Q: I am 28 years old, and have never bought anything on credit, but my credit is a mess. A long time ago when I moved, the bills didn't follow me. Now that I'm settled down and working, I want to deal with these old debts and improve my credit. There's a utility bill and a cell phone bill, at least, that need to be dealt with. How do I do this? The bills are about 7 years old.
A: You need to be careful with this, as you are at or near the statute of limitation for collection of a debt. This is why you have recently been contacted by the bill collectors. At the seven year point, from the date of last activity on an unsecured debt, collection on that debt has to stop. However, if you send the collection agency a payment, or agree to settle on the debt with an amount less than what you owe, that will put that collection notice back on your credit report for another seven years.
The first thing you need to do is pull all three credit reports. Go to www.annualcreditreport.com and print out all three. Next, go through them and look at the date of last activity. If debts are listed that have a date of last activity of over seven years, dispute these debts with the credit bureaus and they will be removed. And, if you are contacted about these debts, state that the statute of limitation has passed and that you no longer owe this debt. However, you cannot do this with student loans, or debt owed to the IRS.
For debts inside the seven years since date of last activity, you need to make the call about what to do. If you want to settle the debt and get it paid, I suggest you offer 50 cents on the dollar, and get something in writing before sending any payment.
Q: I am 58 years old, and went back to school in the 90's so I could get a better job. Now, I am permanently disabled, unable to work, and unable to repay my loan. I have been getting collection letters for two years, and they all say that I am not liable if I am permanently disabled. I send them all the paperwork, then they send the loan to another collection agency and I have to do it all over again. They are calling and calling me, and I don't know what to do. I cannot afford to have my disability check cut at all, as I can barely cover my medications now. What can I do?
A: In looking at the Department of Education website, it appears to me that you need to submit your application for discharge directly to them. A collection agency is only interested in getting payments out of you, so I don't see them being much help with this. Go to www.disabilitydischarge.com and complete their application, and send it to them with your supporting documentation and a letter explaining what you are going through. I would even call, a week after you send this in, to talk with someone to make sure they received it and are processing your application.
Q: I am 64, and my husband is 67. We have been in our home for 16 years, and owe $230,000. The loan was originally $1.3 million. Our mortgage payment is $4,000/mo., and this is tough. I have tried to re-finance it, but my husband owes money to the IRS, so he can't apply for a loan. What do you think about a reverse mortgage?
A: In order to qualify for a reverse mortgage, you have to be age 62 or older, which you are, and you have to have equity in your home. I don't know how much equity you have, but there has to be a good amount. Even if you lost 30% of the value of your home due to the market being bad, your home would still be worth $910,000. I think this might be a good option for you.
Once they do the reverse mortgage, you do not pay any mortgage payments. That alone would help you out. You can set up a line of credit, or monthly payments. As you may not even need the money, and you really just need your mortgage payment to go away, the line of credit might make the most sense. How much equity you can take, is determined by a calculation of your mortality, and equity available. Even if you use up the equity, they cannot make you move out of your home. You continue to live there as long as you are physically able to.
Instead of working with a company who is doing this nationally, call Bank of America. According to my web search they offer this type of mortgage, and maybe you can sit down with a person and discuss this option.
Q: I recently applied for credit at a retail store, and was denied. I find this strange, as last year I applied for credit at a furniture store, and got it without a problem. I have been separated from my husband for ten years. Do you think he could have done something to my credit?
A: There are a number of reason why this may have happened. There are three major credit bureaus that collect and retain your credit information for seven years. Most large retailers report at least monthly to all three of these bureaus, so their information is the same on all three reports. However, some small retailers still only report to one credit bureau, and I have seen cases where creditors don't report at all. And, someone could have applied for credit in your name, or there could just be an error. The first thing you need to do is request all three of your credit reports by visiting www.annualcreditreport.com. Once you get them, review them and make sure all the information is correct. If anything is wrong, you need to dispute it. If the situation is more complicated than that, call Consumer Credit Counseling Service of Macon, at 478-745-6197, for a free appointment to meet with a credit counselor. They will be able to advise you on what to do.
Q: What is your opinion of a reverse mortgage. I see those ads on TV and they seem too good to be true.
A: If you are age 62 or older, and have equity in your home, you may qualify for a reverse mortgage. If you still have a loan on your house, they would take this over so you would not have that payment any more. And, they would begin to pay you the equity out of your home. When you apply, you have to pay closing costs, and annual (plus sometimes monthly) fees, and it can be expensive. I have read recently that they are trying to bring down the cost of these loans.
If you are not concerned with heirs inheriting your property, or with using up the equity, then this may be appropriate for you. Instead of calling someone who advertises on national TV, though, I would prefer to work with a local person. According to a google search I just did, SunTrust, Wells Fargo, and Bank of America all do reverse mortgages. I would call them and compare costs.