Don’t blow the budget on rent

Dear Liz: I have read in your columns and elsewhere that people shouldn’t spend more than 30% of their gross incomes on housing.

But sky-high rent has become a sad reality for many people living in large cities. Even in the smaller city where I live, a one-bedroom apartment costs upward of $800 a month, not including utilities. The 30% rule is no longer true for many of us. I know my rent eats 45% of my monthly income, and I was lucky enough to find a half-decent place.

Many people are not so lucky. I have friends who live in worse parts of town than I do and their rents are high too. And no, not everyone is willing to share a place. In theory, it would be nice if my rent was $520 a month (30% of my income), but that’s just not possible.

Answer: Here’s a news flash: The cost of living in cities has always been high. That doesn’t change the math.

If you spend more than 30% of your gross on housing, you’re likely to have trouble making ends meet. You may not be able to save adequately for emergencies and retirement. You’re more likely to go into debt.

Only on television can young people with entry-paying jobs live in fabulous apartments in great neighborhoods. In reality, smart twentysomethings do what’s required to keep housing costs down, including living in cheaper neighborhoods and sharing space with roommates. They get over their adolescent fantasies of what city living would be like and deal with the reality of making their budgets balance.

Pay disputed bill, then seek redress

Dear Liz: A year ago my doctor sent my blood tests to a lab not covered by my health insurance. The lab charged me $62. I didn’t pay the bill because I felt I shouldn’t be held responsible for someone else’s error. My doctor has refused to pay, and the lab sent the bill to a collection agency.

TransUnion has noted this collection action and my credit score with them is 706. The other bureaus haven’t noted this and my scores with them are 810 and 820.

What’s my best course of action? Should I pay the $62? Will this help my score with TransUnion? Should I challenge the collection agency as you outlined in Chapter 7 of your book, “Your Credit Score”? Or should I do nothing because the matter will eventually decrease in importance?

Answer: You can see how much your stubbornness cost you by the difference in your credit scores among the three bureaus. You’re lucky the collection agency doesn’t report to all three bureaus, or all your scores would have dropped.

At this point, the damage has been done; you can’t reverse it just by paying the bill. You may, however, be able to negotiate with the collection agency to delete the negative mark from your TransUnion report in exchange for full payment. Get its promise to do so in advance and in writing before you pay.

If you do nothing, the effect of the collection on your TransUnion score will decline over time but will not completely disappear for seven years.

Next time, don’t let a dispute go this far. Pay the bill under protest, if you must, and consider seeking redress in small claims court.

Delinquencies on your credit report

Dear Liz: If I obtained a business line of credit, guaranteed personally but used for business purposes only, can a delinquency be reported on my personal credit report? I thought only delinquencies related to consumer debt could be reported.

Answer: You thought wrong. If your credit history is used to get the line of credit or credit card – which it probably was – the account can wind up on your credit reports, regardless of whether the purpose was business or personal.

Liz Pulliam Weston is the author “Easy Money: How to Simplify Your Finances and Get What You Want Out of Life.” Questions may be sent to 3940 Laurel Canyon Blvd., No. 238, Studio City, CA 91604, or via the “Contact Liz” form at www.asklizweston.com. Distributed by No More Red Inc.