New PUA Rules: Don’t Miss These Unemployment Deadlines

The second stimulus package is tightening the rules for millions of gig workers, independent contractors and self-employed workers receiving unemployment aid.

On Dec. 27, the $900 billion stimulus package extended Pandemic Unemployment Assistance, a critical benefits program for folks who don’t typically qualify for regular unemployment aid. The deal lengthened PUA benefits for at least 11 weeks, but it also created new filing rules that affect current recipients and new applicants alike.

Chief among the new rules: You will need to submit income documentation to your state’s unemployment agency if you are a gig worker or self-employed worker — or risk losing future benefits and having to return any benefits collected after Dec. 27.

“I think they are a real pain,” said Michele Evermore, an unemployment policy analyst for the National Employment Law Project, regarding the new PUA filing rules. “Not just for recipients, but for state agencies to collect. Every burden we add to state agencies slows benefit processing for everyone.”

The new requirements are intended to combat fraud. According to the Department of Labor, more than 7.4 million people are relying on PUA and are subject to the changes.

New Pandemic Unemployment Assistance Rules and Deadlines

The new deadlines established by the second stimulus package are different for current PUA recipients and new applicants.

As a current PUA recipient, you have until March 27 to submit income-related documents to prove your PUA eligibility. If you apply for PUA before Jan. 31, you also have until March 27.

If you apply for PUA Jan. 31 or later, you will have 21 days from the date of your application to submit income-related documents.

Need to apply? Our 50-state Pandemic Unemployment Assistance filing guide includes an interactive map and the latest information from the second stimulus deal.

The Department of Labor requires each state to notify you of your state-specific rules. Your state may have different deadlines. In that case, refer to your state’s instructions. The DOL is also leaving it to each state to determine exactly what documents are required to prove your eligibility.

Here are some examples of documents your state may ask you to file:

  • Tax forms such as 1099s and W-2s.
  • Ledgers, recent pay stubs and earnings statements from gig apps.
  • Recent bank statements showing direct deposits.

If you’re self-employed, you may be required to submit:

  • Federal or state income tax documents.
  • A business license.
  • A 1040 tax form along with a Schedule C, F, SE or K.
  • Additional records that prove you’re self employed, such as utility bills, rental agreements or checks.

If you’re qualifying for PUA because you were about to start a job but the offer was rescinded due to COVID-19 related reasons, you may be asked to submit an offer letter, details about the employer and other information related to the job to verify your claim.

Another new rule is that you will have to self-certify that you meet one or more of the following PUA eligibility requirements on a weekly basis:

  • You have been diagnosed with COVID-19 or have symptoms and are seeking diagnosis.
  • A member of your household has COVID-19.
  • You are taking care of someone with COVID-19.
  • You are caring for a child or other household member who can’t attend school or work because it is closed due to the pandemic.
  • You are quarantined by order of a doctor or health official.
  • You were scheduled to start employment and don’t have a job or can’t reach your workplace as a result of the pandemic.
  • You have become the breadwinner for a household because the head of household died due to COVID-19.
  • You had to quit your job as a direct result of COVID-19.
  • Your workplace is closed as a direct result of COVID-19.

Self-certification means that you swear the reason(s) you are on PUA is or are true at the risk of perjury. Previously, PUA applicants had to self-certify only once at the time of their initial application.

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Evermore says that since current PUA recipients weren’t asked to submit all this information when they were first approved, they might no longer have access to the requested documents.

“People who were told they don’t need documentation may have lost it, and this will create panic resulting in more stress on people who have already had an unimaginably bad year,” she said.

The good news, Evermore says, is that states have leniency to waive some of these requirements if you can demonstrate “good cause” for not being able to submit the requested documents. What’s considered “good cause” is also determined on a state-by-state basis.

“People who got approved for benefits in the past won’t necessarily get cut off from benefits simply because they are unable to produce the requested documentation,” Evermore said. “Just follow all of the agency’s instructions carefully.”

Adam Hardy is a staff writer at The Penny Hoarder. He covers the gig economy, remote work and other unique ways to make money. Read his ​latest articles here, or say hi on Twitter @hardyjournalism.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Source: thepennyhoarder.com

How to Get Approved for Credit in a Financial Downturn

In a recession it’s common for many people to rely on credit cards and loans to balance their finances. It’s the ultimate catch-22 since, during a recession, these financial products can be even harder to qualify for.

This holds true, according to historical data from the Federal Reserve Bank of St. Louis. It found that during the 2007 recession, loan growth at traditional banks decreased and remained deflated over the next four years. 

Credit can be a powerful tool to help you make ends meet and keep moving forward financially. Here’s what you can do if you’re struggling to access credit during a weak economy.

Lending becomes riskier in a weak economy. Does this mean you’re completely out of luck if you have bad credit? Not necessarily, but you might need to take the time to understand all of your alternatives.

How Does a Financial Downturn Affect Lending?

Giving someone a loan or approving them for a credit card carries a certain amount of risk for a lender. After all, there’s a chance you could stop making payments and the lender could lose all the funds you borrowed, especially with unsecured loans. 

For lenders, this concept is called, “delinquency”. They’re constantly trying to get their delinquency rate lower; in a booming economy, the delinquency rate at commercial banks is usually under 2%. 

Lending becomes riskier in a weak economy. There are all sorts of reasons a person might stop paying their loan or credit card bills. You might lose your job, or unexpected medical bills might demand more of your budget. Because lenders know the chances of anyone becoming delinquent are much higher in a weak economy, they tend to restrict their lending criteria so they’re only serving the lowest-risk borrowers. That can leave people with poor credit in a tough financial position.

Before approving you for a loan, lenders typically look at criteria such as:

  • Income stability 
  • Debt-to-income ratio
  • Credit score
  • Co-signers, if applicable
  • Down payment size (for loans, like a mortgage)

Does this mean you’re completely out of luck if you have bad credit? Not necessarily, but you might need to take the time to understand all of your alternatives.

5 Ways to Help Get Your Credit Application Approved 

Although every lender has different approval criteria, these strategies speak to typical commonalities across most lenders.

1. Pay Off Debt 

Paying off some of your debt might feel bold, but it can be helpful when it comes to an application for credit. Repaying your debt reduces your debt-to-income ratio, typically an important metric lenders look at for loans such as a mortgage. Also, paying off debt could help improve your credit utilization ratio, which is a measure of how much available credit you’re currently using right now. If you’re using most of the credit that’s available to you, that could indicate you don’t have enough cash on hand. 

Not sure what debt-to-income ratio to aim for? The Consumer Financial Protection Bureau suggests keeping yours no higher than 43%. 

2. Find a Cosigner

For those with poor credit, a trusted cosigner can make the difference between getting approved for credit or starting back at square one. 

When someone cosigns for your loan they’ll need to provide information on their income, employment and credit score — as if they were applying for the loan on their own. Ideally, their credit score and income should be higher than yours. This gives your lender enough confidence to write the loan knowing that, if you can’t make your payments, your cosigner is liable for the bill. 

Since your cosigner is legally responsible for your debt, their credit is negatively impacted if you stop making payments. For this reason, many people are wary of cosigning.

In a recession, it might be difficult to find someone with enough financial stability to cosign for you. If you go this route, have a candid conversation with your prospective cosigner in advance about expectations in the worst-case scenario. 

3. Raise Your Credit Score 

If your credit score just isn’t high enough to qualify for conventional credit you could take some time to focus on improving it. Raising your credit score might sound daunting, but it’s definitely possible. 

Here are some strategies you can pursue:

  • Report your rent payments. Rent payments aren’t typically included as part of the equation when calculating your credit score, but they can be. Some companies, like Rental Kharma, will report your timely rent payments to credit reporting agencies. Showing a history of positive payment can help improve your credit score. 
  • Make sure your credit report is updated. It’s not uncommon for your credit report to have mistakes in it that can artificially deflate your credit score. Request a free copy of your credit report every year, which you can do online through Experian Free Credit Report. If you find inaccuracies, disputing them could help improve your credit score. 
  • Bring all of your payments current. If you’ve fallen behind on any payments, bringing everything current is an important part of improving your credit score. If your lender or credit card company is reporting late payments a long history of this can damage your credit score. When possible speak to your creditor to work out a solution, before you anticipate being late on a payment.
  • Use a credit repair agency. If tackling your credit score is overwhelming you could opt to work with a reputable credit repair agency to help you get back on track. Be sure to compare credit repair agencies before moving forward with one. Companies that offer a free consultation and have a strong track record are ideal to work with.

Raising your credit isn’t an immediate solution — it’s not going to help you get a loan or qualify for a credit card tomorrow. However, making these changes now can start to add up over time. 

4. Find an Online Lender or Credit Union

Although traditional banks can be strict with their lending policies, some smaller lenders or credit unions offer some flexibility. For example, credit unions are authorized to provide Payday Loan Alternatives (PALs). These are small-dollar, short-term loans available to borrowers who’ve been a member of qualifying credit unions for at least a month.

Some online lenders might also have more relaxed criteria for writing loans in a weak economy. However, you should remember that if you have bad credit you’re likely considered a riskier applicant, which means a higher interest rate. Before signing for a line of credit, compare several lenders on the basis of your quoted APR — which includes any fees like an origination fee, your loan’s term, and any additional fees, such as late fees. 

5. Increase Your Down Payment

If you’re trying to apply for a mortgage or auto loan, increasing your down payment could help if you’re having a tough time getting approved. 

When you increase your down payment, you essentially decrease the size of your loan, and lower the lender’s risk. If you don’t have enough cash on hand to increase your down payment, this might mean opting for a less expensive car or home so that the lump sum down payment that you have covers a greater proportion of the purchase cost. 

Loans vs. Credit Cards: Differences in Credit Approval

Not all types of credit are created equal. Personal loans are considered installment credit and are repaid in fixed payments over a set period of time. Credit cards are considered revolving credit, you can keep borrowing to your approved limit as long as you make your minimum payments. 

When it comes to credit approvals, one benefit loans have over credit cards is that you might be able to get a secured loan. A secured loan means the lender has some piece of collateral they can recover from you should you stop making payments. 

The collateral could be your home, car or other valuable asset, like jewelry or equipment. Having that security might give the lender more flexibility in some situations because they know that, in the worst case scenario, they could sell the collateral item to recover their loss. 

The Bottom Line

Borrowing during a financial downturn can be difficult and it might not always be the answer to your situation. Adding to your debt load in a weak economy is a risk. For example, you could unexpectedly lose your job and not be able to pay your bills. Having an added monthly debt payment in your budget can add another challenge to your financial situation.

However, if you can afford to borrow funds during an economic recession, reduced interest rates in these situations can lessen the overall cost of borrowing.

These tips can help tidy your finances so you’re a more attractive borrower to lenders. There’s no guarantee your application will be accepted, but improving your finances now gives you a greater borrowing advantage in the future.

The post How to Get Approved for Credit in a Financial Downturn appeared first on Good Financial Cents®.

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