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Build Credit. Build Assets. AFI University November 7, 2007 Vikki Frank, Executive Director
Mission <ul><li>CBA is a new non-profit organization creating innovative solutions for asset building organizations to hel...
Our Work <ul><li>CBA is implementing its mission through three main activities: </li></ul><ul><li>CBA Reporter </li></ul><...
Why Credit Scores? <ul><li>Low credit scores = “underbanked” </li></ul><ul><li>A good credit score provides:  </li></ul><u...
Why Credit Scores? <ul><li>“ Credit building may be the most cost-effective and efficient asset building tool.”   </li></u...
Why Credit? CBA’s Premise: “Credit Score is a Financial Asset” People with a good credit rating will save approximately $2...
Why Credit? <ul><li>“ Credit Score is a Financial Asset” </li></ul><ul><li>Access to prime, safe financial services is inc...
What’s in your score <ul><li>35%  -- payment histories on your credit accounts, with recent history weighted a bit more he...
Credit Tips <ul><li>Timing is Almost Everything </li></ul><ul><li>A  RECENT  history of   ON-TIME   repayments on  DIVERSE...
What is  credit?  <ul><li>Demonstrating good financial behavior based on information  not  in a traditional credit report ...
What to do as an IDA practitioner? <ul><ul><li>Recognize how important good credit is </li></ul></ul><ul><ul><li>Educate y...
What is Credit Building? <ul><li>X   Credit Repair -  help individuals remove information on the credit report they know t...
Measure your Impact Credit reports could provide a  cost-effective   objective   longitudinal  measure of financial behavi...
 
Vikki Frank Executive Director 202-730-9390 [email_address] www.creditbuildersalliance.org Recent Press: Helping Clients B...
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  1. 1. Build Credit. Build Assets. AFI University November 7, 2007 Vikki Frank, Executive Director
  2. 2. Mission <ul><li>CBA is a new non-profit organization creating innovative solutions for asset building organizations to help low and moderate income families build stronger credit. </li></ul>
  3. 3. Our Work <ul><li>CBA is implementing its mission through three main activities: </li></ul><ul><li>CBA Reporter </li></ul><ul><li>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. </li></ul><ul><li>Credit Builders Toolkit </li></ul><ul><li>An online resource to collect and share tools and best practices for asset-based credit building strategies. </li></ul><ul><li>Research and Awareness Raising </li></ul><ul><li>Working with our partners to implement research and create new credit building opportunities for low-income and underserved populations </li></ul>
  4. 4. Why Credit Scores? <ul><li>Low credit scores = “underbanked” </li></ul><ul><li>A good credit score provides: </li></ul><ul><ul><li>access to mainstream financing </li></ul></ul><ul><ul><li>lower interest rates </li></ul></ul><ul><ul><li>safer products </li></ul></ul><ul><ul><li>less vulnerability to predatory lenders </li></ul></ul><ul><ul><li>access to rental housing, employment, insurance, etc. </li></ul></ul>
  5. 5. Why Credit Scores? <ul><li>“ Credit building may be the most cost-effective and efficient asset building tool.” </li></ul><ul><li>Robert Boyle, Justine Petersen Housing, St. Louis </li></ul><ul><li>JP’s Premise </li></ul><ul><li>The single most important factor in developing and increasing long term assets is attaining and maintaining a high credit score. </li></ul><ul><li>As advocates and practitioners we have a responsibility: </li></ul><ul><ul><li>to recognize how important good credit is in our financial culture, and by contrast how debilitating bad credit is </li></ul></ul><ul><ul><li>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. </li></ul></ul>
  6. 6. 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.
  7. 7. Why Credit? <ul><li>“ Credit Score is a Financial Asset” </li></ul><ul><li>Access to prime, safe financial services is increasingly determined by an individual’s credit score. </li></ul><ul><ul><li>Credit score helps families build wealth -- a home, a business, education. </li></ul></ul><ul><ul><li>Credit also impacts opportunities and access to: </li></ul></ul><ul><ul><li>rental housing </li></ul></ul><ul><ul><li>car insurance </li></ul></ul><ul><ul><li>auto purchases </li></ul></ul><ul><ul><li>employment </li></ul></ul><ul><ul><li>access to checking, savings, and investment accounts </li></ul></ul><ul><ul><li>utilities and phones </li></ul></ul><ul><ul><li>medical services </li></ul></ul>
  8. 8. What’s in your score <ul><li>35% -- payment histories on your credit accounts, with recent history weighted a bit more heavily than the distant past. </li></ul><ul><li>30% -- amount of debt you have outstanding with all creditors. </li></ul><ul><li>15% -- how long you’ve been a credit user (a longer history is better if you made timely payments). </li></ul><ul><li>10% -- very recent history, based on your efforts to obtain loans or credit lines in the past few months. </li></ul><ul><li>10% -- mix of credit you hold, including installment loans (like car loans), leases, mortgages, credit cards. </li></ul>traditional
  9. 9. Credit Tips <ul><li>Timing is Almost Everything </li></ul><ul><li>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. </li></ul><ul><ul><ul><li>Six to twelve months of on-time payments can build a 600 score with no other history . </li></ul></ul></ul><ul><ul><ul><li>Six months of on-time payments toward a $100 loan can increase a score 50-100 points. </li></ul></ul></ul>
  10. 10. What is credit? <ul><li>Demonstrating good financial behavior based on information not in a traditional credit report </li></ul><ul><li>Requires lenders to manually underwrite </li></ul><ul><li>Fannie and Freddie push mortgage underwriters to accept Rent plus 2 lines of “alternative credit” when no credit exists </li></ul><ul><li>PRBC is a new credit reporting agency that allows individuals to build an alternative credit report </li></ul>alternative
  11. 11. What to do as an IDA practitioner? <ul><ul><li>Recognize how important good credit is </li></ul></ul><ul><ul><li>Educate yourself on credit </li></ul></ul><ul><ul><li>Know the credit profile of your clients </li></ul></ul><ul><ul><li>Pull a credit report at client intake & review it </li></ul></ul><ul><ul><li>Help your client “own” their credit history </li></ul></ul><ul><ul><li>Encourage your client to fix incorrect information </li></ul></ul><ul><ul><li>Help your client build a better credit future </li></ul></ul><ul><ul><li>Educate/Coach clients towards good credit </li></ul></ul><ul><ul><li>Offer credit building tools </li></ul></ul>
  12. 12. What is Credit Building? <ul><li>X Credit Repair - help individuals remove information on the credit report they know to be true </li></ul><ul><li>? Credit Counseling - counsel clients and be able to offer them “debt management plans” </li></ul><ul><li>! Credit Education - provide general educational information around credit through websites, workshops, etc. </li></ul><ul><li>! Credit Coaching - provide individual support and strategies for people to create or improve their credit profile </li></ul><ul><li>! Credit Building - provide asset building products and services to help people create or improve their credit profile </li></ul>
  13. 13. 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
  14. 15. Vikki Frank Executive Director 202-730-9390 [email_address] www.creditbuildersalliance.org Recent Press: Helping Clients Build Credit Federal Reserve Bank of Boston: www.bos.frb.org/commdev/c&b/2007/fall/
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