Credit building accelerates asset building. Participants in this session will learn the value of credit building as an asset building strategy and an opportunity for strengthening your clients’ financial capabilities. Participants will learn about what credit building is and basic considerations for integrating credit building into your programs. We will explore credit building innovations including a pilot program here in Oregon that helps clients automatically build credit while fulfilling their IDA savings plan. Sarah Chenven, Credit Builders Alliance Nancy Yuill, Innovative Changes

1. Supersize that IDA:
How enhancing your programs
with credit building can achieve
even greater impacts

2. Establishing and maintaining
ACTIVE (paying on time &
regularly)
trade lines that are
reported by creditors to the
major credit bureaus.
STRONG
CREDIT
HISTORY
What is Credit Building?

3. Opening and successfully
managing financial products is key
to building and maintaining a
good credit history.
Credit Building:
The Key and The Catch 22

4. 64 million U.S. consumers have no or thin credit history
26 million (1 in 10) are credit invisible
19 million (8%) have unscored credit records
Consumers in low-income neighborhoods
• Almost 30% are credit invisible
• 15% have records that are unscored
Black and Hispanic consumers
• About 15% are credit invisibles compared to 9% of
White consumers.
• 13% of Black consumers and 12% of Hispanic
consumers have unscorable records compared to 7%
of White consumers.
• Analysis suggests that these differences across racial
and ethnic groups materialize early adulthood and
persist.
Credit Profile Realities

5. CBA’s Credit Building Community
in Oregon

6. Implementing Credit Building
Initiatives: Lenders
 Report existing financial (loan) products
 Design new financial products
 Identify complementary external financial
products
Credit Building Products can serve many different people and purposes.

7. Every monthly payment reinforces positive financial habits!
Implementing Credit Building
Initiatives: Non-Lenders

8. Reactivate/rehabilitate existing credit lines
Create referral relationships with financial institutions
Partner with nonprofit and/or other responsible
lenders that offer Credit Builder products
Create and offer your own Credit
Builder products!
Implementing Credit Building
Initiatives: Lenders & Non Lenders

9. Determine Mission
Fit
Define Target
Market & Need
Identify/
Create Product
Establish Financial
Education
Requirements/
Support
Assess
Organizational
Capacity
Assess Community
Partnerships/ Create
Relationships
Identify Loan
Capital & Risk
Tolerance
Scan Regulatory
Environment
Identify a
Graduation Product
Sign up to Report
through CBA!!!
Implementing Credit Building
Initiatives: Threshold Considerations

10. Vanilla Credit Builder
Loan Characteristics
 Installment loan with 0% interest
 100% secured, loan disbursed after 12 monthly payments
 Choose your loan amount
 $150 loan with 12 monthly payments of $12.50
(individuals only, no couples)
 $300 loan with $25 payments for 12 months
 $600 loan with 12 monthly payments of $50
 Automatic enrollment in autopay from your bank account
– Payment due dates 5th or 20th

11. Vanilla Credit Builder
Loan Characteristics, cont.
 We report your on-time monthly payments to the three credit
bureaus
 Non-refundable $25 application processing fee due with
application ($35 for dual applicants)
 $25 loan processing fee ($35 for dual applicants)
• Average score improvement:
– 677 if you start with no score
– Gain 42 points if you start with a score

12. Credit stretches your IDA Dollars
$200,000 Mortgage over 30 years
Credit
Score
620-640 760
Interest
Rate
5.6% 4%
Monthly
Payment
$1,148 $955
Total
Interest
Paid
$213,280 $143,800
A strong score saves $69,480!

13. All kinds of dollars are stretched
$8,000 Car Loan over 60 Months
Credit
Score
609 700
Interest
Rate
12.99% 2.49%
Monthly
Payment
$182 $142
Total
Interest
Paid
$2918 $516
A strong score improves cash flow and savings!

14. Look who else cares about credit
Good credit increases access and options!

15. From self directed to nudged
CB loans
Since 2010
350+ borrowers
IDAs
Since 2013
130+ savers
13

16. Promoting the good behaviors
time discount and present bias
Value of frequent feedback Status quo bias

17. Promoting the good behaviors
Social norms and self concept
Betrayal aversion
Consistency and self image

18. CB with IDA Pilot
CASA of Oregon – IDA Fiduciary Organization
Credit Builders Alliance – National network, training,
consulting and reporting
Hacienda CDC – Homeownership IDA
Innovative Changes-IDA and Lender
Neighborhood Partnership-IDA Initiative
NE Oregon Economic Devt District – SB IDA

19. Pairing CB with IDA
IDA Awareness
• sign up for
orientation
• learn about
Credit
building
opportunity
IDA
orientation
• Pre
application
• 2 months
bank
statements
• stability plan
• Monthly
budget
Credit building
orientation
• Just after
the IDA
orientation
• Details of CB
loan
• CB
application
Submit IDA pre
application and
CB application
• Same
supporting
docs
• One staff
contact point
Approved to
apply for an
IDA
• Receive and
submit the
FO
application
• Proof of
income
If not approved
for IDA, they
can still be
approved for a
CB Loan

20. Make it as seamless as possible
Group IDA enrollment
• Sign saving plan
• Pay IDA application fee
• Staff submit FO app to
FO
Group CB closing, right
after IDA enrollment
• Sign loan docs
• Pay CB loan application
fee
• Sign saving plan
amendment
• Get credit report&score
• Get credit action plan
• Schedule individual
coaching
Month 0
• FO sends bank letter
• Saver opens bank
account
• Saver makes 1st deposit
of IDA savings and loan
payment
• Saver sends bank
account number to
lender

21. Make it as seamless as possible
Month 0: Loan disbursal
• Lender deposits loan
proceeds into the IDA
account
• Loan funds are safeguarded
by the FO, it can not be
withdrawn
• It secures the loan
payments
• Client receives invoice for
loan payment month 1
Month 1: Ln payments begin
• Lender ACHs loan payment
• Lender books loan payment
loan management system
• Lender invoices borrower for
next payment
• Borrower makes deposit
number #2, IDA savings and
loan payment
Monthly loan payments
and reporting continue
for set period of time
• Lender reports
payment to credit
bureaus at start of
month 2 and each
month after
• CB loan is set to
mature when IDA
matures
• Can end loan early if
early exit

22. Make it as seamless as possible
Last month of loan
• Borrower makes final
deposit of IDA savings and
loan payment
• Lender ACHs final monthly
loan payment and final
processing fee.
• Lender informs FO to
release the loan proceeds to
the borrower.
Last month plus one
• Lender reports final month
loan payment and paid in full
(PIF).
• Borrower can access the loan
proceeds.
For the next seven years
that loan and all its great
on time performance
stays on the borrower’s
credit report.
If needed,
borrower can
take out
another CB
loan, vanilla
flavored.

23. Loan terms
Loan
term in
months
Number
of Credit
Check-Ins
Loan
Amount
Application
fee
Monthly
payment
Processing
fee
Amount you
receive at the
end
6 2 60 50 10 0 60
12 3 144 25 12 25 119
18 3 180 25 10 25 155
24 4 240 25 10 50 190
30 4 300 25 10 50 250
36 5 360 25 10 75 285
Application fee pays part of the cost to set up the loan, pull the first credit report and
provide first credit session.
Processing fee pays part of the cost of processing the loan payments, reporting the loan payments,
pulling subsequent credit reports and provider subsequent credit reviews and unlimited coaching.
It reflects the increased expenses for longer loan terms.

24. Credit Reviews and Coaching
Loan term
in months
1st credit
score, action
plan &
coaching
Credit
score,
written
review
Credit score,
written
review
Credit score,
written
review
Credit score,
written
review
6 Month 0 Month 6 ////////// ///////// /////////
12 Month 0 Month 6 Month 12 ///////// /////////
18 Month 0 Month 6 Month 12 Month 18 /////////
24 Month 0 Month 6 Month 12 Month 24 /////////
30 Month 0 Month 6 Month 12 Month 30 /////////
36 Month 0 Month 6 Month 18 Month 24 Month 36
Free individual coaching is always available.

25. Lessons learned
• Patience and good communication
• Coordinate document collection
• Funding levels
• Systems and scale
• It’s early yet, we have more to learn

26. Lessons learned

27. • New funds for new classes, such as credit
building with IDAs in April 2016
• Evaluation report of this pilot will be available
in May or June 2016
• Stand alone credit building through
partnerships

28. Questions?
Please be in touch
Nancy Yuill
nancy@innovativechanges.org
Sarah Chenven
sarah@creditbuildersalliance.org