Access to affordable credit is a way of knowing if you are the middle class
What does it mean to be middle class today? That might mean you have access to affordable credit in a squeeze, says reporter Russ Wiles.
Diana Payan, Republic | azcentral.com
Like many Americans, Chris Gray got financial problems when he collected large medical expenses – in his case, for hip surgery four years ago.
"The medical bills just start to pick up, especially if you can. It doesn't work," said Gray, a 37-year-old Phoenix resident who works with sales and delivery to a flooring firm. "You burn through your emergency savings." [19659005] Gry's credit score dropped in the subprime category, making it harder to get attractive interest rates, Chris Gray of Phoenix is working to improve his finances after damaging his credit score. "Width =" 540 "data-mycapture- src = "https://www.gannett-cdn.com/presto/2019/06/12/PPHX/51828d4a-5c63-4a8e-89ab-11ceb9de073e-ChrisGray.jpg" data-mycapture-sm-src = "https: //www.gannett-cdn.com/presto/2019/06/12/PPHX/51828d4a-5c63-4a8e-89ab-11ceb9de073e-ChrisGray.jpg?width=500&height=375"/>
Chris Gray of Phoenix Jobs To improve their finances after damaging his credit score. (Photo: Russ Wiles)
Gray now pays his debt, often works 60 hours a week at his permanent job and a sidetrack, but his financial life is still not back to where he wants to be. Having a subprime credit score has limited its options.
"Until I have a good credit score, (a conventional bank loan) will not happen," he said.
Access to Credit in a Clamp
] When most Americans think about being middle class, they usually visualize having a certain level of income and material assets like a car or a house. But another way to think is to have the opportunity to borrow money, if you need it, at affordable prices.
"The new medium-sized divide is access to credit," says Jonathan Walker, CEO of Elevate Center for the new middle class, a research and lawyer group. "When unexpected expenses show up, they can become a crisis if you don't have access to credit."
Having access to credit does not necessarily mean using it or misusing it. A small piece of Americans is sufficiently wealthy that they do not need to borrow money. But for most of the rest, good credit is not only desirable but represents an important economic backstop.
People with low premium points
People with subprime credit scores – usually below 650 to 700 on the standard FICO scale of 300 to 850 – often cannot borrow cheaply when they need money, to build up their assets (for example, by buying a home) or to meet emergency medical, auto repair or other major ticket costs.
This means that they may have to resort to high-priced borrowing, or without.
According to research cited by the Walker group, some 160 million Americans have subprime points or no credit points. Usually this is because they have already fallen behind on bills, missed payments or filed for bankruptcy. When new expenses come, they often have trouble meeting them.
"Anyone who has to pay 400% annual interest rate (for a payday loan) will probably not be able to pay it quickly," said Mike Sullivan, a personal finance consultant at Take Charge America, a Phoenix-based credit counseling firm. "When to deal with payday loans, it is difficult to get out. "
Struggling middle class Americans, unlike the poor, often do not know about various security net programs such as public subsidized foods or medical problems, whether it or they do not think they will, will qualify or are embarrassed to ask for help, they often see their difficulties as temporary, said Walker.
Approximately 30 percent of adults are within three paychecks who need to borrow money or miss out on bills, according to a new northwestern mutual study.
The three-digit figure measures if you manage debt and is a key factor that determines whether you qualify for a loan and what interest rate you will pay.
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What pushes debtors over the edge
Many factors can cause people problems, but two factors stand out. One is a reduction of working time, which was cited by 55% of non-central respondents in a May study conducted by the Walker group. Another 24% cited medical bills as the main cause.
Secondary factors included a large car repair (11%), leaving home for the first time (6%), and paying for the child's college expenses (5%). [19659005] But instead of something, it is often a combination of pressure that pushes people into financially hot water and damages their credit. Of the studies that responded with medical costs as the primary catalyst, three out of four also said they had had a fall in income, making it more difficult to handle the medical bills.
People with subprime credit scores said unexpected costs that accounted for more than about 30% of their monthly income would be enough to disrupt their finances significantly. On average, it will take an average of only $ 1,400 or so in new commitments to push many of these cash strains over the edge.
Page Jobs Can't Help
So why not just take an extra page job to get the ends to To meet? Some people pursue gig jobs – and new mobile phone applications make it easier to find short-term work quickly.
"But it is not so easy if you are a single parent and have to pay child care and cannot have a great car to get around, says Sullivan. "The Gig economy is not as welcoming to many people living on the edge."
In addition, the time between losing a job and finding a new one, even if only a few weeks, is enough to cause injury, with as many people living as paychecks to paycheck.
"The low unemployment does not mean that there is high job security," Walker said. "Surely, you can go out and find another job, but if you don't have savings, the gap period will be disastrous."
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Friends and relatives, be careful
Cash-stricken people who are unable or willing to borrow with high interest rates, instead turn to family members or friends for help. It can also be dangerous if the person does not repay the money.
In addition to risking your own money, family members or friends who borrow money or incur a loan can see their own credit score damaged if payments are & # 39;
"It can make a person's financial frailty contagious to others," Walker said.
If you find yourself friends or relatives for money, it may be a sign that you have been out of the middle class.
Reach Wiles at russ.wiles@arizonarepublic.com or 602-444-8616.
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