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How to protect your credit if the pandemic affected you financially

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Nearly six in 10 Americans say their income has been negatively impacted by the coronavirus pandemic, according to TransUnion’s poll of over 3,000 U.S. adults fielded last week. About 78% are worried about paying their bills and making good on loans.

They may be right to worry — missing a payment on your mortgage, student loans or credit cards can have a big impact on your credit score. In 2007, the average FICO credit score was about 690, but during the low point of the financial crisis in 2009, when many Americans were out of work and struggling financially, it dipped to 687.

In today’s environment, a good credit score is essential if you want to take out a mortgage, open a credit card, rent an apartment and even land some job opportunities.

The new stimulus package offers some credit protections: Lenders and financial institutions need to report accounts as ‘current’ (as opposed to delinquent) to the credit bureaus until 120 days after the national emergency declaration ends. 

But those rules are limited. First, in order to get credit protection under the Coronavirus Aid, Relief and Economic Security (CARES) Act, you need to be up-to-date on all your payments. If your account isn’t current, you’re not eligible. 

Second, you need to have reached an agreement for forbearance or modified payments with your lender or financial institution. If you applied and received a 90-day forbearance on your mortgage payments — and your previous payments were paid on time and in full — your missed payments will not be reported to the credit bureaus. 

Yet even with the CARES Act provisions, millions of Americans’ credit will be affected, including those who are struggling through no fault of their own, says Chi Chi Wu, a staff attorney at the National Consumer Law Center. Take restaurant employees, for example. Many have been laid off because of shelter-in-place orders and now may be struggling to pay their bills. If they miss payments without first contacting their lender to set up some type of forbearance or modified payment plan, they will be treated the same as someone who poorly managed their credit, Wu says. 

It’s important to take action now to protect your credit and make it easier to get back on your feet once the pandemic is over. Here are five things you can do now if you’ve been financially affected by the coronavirus pandemic. 

1. Call your lenders

Under the CARES Act protections, the only ways to protect your credit is to continue to make on-time payments or apply for coronavirus assistance programs before you’re in trouble. It’s not automatically applied to your accounts. 

“Consumers are going to have to pick up the phone and call their servicer to get relief,” Wu says. You’ll need to call every single lender that you’re not going to be able to pay and request relief separately. Each individual account will need to be put on notice. 

If you don’t have time to wait on hold — some consumers are reporting wait times spanning hours — you can download the DoNotPay app ($3 per month; subscription available only for iPhone), which offers a “skip waiting on hold” function where a bot calls the company, navigates the teleprompts, waits on hold and forwards the call to you when a customer service rep is available. 

2. Ask for a natural disaster code to be added to your credit report

There’s a special comment code, natural disaster code (AW), that lenders and credit bureaus can add to a credit report when there’s been a hurricane or other extreme weather event. After Hurricane Harvey hit Texas and Louisiana in 2017, about 40% of consumers had this code applied to their credit report. 

While it’s existed for decades, the code could be applied to events beyond just natural disasters, including the current coronavirus pandemic, John Ulzheimer, an expert on credit scores and credit scoring, tells CNBC Make It. “When that code is added to an account, it actually adds a sentence to your account that reads ‘affected by declared or natural disaster,'” Ulzheimer says.

It’s not something consumers can add themselves, so you’ll need to call your lender or the credit bureaus, Equifax, Experian and Transunion. Adding natural disaster code (AW) will not affect your FICO credit score, Ulzheimer says: “It’s purely cosmetic, it doesn’t protect the score.” But the code does protect your VantageScore (another type credit score generated by the credit bureaus) from any delinquent reporting being added to that account, Ulzheimer says.

“It’s not what I would call a safety net underneath a trapeze artist, but every little bit helps,” Ulzheimer says. He adds that for most consumers, it makes the most sense to contact your lenders and request that the natural disaster code (AW) be added when you’re calling to ask about a forbearance or payment plan, rather than making extra calls to the credit bureaus just about adding the code. “Kill two birds with one stone,” he says. 

3. Don’t stress if you’re a few days behind

When it comes to late payments, there’s a bit of credit protection already built in for consumers, Ulzheimer says. Lenders can’t report a missed payment until 30 days after the payment is due. “There’s no way to report someone as being late by one to 29 days, it doesn’t exist,” he says. 

But if you don’t contact your lender and set up some kind of agreement and you miss your payment by more than 30 days, your credit score will likely take a hit. How much will vary from “not very much to pretty catastrophic,” Ulzheimer says. It will depend on the quality of your credit before that late payment hits. 

If you have bad credit and you start missing payments, it may not have that much of an impact. “You can only beat a dead horse so much — there’s not really not much more damage you can do to yourself,” Ulzheimer says. But if you have a really good credit score, above 780, adding a late payment to your credit report is going to be a bigger deal. 

4. Keep an eye on how much credit you’re using

Continuing to make minimum payments on your loans and credit cards is going to protect your credit, Ulzheimer says. But that alone may not be enough.

You also need to watch your balances. When many Americans were out of work in 2008 and 2009, they started living off their credit cards to make it through until they were able to find a job, Ulzheimer says. But putting a big balance on your credit card can drive your credit score down. 

That’s because you’re using more of your available credit, which is a big factor in calculating credit risk and credit scores. When you use more than 30% of your available credit, your credit score is typically going to be lower because it signals to credit card companies that there’s a greater risk you may not pay it all off or that it may take a while to do so.

“Even if consumers are able to make those minimum payments on time, the fact that they’re running up credit card debt, that’s another reason why their scores are going to go down,” Ulzheimer says. If you have any emergency savings, use that to pay bills and purchase essentials if your credit card balances are getting high. 

5. Check in on your credit score

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Possible Raises Series B and Moves Fully Remote | State

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SEATLLE, Oct. 20, 2020 /PRNewswire/ — Possible raises $11 million in new equity funding to expand the team and to provide additional products for its customers. Union Square Ventures led the round, with participation from existing investors Canvas Ventures, Unlock Venture Partners, Columbia Pacific Advisors, Union Bay Partners, Tom Williams, and FJ Labs. The company has also secured $80 million in new debt financing from Park Cities Advisors.

Furthermore, the company is now fully remote and recently onboarded software engineers from across the US and the globe. Possible is committed to distributed work and actively recruiting for a number of other remote roles.

Possible provides friendly access to capital and a simple way to build credit for people who otherwise would get a payday loan or get hit with a bank overdraft fee. The company uses real-time financial data, rather than a credit score, to qualify customers and provide funds instantly through its iTunes and Android apps. Unlike payday loans or overdraft fees, Possible loans are paid back in small installments over multiple pay periods to allow customers to catch their breath. By reporting on-time payments to the credit bureaus, Possible enables its customers to build credit history and eventually qualify for cheaper, longer term financial products. On average, customers with low credit scores see their scores increase by 70 points within 4 months.

Tony Huang, Possible’s CEO explains, “So many people who live paycheck to paycheck can’t afford to build credit history. We’re helping them do it for the first time while providing them with a friendlier and more affordable small-dollar loan.”

Since launching in June 2018, Possible’s given out loans to hundreds of thousands of customers, helping meet short-term cash needs while building credit history or establishing credit for the first time. These customers, often with bad credit or no credit history, are underserved by traditional banks. Possible fills that gap and provides financial access to those who need it most while giving them the means to climb their way out.

Gillian Munson, Partner at Union Square Ventures, explains the thesis behind their new investment, “Through tech innovation, data-driven insights, and a focus on the customer, Possible is well on its way to winning the hearts and minds of both consumers and regulators alike, and building a trusted brand that endures.”

A 2019 Experian study shows 34.8% of consumers are subprime and can’t access money when they need it. They pay $106 billion in punitive fees each year to the existing financial system for short-term credit products. These consumers are trapped in predatory debt cycles of payday loans and overdraft fees without the means to rebuild their credit or improve their financial health. While there has been a number of new tech-enabled products in this space, most lead to similar debt cycles and don’t address the harder issue of improving long-term financial health. That’s where Possible comes in.

Since the company is now fully remote, Possible is actively hiring talent across the globe. Tyler, Possible’s CTO, explains, “Being fully distributed allows us to access the talent pool of the entire world. Our success so far is a reflection of the quality of our people, and we believe hiring globally will allow us to find exceptional people to join us in achieving our mission.”

About Possible

Possible is a fintech company based in Seattle, Washington. The company provides a friendlier and easier way for customers to access capital while also building credit history and improving long-term financial health.

About Union Square Ventures

Union Square Ventures is a thesis-driven venture capital firm based in New York City. USV manages over $1 billion in capital across seven funds and focuses investments in portfolio companies with the potential to transform important markets.

About Park Cities Advisors LLC

Park Cities Advisors LLC (“PCA”) is a privately held, SEC-registered alternative credit manager based in Dallas, Texas. PCA is focused on private lending across the specialty finance and FinTech sectors and provides debt capital to companies across a variety of industries through asset-based financing transactions.

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Possible Raises Series B and Moves Fully Remote | State News

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SEATLLE, Oct. 20, 2020 /PRNewswire/ — Possible raises $11 million in new equity funding to expand the team and to provide additional products for its customers. Union Square Ventures led the round, with participation from existing investors Canvas Ventures, Unlock Venture Partners, Columbia Pacific Advisors, Union Bay Partners, Tom Williams, and FJ Labs. The company has also secured $80 million in new debt financing from Park Cities Advisors.

Furthermore, the company is now fully remote and recently onboarded software engineers from across the US and the globe. Possible is committed to distributed work and actively recruiting for a number of other remote roles.

Possible provides friendly access to capital and a simple way to build credit for people who otherwise would get a payday loan or get hit with a bank overdraft fee. The company uses real-time financial data, rather than a credit score, to qualify customers and provide funds instantly through its iTunes and Android apps. Unlike payday loans or overdraft fees, Possible loans are paid back in small installments over multiple pay periods to allow customers to catch their breath. By reporting on-time payments to the credit bureaus, Possible enables its customers to build credit history and eventually qualify for cheaper, longer term financial products. On average, customers with low credit scores see their scores increase by 70 points within 4 months.

Tony Huang, Possible’s CEO explains, “So many people who live paycheck to paycheck can’t afford to build credit history. We’re helping them do it for the first time while providing them with a friendlier and more affordable small-dollar loan.”

Since launching in June 2018, Possible’s given out loans to hundreds of thousands of customers, helping meet short-term cash needs while building credit history or establishing credit for the first time. These customers, often with bad credit or no credit history, are underserved by traditional banks. Possible fills that gap and provides financial access to those who need it most while giving them the means to climb their way out.

Gillian Munson, Partner at Union Square Ventures, explains the thesis behind their new investment, “Through tech innovation, data-driven insights, and a focus on the customer, Possible is well on its way to winning the hearts and minds of both consumers and regulators alike, and building a trusted brand that endures.”

A 2019 Experian study shows 34.8% of consumers are subprime and can’t access money when they need it. They pay $106 billion in punitive fees each year to the existing financial system for short-term credit products. These consumers are trapped in predatory debt cycles of payday loans and overdraft fees without the means to rebuild their credit or improve their financial health. While there has been a number of new tech-enabled products in this space, most lead to similar debt cycles and don’t address the harder issue of improving long-term financial health. That’s where Possible comes in.

Since the company is now fully remote, Possible is actively hiring talent across the globe. Tyler, Possible’s CTO, explains, “Being fully distributed allows us to access the talent pool of the entire world. Our success so far is a reflection of the quality of our people, and we believe hiring globally will allow us to find exceptional people to join us in achieving our mission.”

About Possible

Possible is a fintech company based in Seattle, Washington. The company provides a friendlier and easier way for customers to access capital while also building credit history and improving long-term financial health.

About Union Square Ventures

Union Square Ventures is a thesis-driven venture capital firm based in New York City. USV manages over $1 billion in capital across seven funds and focuses investments in portfolio companies with the potential to transform important markets.

About Park Cities Advisors LLC

Park Cities Advisors LLC (“PCA”) is a privately held, SEC-registered alternative credit manager based in Dallas, Texas. PCA is focused on private lending across the specialty finance and FinTech sectors and provides debt capital to companies across a variety of industries through asset-based financing transactions.



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Business Loans – Make The Right Choice!

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Your business needs funding and there’s no denying that! ‘You need money to make money’ and this is most applicable in the business world! While it is fairly easy to start with an awesome idea, to make a business profitable, you need to invest a good chunk of capital.

Whether to buy equipment or hire the right minds, you need capital! And the best way to go about it is to search for the ‘right’ business loan solution. Finding the ‘right’ one amongst the plethora of available options is a tricky decision.

You’ll be under stress to match the repayment frequency. And thus, your business will suffer. Hence, finalizing the right business financing solution after analyzing your business structure, repayment terms, cash-flow, and urgency is the best practice.

Here’s a detailed breakdown of which business financing solution or small business loan will help your business better!

1. For Real Estate – SBA

SBA loan is one of the most popular loans for small business owners. This is pretty straightforward to understand but involves extensive paperwork. If you need a place to kickstart your business, this is most suited for you.

It is issued by a private lending party or a bank. But the interesting part is that this loan can be guaranteed up to 85% by the federal agency—Small Business Administration (SBA). Hence, lending institutions are free and content to give the loan.

The best things about this loan are the lowest down payments and low-interest rates. If you wish to pay in the very long term, you can do so. An SBA loan involves a lot of flexibility. The condition being you should have the right financial service provider to guide you.

2. For An Equipment Or Any One-Off Loan – Equipment Financing, Term Loan

Do you need a new computer, or a tablet for your employee, or maybe a vehicle for your business’ delivery needs? Equipment financing is best suited for such kinds of needs. You can also get up to 100% financing solutions.

But there is one drawback that you should be aware of. As long as the repayments are done on time, you’ll continue to have access to the equipment. But the moment you fail short of your commitment, the lending institution has completed control over ceasing it.

A business term loan is another solution for this kind of requirement. Term loans are based on the ‘term’ that can be anywhere from 1 to 5 years. So, the repayment has to be made in that time-frame. If you’re looking for business loans in Edgewater, NJ, this will be just about right for you!

3. Need To Balance Cash Flow – Business Line of Credit

Business Line of Credit is the best financing solution that can help you with balancing your cash flow or handling any emergencies.

You get access to a limited amount of funds for a set period of time that you need to pay with interest and as soon as you pay it back, your specific balance sheet is turned back to ‘0’. This indicates that you’re again eligible for using that fund.

You can do it repetitively. There is no drawback to this mechanism. So every time you have an emergency fund need, you can look towards the business line of credit.

The only shortcoming of this system is that the interest rate is high and may require collaterals for approval. However, it is one of the most appealing choices if you need capital and have a bad credit score!

4. Credit Card Based Businesses – Merchant Cash Advance

Do you own a business that involves payments via credit cards? If yes, then the merchant cash advance is the right solution for you.

A business like retail or food chain that makes use of credit card transactions the most, can utilize merchant cash advance to boost its business. The way this financing system works is, the lender will enquire about your daily credit card transactions to the terminal provider and get your exact details. Then, he will compare it with the asked amount. If both are in accordance, you’ll become eligible for the advance.

The repayment term is interesting for this financing solution. Instead of getting a fixed rate, the advance provider will give you the figure in percentage. So every day if you make $1000 and the decided percentage is 5, then $50 will be ‘withheld’.

A merchant cash advance acts more like an investment than a loan!

5. Have No Collateral – Invoice Financing, Equipment Financing

Not all businesses have the luxury of putting collateral on the line and getting access to the desired fund. If you fall into the same category, you do not need to worry! Invoice financing can help you out even in this crunch situation.

Your account receivables serve as collateral in this financing solution and can help you get a loan up to 85% of its worth.

The only downside is the interest rate that is marginally higher than the traditional solutions.

Bonus: For A Small Duration – Short Term Loan

What if you need a loan just for 18 months? You have some debt or need to manage the cash flow, but your requirement is small. Which loan is right for you?

Well, you can opt for a short term loan. This loan gives you instant access to a lump sum of money that should be paid within the next 18 months.

The best part about this loan is that bad credit doesn’t bother the process!

This can also support businesses that need temporary loans to manage or settle a few things. Businesses that do not need some loan that lasts for years!

But just like all other financing solutions, this loan as well comes with a few drawbacks.

The first one being the annual cost will be slightly towards the higher side and the second being that a few businesses may find it hard to cope-up with the weekly payments.

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