8:20 AM
“A recent report by two Harvard researchers found that economic mobility among consumers with higher risk scores is hampered by lack of credit access, and U.S. small business owners who use personal cards to help their operations can be stymied, too.”
The report titled “Out of Reach: Regressive Trends in Credit Card Access,” discusses the side effects of regulation of the credit card and banking industries as mandated by the CARD Act.
What has happened due to regulations, is that access to credit has become more difficult. Individuals without an established positive credit history are having trouble getting credit in the first place.
Statistics from the article and report are astonishing, as credit card originations and going in two opposite directions. Individuals who are quote “High-risk” or basically have no positive credit history, are obtaining 50% less credit cards than before. Let’s go over that statistic one more time…HALF of the credit that those people who need it the most would have obtained, is NOT being granted.
If you do not have positive credit history and money in the bank, you probably are not going to get a credit card with the line of credit you need.
What is even worse, those with “relatively high scores actually moved higher with an average of 1.3 million new originations annually.” Meaning that those that have money are getting even more, creating an uneven playing field for low-income / low-credit individuals.
How does this affect business? The report indicates that twenty percent of small business owners use their own personal credit to finance the daily operations of that business.
“Personal credit card use can, at times, be a lifeline for a small business, especially among the very smallest firms within the United States, such as those with fewer than 10 employees. The authors noted that as many as 1.5 million of these smallest of small business owners (or 20 percent) use personal cards in a business setting, as found by the National Federation of Independent Businesses.”
The report and article go on to talk about the effects of Frank-Dodd and regulation and the need to change regulation, but in the meantime, the small business startup is not getting funded because she or he doesn’t have the credit history to get a line of credit significant enough to fund her startup for the first 6-12 months.
This is where Credit Pathway comes in. We know that this is a problem and we have the solution: Tradelines. Tradelines are a way of “piggybacking” on someone else’s good or even great credit history. By taking advantage of this completely legal strategy (see our previous blog about the Federal Reserve), small business owners can get a $60,000 line of credit.
Yes, getting a line of credit for a new small business startup, like a food truck (as described in the PYMNTS article) is difficult, but it doesn’t have to be if you know how to work within the legal limitations of the system.
As we have mentioned before, our goal is to fund 300 small businesses this year, let’s help make you one of those.
Take a look at www.CreditPathway.com and we’ll get you the funding you deserve.
To read the original report by Lux and Green:
https://www.hks.harvard.edu/centers/mrcbg/publications/awp/awp37
To read the original article by PYMNTS:
http://www.pymnts.com/news/b2b-payments/2016/as-lower-score-consumer-access-to-credit-dwindles-smbs-to-suffer/
