# Presentation: 514707

- Build Credit. Build Assets.
- AFI University
- November 7, 2007
- Vikki Frank, Executive Director

## Mission

- 	CBA is a new non-profit organization creating innovative solutions for asset building organizations to help low and moderate income families build stronger credit.

## Our Work

**CBA is implementing its mission through three main activities:**
- _[CBA Reporter](http://www.creditbuildersalliance.org/cbareporter/)_
- 	CBA is a a One-Stop Shop for community lenders to provide and receive data critical to their mission through our unique partnerships with major credit bureaus.
- _[Credit Builders Toolkit](http://www.creditbuildersalliance.org/toolkit/)__ _
- 	An online resource to collect and share tools and best practices for asset-based credit building strategies.
- _[Research and Awareness Raising ](http://www.creditbuildersalliance.org/about/creditbureaus.htm)_
- 	Working with our partners to implement research and create new credit building opportunities for low-income and underserved populations

## Why Credit Scores?

- Low credit scores = “underbanked”
- 	A good credit score provides:
- access to mainstream financing
- lower interest rates
- safer products
- less vulnerability to predatory lenders
- access to rental housing, employment, insurance, etc.

## Why Credit Scores?

**“****Credit building may be the most cost-effective and efficient asset building tool.”**
- 	Robert Boyle, Justine Petersen Housing, St. Louis
- JP’s Premise
- The single most important factor in developing and increasing long term assets is attaining and maintaining a high credit score.
- As advocates and practitioners we have a responsibility:
- to recognize how important good credit is in our financial culture, and by contrast how debilitating bad credit is
- to convey information to our client/customer about how to begin to get good credit and how to safeguard or improve her credit if hard times hit.

## Why Credit?

**CBA’s Premise: “Credit Score is a Financial Asset”**
- People with a good credit rating will save approximately $250,000 in interest throughout their working lives
- A homeowner will save more than $250,000 on a 30-year fixed $300,000 mortgage.
- A car buyer will save up to $50 a month on a 36-month car loan.

## Why Credit?

**“****Credit Score is a Financial Asset”**
- Access to prime, safe financial services is increasingly determined by an individual’s credit score.
- Credit score helps families build wealth -- a home, a business, education.
- Credit also impacts opportunities and access to:
-  rental housing
-  car insurance
-  auto purchases
-  employment
-  access to checking, savings, and investment accounts
-  utilities and phones
-  medical services

## What’s in your score

**35%** -- payment histories on your credit accounts, with recent history weighted a bit more heavily than the distant past.
**30%** -- amount of debt you have outstanding with all creditors.
**15%** -- how long you’ve been a credit user (a longer history is better if you made timely payments).
**10%** -- very recent history, based on your efforts to obtain loans or credit lines in the past few months.
**10%** -- mix of credit you hold, including installment loans (like car loans), leases, mortgages, credit cards.

- traditional

## Credit Tips

- 	Timing is Almost Everything
- 	A **RECENT** history of **ON-TIME** repayments on** DIVERSE** **CREDIT **account**S** **REPORTED** to a major credit bureau is the best way towards a good credit score.
- Six to twelve months of on-time payments can build a 600 score with no other history.
- Six months of on-time payments toward a $100 loan can increase a score 50-100 points.

## What is     credit? 

- 	Demonstrating good financial behavior based on information not in a traditional credit report
- Requires lenders to manually underwrite
- Fannie and Freddie push mortgage underwriters to accept Rent plus 2 lines of “alternative credit” when no credit exists
- PRBC is a new credit reporting agency that allows individuals to build an alternative credit report

**alternative**

## What to do as an IDA practitioner?

- Recognize how important good credit is
- Educate yourself on credit
- Know the credit profile of your clients
- Pull a credit report at client intake & review it
- Help your client “own” their credit history
- Encourage your client to fix incorrect information
- Help your client build a better credit future
- Educate/Coach clients towards good credit
- Offer credit building tools

## What is Credit Building?

**X**** ****Credit Repair -  **help individuals remove information on the credit report they know to be true
**? ****Credit Counseling**  - counsel clients and be able to offer them “debt management plans”
**!**** Credit Education **- provide general educational information around credit through websites, workshops, etc.
**!**** Credit Coaching - **provide individual support and strategies for people to create or improve their credit profile
**!**** Credit Building - **provide asset building products and services to help people create or improve their credit profile

## Measure your Impact

- 	Credit reports could provide a *cost-effective* *objective* *longitudinal* measure of financial behavior and behavior change to look at client and community impact:
- 	Best Practices in financial education and asset building
- 	Increased Access to Bank Products
- 	Increased Borrowing Power
- 	Savings in Cost of Borrowing/Interest
- But...you would need access to credit reports

## Slide 14

## Vikki Frank

**Vikki Frank**
**Executive Director**
**202-730-9390**
- vikki@creditbuildersalliance.org
- www.creditbuildersalliance.org
- Recent Press:
- Helping Clients Build Credit
- Federal Reserve Bank of Boston:
- www.bos.frb.org/commdev/c&b/2007/fall/