Update on Unemployment Programs: What You Should Know about the American Rescue Plan Act of 2021

May 1, 2021CreditBy toptierfinancial

Unemployment programs have been incredibly important throughout the COVID-19 pandemic. When the global health crisis first began, many businesses shut down and the unemployment rate spiked almost immediately. Now, over a year since the initial outbreak, many businesses have been able to adjust to the “new normal” and hiring is picking back up. However, many people are still out of work, and thankfully there is still relief. Here is a quick look at some of the important updates you should know.

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law (also known as ARPA). This law is the most recent in a line of pandemic-related legislation going back to early last year. The CARES Act was the first legislation. It was followed by the Consolidated Appropriations Act, 2021 (which included the Continued Assistance for Unemployed Workers Act), and now ARPA. ARPA arrived just in time and extended provisions in the previous Continued Assistance for Unemployed Workers Act which expired March 14. Here is a closer look at some of the important provisions regarding unemployment benefits under this new law.

Unemployment Benefits

Legislation during the pandemic has created a robust framework of various unemployment programs. Here are some of the most important ways ARPA affects the different programs:

Pandemic Emergency Unemployment Compensation (PEUC). This program provides unemployment benefits even after you exhaust state your state unemployment compensation benefits. You can think of this program as essentially extending the period of time you can collect unemployment. Though the money comes from the federal government, this program is designed to essentially work like an extension of your usual state benefits, and the program is administered by each state.  ARPA extends PEUC benefits up to a maximum of 53 weeks and through September 6, 2021.

Pandemic Unemployment Assistance (PUA). This program temporarily provides unemployment insurance to freelancers, self-employed individuals, and other workers who would usually not be eligible. ARPA provides for a maximum duration of PUA benefits of 79 weeks (up to 86 weeks for individuals in those states with high levels of unemployment) and it extended the program through September 6, 2021.

Federal Pandemic Unemployment Compensation (FPUC): This program originally provided an extra $600 per week in unemployment benefits in addition to state benefits. The program was extended by the Consolidated Appropriations Act through March 14, 2021, but at a reduced benefit level of $300 per week. ARPA extended the program through September 6, 2021, and the amount remains at $300.

Mixed Earner Unemployment Compensation (MEUC). This program was not part of the CARES Act. Instead, it was created by the Continued Assistance for Unemployed Workers Act. This program is designed to help workers who have self-employment income and traditional income (i.e. reported on a W-2). It provides assistance to eligible workers who earn at least $5,000 in self-employment income, are not in the PUA program, and who are eligible to receive state unemployment. The MEUC program is extended through September 6, 2021, under ARPA.

Income Tax Waiver

One of the big “gotchas” with unemployment benefits (both before and during COVID-19) has been that the benefits are considered taxable income. ARPA has provided some relief on this issue. ARPA provides a tax break by waiving federal tax on $10,200 of unemployment benefits collected in 2020. This applies to each taxpayer who earns less than $150,000. Many, but not all, states are offering similar tax waivers for state taxes.

Moving Forward

As you can see, ARPA has brought about many important changes. Perhaps most importantly, key unemployment programs have been extended, and there is a tax break for the benefits received last year. Gig workers may also find some additional assistance as they now have PUA and MEUC as potential relief options.

If you are unemployed, you not only need to determine the right benefits options, but you also need a structured budget and financial plan. The NFCC can help. Contact an NFCC-certified credit counselor to get started.

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Ask an Expert: Does Credit Counseling Affect My Federal Student Loan Consolidation?

April 28, 2021CreditBy toptierfinancial

The NFCC often receives readers questions asking us what they should do in their money situation. We pick some to share that others could be asking themselves and hope to help many in sharing these answers. If you have a question, please submit it on our Ask an Expert page here.

This week’s question: I just recently petitioned Fedloan Servicing to get my student loans consolidated, can I still get credit counseling or get a debt management plan? Would enrolling in a nonprofit debt management plan create issues with the application process for student loan consolidation?

The answer is yes, you can get credit counseling or enroll in a debt management plan even if you are working with your loan servicer to consolidate your federal student loans. In fact, if you are struggling to pay your bills, it is the perfect time to enlist extra help to find ways to manage all your debts, not only your student loans.

Each Debt Type Requires a Unique Repayment Strategy.

Each type of debt has a unique repayment strategy. So, the way to deal with your consumer debts and student loans is to do so separately. One of the main benefits of working with a nonprofit financial counseling agency is that you can get holistic counseling to help you find the best ways to deal with all your debt and put your finances in order. Before recommending a debt repayment strategy, your financial counselor will review your finances, help you create a budget, and set achievable goals. There are many strategies to repay debts, from self-repayment plans to Debt Management Plans. However, not all strategies are right for everyone. Finding the one that’s right for you is crucial.

When dealing with federal student loans, your best option is to explore the repayment programs offered by your servicer. It’s usually the best way to help you preserve some of the benefits that come from having student federal loans. A financial counselor can help you figure out which program could benefit you the most. But if you are already working toward a consolidation, they can take that into account during your counseling session.

Don’t hesitate to reach out to one of our NFCC Certified Financial Counselor. They won’t interfere with your consolidation, instead they can help you understand the process and manage your overall debt and financial situation. You’ll see that with the right guidance you will be debt-free before you know it. Good luck!

 

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Can Inquiry “Bumpage” and “Choppage” Help Your Credit?

April 28, 2021CreditBy toptierfinancial

Can Inquiry "Bumpage" and "Choppage" Really Help Your Credit? - Credit Countdown With Expert John Ulzheimer - PinterestSome folks in the field of credit repair claim that hard inquiries can be “bumped” or “chopped” off of your credit report through the processes of inquiry “bumpage” and “choppage.”

What do these terms mean, and do they actually work?

Credit expert John Ulzheimer, who has worked in the credit industry for 30 years, gave us his take on this trend in a Credit Countdown video on our YouTube Channel. We’ve outlined the main points of the video for you in the article below.

How Much Do Inquiries Impact Your Credit Score in the First Place?

Credit scores factor in five categories of information when calculating your score, and they are not all given equal weight.

The most important piece of the credit score pie chart is your payment history, or in other words, your track record of making your payments on time. This factor accounts for 35% of your FICO credit score.

The next largest piece is how much debt you owe, which relies heavily on your revolving utilization metrics, among other factors. Your debt comprises 30% of your credit score.

Your length of credit history, AKA your credit age, represents 15% of your score, while credit mix, or your diversity of types of credit accounts, makes up 10%.

Finally, the last 10% of your credit score comes down to the new credit category, which includes hard inquiries.

For this reason, focusing on trying to remove inquiries from your credit report usually does not make sense as a credit improvement strategy. Even if you are 100% successful in removing all of the hard inquiries that may be bringing down your credit score, you will only move the needle a small amount relative to what you could accomplish by focusing on the more important credit score factors.

What Is Inquiry Bumpage?

The concept behind credit inquiry “bumpage” is the idea that the credit bureaus only have a certain amount of space allocated for each consumer’s credit report. Therefore, the theory goes, if you can fill that limited amount of space with new information, you can “bump” the oldest inquiries off of your credit report.

What Is Inquiry Choppage?

Inquiry “choppage” is theoretically what happens when the soft inquiries get “chopped” or removed from your credit report before the hard inquiries can be “bumped” off.

Do Inquiry Bumpage and Choppage Really Work?

According to John Ulzheimer, aside from the speculation and marketing tactics you may see in credit repair space online, there is no reason to believe that bumpage and choppage even happen in the first place, let alone that they are effective strategies to help get hard inquiries removed from your credit report.

Better Ways to Increase Your Credit Score

While the methods of bumpage and choppage are not recommended when trying to improve your credit, fortunately, there are more legitimate and effective things you can try.

Remove inaccurate derogatory information. If there is damaging information on your credit report that is not supposed to be there, filing a dispute to get it removed or corrected should be your top priority.
Pay your bills on time. Since your payment history has the greatest amount of influence on your credit score, getting more on-time payments onto your credit report will go a long way toward attaining a higher credit score.
Maintain low balances on your credit cards. Factors having to do with the amount of debt you owe also play a sizeable role in determining your credit score, and your credit card utilization ratios are the key metrics in this category. The lower your credit card balances are, the higher your credit score can climb.
Limit the number of accounts that have balances on your credit report. In addition to utilization ratios, credit scoring models also consider how many of your accounts have balances on them. Even if the balances are small, if you have too many accounts with balances, this can bring down your credit score.
Increase your credit age. All you have to do to increase your credit age is wait patiently for your accounts to get older!
Plus, try some of the other credit tips we’ve published in our Knowledge Center, such as our list of easy credit hacks that will actually get you results.

Read more: tradelinesupply.com

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Which Forms Are Used to Complete the Credit Dispute Process?

April 27, 2021CreditBy toptierfinancial

When you file a credit dispute, there are certain forms and processes that are used in order to resolve the dispute.

To help familiarize you with the credit dispute process, let’s go over:

What these forms are used for
When these forms are used
The information that is included on these forms

The specific forms that are required depend on which type of dispute you are filing.

Indirect Disputes

The credit bureaus get your credit data from the individual lenders or companies you have accounts with, also known as data furnishers. Some examples of these businesses include financial services companies, banks, credit unions, credit card issuers, and debt collectors.

When you file a credit dispute with the credit reporting agencies rather than contacting the business that is furnishing the disputed data, this is called an indirect dispute, since you are not going directly to the company that is providing the incorrect information.

Automated Consumer Dispute Verification Form (ACDV) or Consumer Dispute Verification Form (CDV)

Indirect disputes involve a form called the Automated Consumer Dispute Verification form (ACDV) or the Consumer Dispute Verification form (CDV). The ACDV is simply the modern digital version of the CDV, which refers to the analog format of the original document on paper.

When you initiate a dispute with a credit bureau, the credit bureau generates an ACDV that contains the information about your dispute.

The credit bureau then sends the completed ACDV form to the data furnisher using a communication system called e-OSCAR.

At this point, the lender furnishing the disputed data investigates the claim, updates the ACDV, and sends the form back to the credit bureau.

Finally, the credit bureau reviews the form, makes the appropriate changes to the consumer’s credit report, and notifies the consumer of the results of the dispute.

Direct Disputes

If you choose to dispute the inaccurate information on your credit report with the furnishing party, that is called a direct dispute, because you are going directly to the lender without involving the credit bureaus.

Automated Universal Dataform (AUD) or Universal Dataform (UDF)

When you make a direct dispute with the furnishing party, the data furnisher should correct the error and fill out an Automated Universal Dataform (AUD) reflecting the correction. The AUD is the automated digital version of the form, which was originally called the Universal Dataform (UDF).

Once the AUD has been prepared, the furnishing party sends it using e-OSCAR to all of the credit bureaus where the error is appearing on your credit report. The data furnisher is obligated to contact each credit bureau to ensure that the error has been removed from all three of your credit reports.

Watch the Credit Countdown video on this topic with credit expert John Ulzheimer below.

Read more: tradelinesupply.com

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