Consumer Updates

PHOTOGRAPHY BY OLEG MAGNI

Getting the Best Car Loan Rate Despite a Low Credit Score

Article from http://www.consumerreports.org

If you’ve ever financed the purchase of a car or a refrigerator, you know your credit score is important to getting a good deal. A good credit score can get you a lower interest rate, while a poor credit score—or having no credit— pushes you into the subprime category. This indicates a higher risk to the lender, so you have to pay more, adding significant finance costs on top of the purchase price.

Anywhere from a fifth to a quarter of all auto loans fall in the subprime category, according to analysts at TrueCar, a major online automotive marketplace that is partnered with Consumer Reports. That’s more than 5 million car loans per year.

But your credit rating may not be the only factor driving up the rate on your car loan. If you finance through the car dealer, using a lending option that they broker rather than a bank or credit union, the rate is often higher because the dealership takes a cut for acting as the middleman. Further, a recent study shows that car-loan rates for Black or Hispanic consumers can be higher because of bias and weak government oversight. But there are ways to keep the rate on your car loan as low as possible. Although Consumer Reports and other auto loan experts recommend improving your credit rating before applying for a loan, real-life circumstances don't always allow enough time to do that.

Perhaps the best way to get a lower rate is to see what your bank or credit union is offering instead of the car dealer. “Before you go to the dealership, shop around and compare interest rates for yourself, so you know what's available based on your credit and income,” says Chuck Bell, programs director for CR’s advocacy division. “Many lenders will give you a direct loan, so you don't have to work through the dealership to get their often higher-priced financing," Bell says. "You can apply for loans to banks or credit unions, and some lenders will prequalify you for the amount you are seeking with a soft credit check, which won't hurt your credit score.”

In general, those with excellent credit will get the best rates. People with poor credit ratings or no credit—those who haven’t had to make payments on credit cards and other monthly bills lately—will pay the highest rates. Rates are marked up on subprime loans because the borrower is more likely to default on the loan.

“Your score is designed to be a predictor of your risk of paying back what you borrow,” says Alain Nana-Sinkam, vice president of strategic initiatives at TrueCar. “It looks at your history of paying bills, credit cards, auto, home and personal loans on time, and uses that information to predict your future behavior and therefore your risk.”

A low credit score means you won’t qualify for the catchy zero percent offers highlighted in ads for new cars, and it means that you could pay hundreds or even thousands of dollars more in interest over the life of the loan. According to Experian one of the major credit reporting agencies, credit scores are broken down as follows: • Excellent: 800-850 This category includes 21 percent of borrowers and gets the best rates. • Very Good: 740-799 A quarter of borrowers fall into this category, which promises better-thanaverage interest rates from lenders. • Good: 670-739 This segment covers 21 percent of borrowers, and Experian says only 8 percent of the group is likely to become seriously delinquent on payments. • Fair: 580-669 This category is considered subprime and comprises 17 percent of borrowers. • Poor: 300-579 Only 16 percent of borrowers are in the deep subprime category, which carries the likelihood of extra fees, deposits, or loan application rejections. “The sad reality is that if you're a subprime buyer, you're going to pay more interest than someone with a good credit score,” says Matt DeLorenzo, managing editor at Kelley Blue Book. • Know your credit score. Experian recommends checking your credit score at least once per year as a matter of course.

That way, you’ll know where you stand so that you can manage expectations regarding loan eligibility and be aware of what you have to do to bring up your score. You should also look for errors in your credit report, which can affect your score, Bell says. “Luckily, there is no shortage of sites you can visit online to get a free credit score," says Nana-Sinkam. “All the major credit bureaus offer one free credit report annually.” • If there’s time, improve your score. A credit score can be improved in a number of ways, mostly by paying bills on time. Always pay credit card and other bills when they’re due, even if it’s only the minimum payment. This is good advice for any loan—the more you pay up front, the less you’ll pay in the long run. • Bring a bigger down payment. “Having a bigger down payment reduces the amount of loan you need, and a smaller loan means less interest,” says Amy Wang, associate director of Credit Karma Auto. “A down payment can be in the form of cash, a trade-in vehicle, or a combination of the two.” • Get prequalified. Much like knowing your credit score, getting prequalified for a loan from your bank helps manage expectations about what’s possible. • Talk to your financial institution and see what’s available. Nana-Sinkam says that before you get prequalified, it’s a good idea to review your credit report to see if there are any disputable items. Every little bit helps, and just a few corrections can get you a better rate. Getting approved for a loan before you go to buy a car gives you yet another bargaining chip. • “Have a rate you can take to the dealer to see if they can beat it,” says DeLorenzo. “The dealers may have access to programs that can get subprime borrowers a better rate.” • See what the dealer's manufacturer is offering. If you’re in the market for a new vehicle, manufacturers such as Chrysler, Hyundai, and Kia often have programs for subprime borrowers, says DeLorenzo. You have to dig around on their websites to see what’s out there, and keep in mind that this type of deal is going to be found on less expensive cars. “Most of the subprime lending you'll see is on entry-level and economy cars—the bottom end of the product lineup,” he says. “I don't think any manufacturer wants to leverage a subprime buyer into a high-margin vehicle like a luxury car or a pickup truck.” • Consider buying a used vehicle. In general, used cars cost less money, and the value of a used car is more likely to stay stable for longer than a new car, which will depreciate rapidly. That means used-car transactions pose less risk for the lender, and there is a higher likelihood that a subprime borrower will be approved for a loan. “In our experience, most subprime buyers shop the used-car market because they're looking for vehicles at a lower price point,” says Wang. • Report suspected discrimination. Racial discrimination in auto lending is nothing new. Ally Financial, which services loans for several automakers, settled a discrimination lawsuit for $80 million only a few years ago. An academic report published in December found that Black and Hispanic borrowers were 1.5 percent less likely to be approved for a loan and that they pay 0.7 percent higher interest rates, regardless of their credit. The study found that although bank loans—which are federally regulated—were much less likely to be discriminatory, more than 80,000 Black and Hispanic borrowers were denied loans they would have been approved for had they been white.

Loans offered by dealers are known as indirect loans, because the dealer arranges financing through a third-party company. But the dealer doesn’t have to share loan offers that come back from the lender with the borrower. This is how they markup loans for profit, and as outlined in last year’s study, how dealers were able to charge minority borrowers more. A federal rule enacted in 2013 placed auto lending under the guidance of the Consumer Financial Protection Bureau (CFPB) and reduced discriminatory auto lending by 60 percent. But the rule was overturned by Congress several months before the 2018 midterm election. “Unlike mortgage lenders, who report each application through the Home Mortgage Disclosure Act, auto lenders do not systematically report application or loan level data, making it difficult for regulators to monitor lenders for discriminatory practices,” says Erik Mayer, one of the authors of the study. “We find the strongest evidence of discrimination in the Deep South, the Ohio River Valley, and parts of the Southwest. Our estimates of discrimination in auto lending correlate strongly with state-level measures of the prevalence of racial biases.”

If you suspect discriminatory lending, Mayer suggests filing a report with the CFPB (consumer finance.gov) or with the Federal Trade Commission.

For Some' Coronavirus Testing Has Become a Surprise Medical Bill

COVID-19 tests should cost nothing if you have health Insurance, but some are being

billed thousands of dollars.

After Stephanie Nickolas learned that a coworker’s husband tested positive for COVID-19, she decided to get tested to see if she had the disease or antibodies that might reveal whether she ever had the infection.

Nickolas, 45, went to CityMD, an urgent care chain near where she lives in Brooklyn, N.Y., which she found listed as a free testing site through New York City’s government website.

Nickolas, a high school science teacher, was relieved when both tests came back negative. But about a month later, Nickolas was surprised when she got a $300 bill from CityMD. She went to her insurer’s website to look up the claim and saw that the company had already paid CityMD. When she contacted CityMD to ask about the bill, she was told it was a mistake and to ignore it. “I was so mad when I got the bill,” says Nickolas, who is teaching summer school remotely. “The government tells everyone to get tested and has kept saying it was no cost. I did the right thing and made sure I was healthy to be out in public. I felt like CityMD was using the pandemic to make a bunch of money.” CityMD didn’t respond to our request to comment on Nickolas’ billing problem, but on its website, it says it is not collecting copays for COVID-19 testing and does not bill for lab testing. Billing problems like Nickolas the one had aren’t supposed to happen. Congress mandated free COVID-19 testing as part of two coronavirus aid packages signed into law in March–the Families First Coronavirus Response Act and the Corona Aid Relief, and Economic Security Act. Those laws require health insurers to cover medically appropriate COVID-19 and antibody testing without any cost to consumers. According to the law, that means no copay, coinsurance, or need to meet a deductible as well as no charge for the testing itself or the related doctor’s appointment. Congress also set aside a pool of money to cover people who are uninsured.

But because of loopholes in the law, mistakes by insurers and healthcare providers and confusion about what is cover d, some consumers like Stephanie Nickolas are getting hit with surprise medical bills for COVID-19 testing that can be hundreds or thousands of dollars. Nickolas says she worries that some people won’t realize coronavirus testing is free or just won’t have time to fight the bill.

The problem is likely to get worse as COVID-19 cases rise sharply in parts of the U.S. and the push for testing grows, says Karen Pollitz, a senior fellow at the Kaiser Family Foundation (KFF) who has coauthored several reports on the financial impact of the pandemic. It’s yet another healthcare issue that hits communities of color harder. That’s because these groups account for a higher share of cases and deaths relative to their population, in particular in states experiencing a spike in coronavirus infections and deaths. A recent Kff analysis forecast that as the COVID-19 pandemic intensifies in the South and West, it’s likely to affect Hispanic and Black people especially, because they are also at higher risk of experiencing more serious symptoms and have more barriers to accessing healthcare.

The Cost of Getting Tested.

The charges for COVID-19 testing can be substantial. While a recent analysis by KFF of the two largest hospitals in every state and Washington, D.C., found that about half of healthcare providers that posted list prices for COVID-19 tests charge $100 to $199, 19

percent charged $200 or more. Meanwhile, of the hospitals that posted prices for antibody tests, almost 60 percent of those tests cost $50 to $149 while 16 percent were $150 or more.

But in many cases, according to the KFF, that appears to just be for the test itself and doesn’t include the cost of related services that go along with testing, such as specimen collection and the office visit to get the procedure done.

All these costs are supposed to be covered by your health insurance, according to federal law, but when mistakes happen or consumers find themselves in a situation where insurance doesn’t cover the cost, they can find themselves with big medical bills, says Jeanne Pinder, founder, and CEO of clear health costs, which tracks healthcare pricing around the U.S. and has helped patients untangle medical billing problems.

When ClearHealthCosts looked into the issue, it found several cases of people who received bills from urgent care centers, freestanding test sites, or hospitals that ranged from $125 to $3,000 for COVID-19 testing. In three of the four cases, the bills were resolved after ClearHealthCosts investigated, and the people didn’t have to pay for testing. The healthcare providers and insurers ClearHealthCosts contacted cited various reasons for the incorrect billing, including providers using the wrong billing codes and a patient who lacked insurance and wasn’t guaranteed coverage under the law.

What Can Trigger a Surprise Medical Bill. There are a number of situations in which COVID-19 and antibody testing can trigger a medical bill, says Pollitz at the KFF. Here are circumstances to watch out for. You go out of network. If you go to a doctor or hospital not in your insurance company’s network for your test, insurers are supposed to pay the full price the provider charges. But in a loophole in the law, the KFF found that if the price isn’t publicly posted and the insurer and healthcare provider can’t agree on a price for the testing, you could end up with a bill for what the insurer won’t cover. Also be aware that not all healthcare providers that offer tests take insurance. In those cases, you’ll have to pay up front, then submit the bill to your insurer to get reimbursed.

You get evaluated for COVID-19 but don’t get a test. Not everyone who goes in for a COVID-19 test will necessarily get the test. A healthcare provider might order a test for other health problems first, such as pneumonia or the flu, and if one of those is positive, a COVID19 test might not be needed, which could leave you with a bill for the tests you did get. Kaiser reported one case in which a woman who had COVID-19-like symptoms got a bill after going to the emergency room for a test but was charged for the visit even though the hospital didn’t have any testing kits available.

You don’t have comprehensive insurance. Medicare, Medicaid, and private insurance plans must adhere to federal laws on free coronavirus testing. But if you have short term health insurance, which doesn’t meet regulations set by the Affordable Care Act for minimum essential coverage, federal requirements for insurance to cover COVID-19 and antibody tests don’t apply.

You don’t have any insurance. People without health insurance don’t have the same guarantee as those with coverage to get free testing, though Congress did try to address that. Under the coronavirus relief laws passed earlier this year, the government set up the Provider Relief Fund. Instead of billing you, hospitals or healthcare providers who provide testing services to the uninsured can submit claims to the fund. But not all hospitals or doctors are aware of the fund or want to go through the paperwork hassle to apply for reimbursement, says Pinder from ClearHealthCosts. “It’s easier to bill you,” Pinder says. In that case, you should appeal the bill.

Your employer requires a test. Federal law applies only to individual diagnostic testing–such as when you seek treatment for COVID-19-like symptoms or think you have been exposed to someone with COVID19. But another category of testing, known as surveillance testing, which may be done to assess how prevalent the disease is in a particular area or by employers who want to screen workers returning to the office, isn’t covered under the federal law. According to the Centers for Medicare & Medicaid Services, insurers are not required to pay for testing for general public health assessments or workplace screening for COVID-19. Employers who do require workers to get periodic testing can pay for the tests, but their health insurer plan doesn’t have to cover that cost, which can lead to confusion over who is responsible for the bill.

You get treatment for COVID-19. While the doctor visit and test are covered, there are no federal laws that require health insurance companies to cover the cost of treatment related to COVID-19 health problems if you are insured. If you end up testing positive for the coronavirus and get treatment or are admitted to a hospital, you can expect to be charged for your care, and have to pay your normal deductibles and copays and, if your provider is not in your network, possibly higher out-of-network fees, too.