Connect with us

Bad Credit

What is a W-shaped economic recovery? (Hint: It’s scary.)

Published

on

Anthony S. Fauci, director of the National Institute of Allergy and Infectious Diseases, put it this way when asked about when baseball stadiums will be filled again: “I cannot see a return this year to what we consider normal.”

What isn’t getting as much attention is the possibility of a W-shaped recovery, the scary scenario when the economy starts looking better and then there’s a second downturn later this year or next. The “W” could be triggered by reopening the economy too quickly and seeing a second spike in deaths from covid-19, the disease caused by the coronavirus. Businesses would have to shutter again, and people would be even more afraid to venture out until a vaccine is found.

Something else could also cause a “W” pattern: A wave of bankruptcies and defaults later this year. As companies go belly up, a domino effect ensues: Workers aren’t rehired, suppliers aren’t paid, and fear rises about who will be next to fall.

“Pretending the world will return to normal in three months or six months is just wrong,” said Diane Swonk, chief economist at Grant Thornton. “The economy went into an ice age overnight. We’re in a deep freeze. As the economy thaws, we’ll see the damage done as well. Flooding will occur.”

Early warning signs are here. Major retailers like Macy’s and Neiman Marcus face significant financial duress, and analysts anticipate bankruptcies ahead in the retail sector. Oil prices plunging below $20 a barrel is another blow to America’s fragile energy sector that will reverberate for months. Rystad Energy predicts more than 500 U.S. companies will go bankrupt by the end of 2021.

Big law firms like Hogan Lovells are urging their lawyers to brush up on bankruptcy and restructuring law “in anticipation of a wave of bankruptcy filings in the coming months,” and the major banks spent a lot of time on their earnings calls last week predicting a surge in credit card, auto loan and business loan defaults. Both firms and consumers are teetering on the financial edge.

Constance Hunter, chief economist at KPMG, expects job losses of “at least 25 million” this spring, a sky-high level not seen since the Depression era. The equally frightening number that’s received too little attention is that the median forecast for the unemployment rate by the end of the year is 10 percent — meaning more than 15 million Americans would still be out of work in December.

As people lose jobs, they stop paying their rent or mortgage, which can lead to eviction and a bad credit rating that drags them down for years. They lose health insurance and possibly their car. Often, they lose hope. This is the scenario the nation needs to avoid, and policymakers could be doing a much better job trying to prevent this, economists say.

The nation already is experiencing modern-day bread lines as Americans flock to food banks after just a few weeks of the massive unemployment spike. On Friday, Dustin Sider, pastor of Fairland Church in the small town of Cleona, Pa., posted a message on Facebook offering 2,700 eggs free to anyone who needed them. A farmer had donated the eggs to the church. Sider figured it would take a few days to get rid of them. Instead, they were gone in 28 minutes.

“I pretty much stood in the parking lot until 5 p.m. and kept telling people, ‘Sorry, we’re all out.’ The cars just kept on coming,” said Sider. “Many said they were laid off.”

Even among people who still have jobs, 25 percent are fearful they will be laid off or furloughed in the coming year, according to a Gallup poll released Wednesday. Pay cuts also are becoming common, with over 14 percent of people still employed getting lower pay or fewer hours in March, according to Gusto, a payroll processing company. All of this puts consumers on edge, making them hesitant to spend — even beyond fears about the coronavirus.

“The full restoration of consumer confidence will be more difficult and will take longer to complete than following any other recession since the Great Depression,” wrote Richard Curtin, head of the University of Michigan Survey of Consumers.

The $1,200 relief payments from the U.S. Treasury will help, but that money is likely to go to rent, food and medicine. The generous unemployment benefits Congress approved will run out at the end of July — right about when many landlords expect people to pay full rent again plus any rent they missed this spring.

The White House has heavily touted the Paycheck Protection Program, which gives businesses loans that turn into grants if the bulk of the money is used to pay employees. Companies have to rehire people by June 30, a date when a lot of employees could return to work, but businesses like restaurants won’t be able to pay their full staff if they can fill only half their tables. It’s not hard to foresee a scenario where some businesses have to lay people off again in September as Paycheck Protection Program loans dry up and customers are not back in full force.

Early evidence from China shows how cautious consumers there have become.

“The SARS epidemic in 2003 and the Spanish flu in 1918 had three peaks before subsiding. Relapses are not uncommon,” said Sung Won Sohn of SS Economics. “China claims that production is approaching about 80 percent of the capacity, but subways are less than half full. In Macao, the casinos have reopened, but the business is still down 80 percent from the previous high.”

All of this points to 2020 as the year of heavily curtailed spending as consumers are out of work or fearful of losing a job and businesses take extreme caution. Goldman Sachs expected business investment to decline by 27 percent.

“I really worry a lot about a W-shaped recovery,” said Ernie Tedeschi, a former Treasury Department economist. “People who do have jobs are going to save more than normal. That’s perfectly rational, but it delays the recovery.”

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Bad Credit

Is There a Difference Between No Credit and Bad Credit?

Published

on

The short answer is yes, and understanding the difference could be instrumental in getting better credit.

No credit and bad credit often get grouped together. It’s understandable why, as they both sound similar enough. And if you have either, the next step forward is to focus on improving your credit.

The two situations aren’t the same, though. It’s important to know the difference, because the right way to build your credit often depends on whether you have no credit history or bad credit.

Start your journey to financial success with a bang

Get free access to the select products we use to help us conquer our money goals. These fully-vetted picks could be the solution to help increase your credit score, to invest more profitably, to build an emergency fund, and much more.

By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time.
Please read our Privacy Statement and Terms & Conditions.

The difference between no credit and bad credit

Having no credit means that there’s not enough information on your credit file to calculate a credit score for you. It’s also known as being credit invisible. Sadly, this is an issue that affects millions of Americans.

There aren’t any problems on your credit file; the credit bureaus just don’t have enough data on you. That means when a lender or any other third party checks your credit, there’s nothing to go on.

Meanwhile, “bad credit” is a common term used to describe a low credit score. That low score is because of negative items on your credit file, such as not paying your credit card bill.

When you have no credit, the solution is to build your credit. When you have a low credit score, the solution is to rebuild your credit. Now, let’s look at how you can do each one.

How to build credit for the first time

Here’s the simplest way to build credit:

  • Open a credit card.
  • Use the credit card for at least one purchase per month.
  • Always pay your credit card bill on time and in full.

It’s that easy; that’s all you need to do to get a good credit score. When you use a credit card and pay the bill on time, you establish a positive payment history. That’s the biggest credit scoring criteria.

The tricky part when you have no credit is finding a credit card you can qualify for. Secured credit cards are one of the most common options for consumers in this situation. You pay a security deposit for this type of card, so it’s possible to open a secured card even if you have no credit.

If you’re in college, credit cards for students are available. These are often an option for applicants without any credit history.

How to rebuild a low credit score

It’s a little more complicated to rebuild your credit. First, you need to find out what negative items are affecting your credit score. Here’s how to start:

  • Use an online credit score tool to check your score and learn about any items damaging your credit. If you have a credit card, there may be a credit score tool in your online account. If not, there are plenty of free ways to get your credit score.
  • Request your credit report from the three consumer credit bureaus (Equifax, Experian, and TransUnion). You can pull a free annual credit report from each bureau, and through April 2022, you can get free weekly credit reports. Your credit report will show you exactly what’s affecting your credit.

Once you know what’s affecting your credit, you can work on correcting it. Below are a few of the most common issues and how to fix them.

Problems with your payment history

This includes anything related to not paying a bill on time, from late payments to having accounts go to collections.

The first step is catching up on your payments. If you can’t pay in full, contact your creditors and see if you can set up a payment plan with them. They may be willing to work with you if that means you’ll be making regular payments.

Next is rebuilding your payment history. The easiest option is to use a credit card at least once per month and pay in full by the due date. Why do you need to use a credit card? Credit card companies report on-time payments to the credit bureaus, which helps your credit score. With other types of bills, your on-time payments typically don’t get reported to the credit bureaus. That means you may not be able to improve your payment history with rent, utilities, or other monthly bills.

If you already have credit cards, you can continue using them to rebuild your payment history. If you don’t, look for secured credit cards and apply for one you like.

Using too much of your credit

A big factor in your credit score is your credit utilization ratio — your credit card balances divided by your credit limits. If this number gets too high, it can lower your credit score. The standard recommendation is a credit utilization ratio of under 30%.

Let’s say you have one credit card with a $4,000 balance and a $5,000 credit limit. That would put your credit utilization at 80% ($4,000 divided by $5,000 is 80%), a very high number that would decrease your credit score.

Fortunately, only your current credit utilization matters. Once you pay down your credit card balance, your credit score will bounce back.

Errors on your credit history

A low credit score may be due to an error and not any action on your part. This is why it’s so important to pull your credit reports from each credit bureau. By reviewing those, you can see if there are any mistakes.

If there are errors on your credit report, you can go to the credit bureau’s website to dispute them online and get them removed.

A low credit score and a nonexistent credit score are both things you can change. After you determine exactly what the issue is, you’ll be able to choose the best solution to fix it.

Source link

Continue Reading

Bad Credit

‘There is no new normal’: Worcester small business owner pivoted during COVID-19 and expects only more change after pandemic

Published

on

It took about eight minutes for the bank to reject Natalie Rodriguez’s application for a loan through the Small Business Administration.

Rodriguez opened Nuestra, a Puerto Rican inspired restaurant in Worcester, in January of 2020. When COVID-19 arrived months later she discovered Nuestra wasn’t eligible for the federal or state funding that thousands of other establishments received.

To qualify, restaurants were required to show payroll and salary for years before 2020. Those figures didn’t exist for a restaurant that weren’t open in 2019.

“[I was] determined and knew that ‘no’ is not an OK answer,” Rodriguez said. “A door may close but you may need to kick down another door.”

Rodriguez then applied for conventional loans only to be led to more closed doors. Less than 10 minutes after applying for an Economic Injury Disaster Loan, she received notice that her poor credit score resulted in her application being denied.

Rodriguez used the dead end with the SBA to create a new path for herself and Nuestra.

She not only learned how to improve her credit but wanted to ensure others didn’t have to follow her journey as an entrepreneur.

Rodriguez extended the “Nuestra” brand to include financial advising. She started Nuestra Financial in April of 2020.

“Now I’m helping others. I’ve been able to restore my credit,” Rodriguez said. “I’ve been able to help others restore their credit and be able to help them make a business themselves if they so choose. I’ve been able to survive.”

Without grants and other funding, Rodriguez managed to keep her restaurant open through funds generated from Nuestra Financial.

“I was very quiet about it in the beginning. I didn’t want people to be like, ‘Oh look at this girl, she just opened a restaurant in the middle of a pandemic,’ and talk smack,” Rodriguez said. “About a month or two later, a light bulb hit and I was like, nobody pays my bills but me. I needed to mind my own business and not worry about what other people thought.”

In creating Nuestra Financial, Rodriguez said she’s helped Worcester residents restore their credit and purchase new vehicles and homes.

Rodriguez said financial literacy is rarely taught to children in school and wasn’t something she learned. When a situation arises like a rejection notice for an economic disaster loan, many don’t know how to respond or where to find answers.

Rodriguez said she’s helped young and old people, along with those who have bad credit or no credit.

“We lack the confidence, including myself, because we weren’t taught,” Rodriguez said. “So if you don’t know something, you weren’t taught, you’re not going to be confident about it.”

Coming out of the pandemic, Rodriguez remains confident about both her businesses. Nuestra, the restaurant, while closed for daily service continues to provide catering services. Rodriguez is still preparing what the future holds for the restaurant but plans to announce an update soon.

As masks start to become less a part of daily routines, Rodriguez, as a small business owner, doesn’t envision many differences from this year to last.

So many aspects of life remain uncertain from rising food costs to a potential third booster for vaccines and whether the country will ever reach herd immunity for COVID-19.

The pandemic arrived with Rodriguez immediately pivoting. As it approaches its potential end, Rodriguez will continue to do what helped her to navigate it.

“I feel like there is no new normal just yet,” Rodriguez said. “I think we’re all just trying to adjust and pivot at the same time and getting creative. I think it’s where we all are.”

Related Content:

Owner of Worcester’s Nuestra restaurant, closing due to COVID impact, has something she’d like to say to Gov. Baker

Source link

Continue Reading

Bad Credit

Columbus Mattress Wholesale moves to newer, larger Gahanna store

Published

on

More than four years back, Cathryn Clark’s boyfriend, Christopher Robbins, was on the hunt for a new mattress. He just couldn’t find one at an affordable  price. 

Clark, 29, and Robbins, 34, who are now engaged, were living in Franklinton, where they still live today.

They had no experience owning or operating a small business; Robbins worked as a retail assistant for SAS Retail Services while Clark worked as the communications director for two Methodist churches. 

But in 2017, Robbins, with Clark at his side, took the leap and opened Columbus Mattress Wholesale on the West Side, with the goal of  helping low-income consumers secure mattresses and other bedtime products.  

“We really wanted to bring a store to people that, you know, they weren’t paying an arm and leg, but they still could get a good night’s sleep,” Clark said.

Customers at Columbus Mattress Wholesale can pay cash or credit, for example, but the business also works with financing companies that serve people without credit scores, with bad credit or who are lower income. 

Last month, the business made a big move. It expanded from its original location on Harrisburg Pike to a store double the size at 435 Agler Road in Gahanna.

Clark said she and Robbins saw a need in the broader area, with many of their customers coming from outside the Hilltop, such as Linden.

Nestled between Dollar Tree and the Ohio BMV in Gahanna, the new storefront opened Memorial Day weekend and sells mattresses, bed bases, bed frames and pillows. Mattress prices range from under $100 to more than $1,000, depending on the size and brand, which includes some well-known names such as Serta, Beautyrest and Casper.

Clark said while she and Robbins originally sold solely Ohio-based brands, they’ve branched out to national brands as business has grown.

Columbus Mattress Wholesale also offers free same-day delivery on most orders from customers living in Columbus. 

Clark does a little bit of everything for the business, from running communications, to working on the sales floor, to managing the sales team, to ordering what they sell. 

She said a big mission for herself and Robbins, beyond doing business, is aiding the community.

“We’ve seen a lot of people struggle,” Clark said.

Clark said she and Robbins work to mentor other people who are hoping to open or currently own a small business. She added that the store starts employees at $17 per hour.

She and Robbins haven’t decided yet what they will do with the original location — which is currently closed — but said they might shift it into an accessory store.

[email protected]

@SarahEDon

Source link

Continue Reading

Trending