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Exploring Innovation in Community Development Closing the wealth divide…

Exploring Innovation in Community Development Closing the wealth divide… New Ways to Help Underserved Communities Build Credit and Assets April 17, 2008. Session Highlights. Credit in today’s economy Innovative Approaches in Building Credit Asset-based Credit building strategies

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Exploring Innovation in Community Development Closing the wealth divide…

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  1. Exploring Innovation in Community Development Closing the wealth divide… New Ways to Help Underserved Communities Build Credit and Assets April 17, 2008

  2. Session Highlights • Credit in today’s economy • Innovative Approaches in Building Credit • Asset-based Credit building strategies • CBA Reporter: Report borrower repayment to build traditional credit

  3. Mission To create innovative solutions to help non-traditional financial and asset building institutions serving low and moderate income individuals build client credit and financial access in order to grow their businesses and/or personal assets.

  4. Our Board CBA has a diverse active board with more than 50% practitioner representation: • ACCION USA • Association for Enterprise Opportunity (AEO) • Center for Financial Services Innovation • Central Vermont Community Action Council • Virgin Money (formerly Circle Lending) • Community Capital of Vermont • Fox Valley Micro Loan Fund • Justine Petersen Housing • New Mexico Assets Consortium • Opportunity Finance Network • RUPRI Center for Rural Entrepreneurship

  5. Our Work CBA is implementing its mission through three main activities: Innovative Products and Services CBA Reportercommunity lenders can provide borrower data through our unique partnerships with major credit bureaus. Education and Training CBA Toolkitis an online resource to collect and share tools and best practices for asset-based credit building strategies. CBA Workshopsas webinars and on-site trainings Credit Impact Measure Toolinforming how credit reports could provide a cost-effectiveobjectivelongitudinal measure of economic self-sufficiency Research and Awareness Raising CBA works with national partners to understand and impact policy, conduct research, and create better understanding around credit building Longitudinal Researchwith Justine Petersen & St. Louis University

  6. CBA Premise “A Credit Score is a Financial Asset” People with a good credit rating will save approximately $250,000 in interest throughout their working lives Good credit decreases the cost of doing business for micro-entrepreneurs so that they are more competitive in the marketplace. A business vehicle will cost $50 less a month on a 36-month loan.

  7. Credit Catch-22 Families with low or poor traditional credit have few opportunities to build credit Low credit scores = “underbanked” Good score = financial Inclusion • 15 percent of the U.S. population - between 35-50 million people – have no credit files or thin files and are “unscoreable.” • 25 percent of the population have poor scores (lower than 650 FICO)

  8. What is Credit Building? • XCredit 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

  9. Credit builder 5-step • Step 1 : Credit Education • many people are creditworthy, but not credit educated • Step 2 : Know the Score • Know the credit profile of your clients and pull a credit report at every client intake • Step 3: Get the Good Stuff Going • Build NEW good credit versus dwelling on old bad credit • Step 4: Create a Credit Action Plan • Step 5: Delve Deeper out of Debt

  10. Non profit challenge: Few nonprofit and other small lenders furnish loan data to the credit bureaus. • Policy barriers for small loan portfolios/non-paying clients • Technology gaps • Need for support and technical assistance

  11. Leverage your Lending:CBA Reporter Key benefits that Credit Builders Alliance members enjoy: • Actually get to report! • Your organization’s name on the credit reports of your borrowers. • No fuss application process • Centralized e-Oscar support • CBA is your time-saving interface with the credit bureaus • Ongoing Technical Support 5 day-a-week unlimited support • Best Practices and Awareness Raising

  12. Why Report? • Stronger Loan Portfolio • Credibility • Diversified Loan Portfolio • Cost-effective Asset Building • Measurable Community Impact • Better Borrowers • Stronger Bank Partnerships • New Fundraising Tool • Management Efficiencies • Opportunities for clients to build credit

  13. CBA Reporter • $325 set-up fee includes all credit bureau application and site visit fees • $600 annual Reporter membership dues includes e-Oscar account ($85), monthly upload support, on-going technical assistance Total price = $925 first year then $600 annually

  14. Build credit. Build assets. Vikki Frank Executive Director vikki@creditbuildersalliance.org www.creditbuildersalliance.org Tel: 202-730-9390 Dir: 202-368-0500

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