Building Credit, Building a Business!. Donna Rockin Director Mike Cohen Manager Financial Services...

Building Credit,Building a Business!

Donna Rockin

Director

Mike Cohen

Manager Financial Services

IL SBDC at The Duman Entrepreneurship Center at JVS

Chicago

(312) 673-3498

[email protected]

Dara Duguay

Executive Director

Credit Builders Alliance

www.creditbuildersalliance.org

202-888-7588

http://www.creditbuildersalliance.org/

*Credit is a critical asset!

*When you are starting a business, your personal credit is going to directly impact your chances for success. The ability to purchase resources, rent space, borrow capital, and leverage cash flow is all dependent on your financial history.

Huh???

*Credit Report

A credit report is a record of how you have paid your debts. It contains the following:

* Who you are

* Where you have worked

* How much debt you have

* Whether you have made your payments on time

* Any negative information about you in public records

*Public Record InformationNegative Information Time on Credit Report

General civil judgments 7 years from date filed

Tax liensCollection accounts

7 years from date paid7 years from most recent activity

Chapter 13 bankruptcy 7 years from date of discharge

Chapter 7 bankruptcy 10 years

*Bankruptcies

*Chapter 7 Complete release from debt EXCEPT for student loans and child support. Allows for recertification of “necessary” debts including a primary home and one car.

*Chapter 13 Creation of a repayment plan with creditors allowing for retention of most assets including additional properties and cars.

*Largest Credit Reporting Agencies

*Equifax, based in Atlanta, GA

*Experian, based in Costa Mesa, CA

*TransUnion, based in Chicago, IL

*The FICO Score

FICO stands for Fair Isaac Corporation

Your FICO score is a composite score calculated by a proprietary formula using the information from the three reporting agencies

*The FICO Score

The FICO credit score is:

* A three-digit number that predicts how much of a credit risk you will be

* The FICO score range is 300-850.

* It is calculated based on a proprietary

algorithm from information obtained by

the credit bureaus

* It is generally NOT given directly to the party

scored. It is considered proprietary

*FICO Credit Scores

*720 and above

*675 – 719

*620 – 674

*Less than 620

*Excellent! Favorable rates, easy to obtain credit.

*Good. Not the best rates, still easy to obtain credit.

*Fair. Higher rates, more difficult to get credit/loans.

*Could affect your ability to secure employment, leasing, insurance rates are higher

*National Credit Score

Distribution

Source: myFICO.com

Approximate Weight of Credit Factors on the FICO Score

*How Your Credit Report Is Used

Information in a credit report may determine numerous outcomes:

* Getting a loan or other forms of credit

* Obtaining employment

* Renting space

* Obtaining auto insurance

* Receiving favorable interest rates and other

terms

* Reasons a Loan Application May Be Denied

*No credit history

*Past credit problems

*Negative information in public records

*Low credit score vs. “thin file”

THIN FILE: limited or brief credit history or not enough credit

accounts to generate a credit score

* Demonstrate credit worthiness by using credit in a responsible manner

* Consider a secured credit card to establish a payment history

* Inquiries and Your Credit Score

*When you apply for credit, you authorize the lender to ask for a copy of your credit report — an inquiry or “hard pull”

*Your credit score may drop when you apply for new credit

*Most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time (30 days)

*If you can run a “soft pull”, it does NOT affect their credit

*Tips for Score Improvement

*Keep all accounts current

*Reduce the balances to less than 30% of limits

(capacity)

*Do not open unnecessary new accounts

*Don’t close unused, older accounts

*If you have a thin file, you can utilize a secured credit

card or institute an installment loan for a small, fixed

payment over a period of time of at least a few years

*Check for Errors

*Your clients should review their credit report regularly to make sure there are no errors in it

*If you think there is an error, report it to the credit bureau immediately: they are required to take action within 30 days

*Identity Theft

Identity theft occurs when thieves steal your personal information and use it to:

* Open a new credit card account

* Write checks in your name

The unpaid credit card bills or bad checks can damage your credit history.

26%

18%17%12%

9%

6% 13%

Types of Identity Theft

Credit Card Fraud

Utilities Fraud

Bank Fraud

Employment Fraud

Government Fraud

Loan Fraud

Other

*Can clients remove their names from credit solicitation lists?

Yes!

Optoutprescreen.com

* The Truth About Credit Repair

*No one can remove accurate information from your credit report PERMANENTLY!!

*It can take years to repair your credit

*No one can create a new identity for you

*The Truth About Credit

Repair (Continued)

*Credit repair companies cannot provide any service that you cannot achieve on your own. They cannot GUARANTEE results. Use EXTREME caution!

You can order your credit report yourself: www.annualcreditreport.com

(once per year from each agency for FREE)

http://www.annualcreditreport.com/

Consider offering FREE credit building services to your SBDC clients.

Consider affecting your clients’ credit by regularly reporting to the credit bureaus

on their behalf.

www.creditbuildersalliance.org [email protected] © 2013 Credit Builders Alliance, Inc. Some rights reserved.

© 2013 Credit Builders Alliance, Inc. Some rights reserved. CREDIT BUILDERS ALLIANCE and the accompanying Logo are trademarks of Credit Builders Alliance, Inc.

This document is licensed under a Creative Commons Attribution-Noncommercial-Share Alike License (US/v.3.0).

Noncommercial uses are permitted on the condition that you include an attribution to Credit Builders Alliance. If you alter, transform, or build upon this work, you may distribute the resulting work only under the same or similar license to this one. More information regarding the license is at: http://creativecommons.org/licenses/by-nc-sa/3.0/ . Requests for permissions beyond the scope of the license should be directed to Credit Builders Alliance, Inc., at www.creditbuildersalliance.org/.

Credit Builders Alliance ("CBA"), a not-for-profit organization, makes this information available for informational purposes only. This information is not intended as legal, financial, or other advice, and you and your clients should consult qualified advisors before making any decisions. CBA does not represent that any of the information will produce results.

CBA Reporter, Business Reporter, and Access Overview

SBDC Annual conference

http://creativecommons.org/licenses/by-nc-sa/3.0/

http://www.creditbuildersalliance.org/


CBA’s Credit Builder Platform

CBA Business Reporter

CBA Access

CBA Reporter


CBA Reporter & Biz Reporter

Borrower & Small Business Benefits• Build consumer credit for more affordable future. • Build commercial credit for long-term business

growth.• Reward timely clients and businesses while holding

delinquent ones accountable.• Positively impact consumer behavior and outcomes.• Foster consumer loyalty to credit-building products.



Lender Benefits• Reduce delinquencies for improved portfolio

quality.• Build program capacity and sustainability.• Strengthen cash flow for revolving loan funds.• Increased industry visibility.• Increase banking and funding partners.• Access to CBA’s member community.



The CBA Advantage• Streamlined Experian and TransUnion credentialing for

consumer reporting.• Streamlined D&B and Experian Business credentialing for

business reporting.• Minimum portfolio size (3 loans).• Reduced set-up and site-visit costs.• Assistance with FCRA compliance.• Resource for lending best practices.• E-OSCAR consumer dispute management.• Expert software and Metro 2 technical assistance on demand.


CBA Access

Client Benefits• Grasp credit strengths and weaknesses.• Raise awareness about credit report

importance.• Confirm personal and account

information.• Check for identity theft and inaccuracies.


CBA Access

Lender & Financial Educator Benefits • Pair reports with education for maximum

asset building.• Track education outcomes and success.• Support best underwriting practices.• Increase funding opportunities and

partnerships.• Access to CBA’s member community.


The CBA Advantage:• Streamlined TransUnion application process for soft- and hard-

inquiry reports. • Waived TransUnion monthly fees and minimum requirements.• Reduced TransUnion set-up, site-visit, and credit report pricing.• Streamlined CoreLogic referral process for soft- and hard-inquiry

tri-merge reports.• Ongoing technical assistance and member education

opportunities.• Credit report interpretation and compliance assistance.

CBA Access



What It Takes

CBA assesses, engages, and moves non-profit lenders along the credit reporting path.

• Non-profit designation.• Credit-building mission.• Commitment to long-term

lending and reporting.• Established program(s) and

office space.

• Data security/compliance.• Dedicated staff time and

resources.• Supporting documentation.• Metro 2 software.• Lending license/exemption.


What It Takes:

CBA Access

• Non-profit designation.• Credit-building mission.• Established program(s) and

office space. • Dedicated staff

time/resources.

• Data Security/Compliance.• Permissible purpose(s) –

lending and financial education.

• Supporting documentation.• Lending license/exemption for

lenders using reports.


Reporter & Biz Reporter Costs

New Reporters• $100 Annual

Membership fee.• $500 One-time

Reporter Set-Up fee (consumer or business)

Live Reporters• $550 – 50 or fewer loans• $800 – 250 or fewer loans• $1,000 – 500 or fewer

loans• $1,400 – more than 500

loans• $200 add-on for consumer

and business reporting


Access Costs

TransUnion Access• $100 Annual Membership fee.• $650 One-time Access Set-Up

fee.• $200 instead if in tandem with

CBA Reporter set-up• $150 one-time TransUnion

Account Set-Up fee • Report pricing:

• $2.50 - $5.65 tiered pricing for each soft- and/or hard-inquiry report (includes one credit score)

CoreLogic Tri-Merge• $100 Annual Membership fee.• $100 One-time CoreLogic

Credentialing and Site-Visit fee• Report pricing:

• $4.00 - $5.50 per report (includes one credit score)

• $14.25 per Tri-Merge report (includes three scores)

• Soft Inquiry: ONLY HUD housing or credit counseling certified

• Hard inquiry: ONLY for lenders


Additional CBA Programs

*WE WISH YOUR CLIENTS MUCH

FINANCIAL SUCCESS!DONNA ROCKIN

Director

MIKE COHENManager Financial Services

The Duman Entrepreneurship Center at JVS ChicagoPhone 312-673-3498

Mike [email protected]

www.jvschicago.org/duman

mailto:[email protected]


Get Started with CBA!

CBA Reporter Team202-730-9390

[email protected]

Write or call to get started!

mailto:[email protected]

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