, and hand towels – there’s a really good chance someone is either pregnant or a corner man for an upcoming Logan Paul fight. For real they’ve got it down to a science.

Well before your due date sit down and create a detailed budget for all of your baby’s upcoming expenses. Just like any budget create two categories for fixed  expenses that don’t change, like child care or higher health insurance premiums, and flexible costs you can control – lotion, blankets, toys, etc.

Also, don’t forget to set aside a little extra cash for mom and dad. An occasional massage, take out meal, or new streaming service can be a nice stress reliever for an overworked parent.

Often a big extended Native family will want to pitch in which is great. However, you might want to politely offer suggestions for what types of purchases you need so you don’t wind up with a closet full of diapers but no wipes or baby powder to freshen up a sore bottom. Yep, been there.

Also pace yourself. For example, strollers are really useful and every family wants a cool one but you won’t need one until the baby is a few months old. Save money by holding off on those items you won’t need right away.

Then there’s some stuff you just don’t really need no matter how many ads mysteriously pop up on your phone – like changing tables. When our daughter was born we got a fancy cabinet with a built on changing table, but turns out a bed or couch was a lot more practical and easier to use. Those little plastic baby bathtubs are a non-essential item too. We found the regular tub worked just fine as long as the caregiver was attentive.

Bottom line – don’t be afraid to economize on your newborn or feel pressured to overspend. Parenthood is a marathon not a sprint.

Dear Dr. Per Cap: 

I made some mistakes a while back that appear on my credit report as collection accounts.  Since then I’ve been careful managing credit but my low FICO score makes it hard to borrow.  How can I prove to lenders I’m better than my credit score?

Signed, 

FICO Failure

Dear FICO,

Don’t be too hard on yourself.  Contrary to how banks and lenders might make you feel there is much more to life than having a great credit score.  Please don’t give a number on a credit report the power to define who you are.

If it makes you feel better many consumers are in the same boat – stuck with bad credit scores from old missteps even though their recent credit history is clean.  I always tell people that a FICO score, which ranges from 300 to 850, is not a perfect measure of one’s financial character and people can be unfairly burdened by a low score. For example, delinquent accounts can be factored into a credit score for up to seven years making them really tough to live down, even though a person can make a lot of positive changes during that time.  

Some good news is that banks and creditors are beginning to rely less on FICO scores when making lending decisions because they’re learning FICO isn’t always the best measure of creditworthiness.  More are turning to in-house credit scoring models which factor in stuff FICO doesn’t consider like bank balances, overdrafts, and a borrower’s lending history with their specific bank.  They argue their methods are more accurate than FICO.

Moreover regulators are asking banks to rely less on FICO scores so fewer folks turn to payday loans.  Even Fannie Mae and Freddie Mac, the federally backed home mortgage companies, are looking into allowing lenders to use credit scores other than FICO, such as VantageScore which was created by the credit bureaus as an alternative to FICO.

Meanwhile the Office of the Comptroller of the Currency, a federal bank regulator, recently determined that its own credit score guidance to banks was negatively impacting minorities and people of color.

So hopefully we’re in the beginning stages of a major shift that will enable more consumers to access affordable credit.

In the meantime I recommend shopping around the next time you need credit by asking different lenders what types of credit scoring models they use and if they consider information not factored into a traditional FICO score.

A good place to start is a Native led community development financial institution.  I’ve written about CDFI’s in this column before.  They’re non-profit lenders with a social mission geared toward underserved communities.  Many tribal communities have locally managed CDFI’s but if your community doesn’t have one, there are regional Native CDFI’s that might be able to work with you.

For more info check out the Native CDFI Network website at www.nativecdfi.net.