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
Dara Duguay
Executive Director
Credit Builders Alliance
www.creditbuildersalliance.org
202-888-7588
*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)
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
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CBA’s Credit Builder Platform
CBA Business Reporter
CBA Access
CBA Reporter
www.creditbuildersalliance.org [email protected] © 2013 Credit Builders Alliance, Inc. Some rights reserved.
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.
www.creditbuildersalliance.org [email protected] © 2013 Credit Builders Alliance, Inc. Some rights reserved.
CBA Reporter & Biz Reporter
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.
www.creditbuildersalliance.org [email protected] © 2013 Credit Builders Alliance, Inc. Some rights reserved.
CBA Reporter & Biz Reporter
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.
www.creditbuildersalliance.org [email protected] © 2013 Credit Builders Alliance, Inc. Some rights reserved.
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.
www.creditbuildersalliance.org [email protected] © 2013 Credit Builders Alliance, Inc. Some rights reserved.
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.
www.creditbuildersalliance.org [email protected] © 2013 Credit Builders Alliance, Inc. Some rights reserved.
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
www.creditbuildersalliance.org [email protected] © 2013 Credit Builders Alliance, Inc. Some rights reserved.
CBA Reporter & Biz Reporter
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.
www.creditbuildersalliance.org [email protected] © 2013 Credit Builders Alliance, Inc. Some rights reserved.
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.
www.creditbuildersalliance.org [email protected] © 2013 Credit Builders Alliance, Inc. Some rights reserved.
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
www.creditbuildersalliance.org [email protected] © 2013 Credit Builders Alliance, Inc. Some rights reserved.
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
www.creditbuildersalliance.org [email protected] © 2013 Credit Builders Alliance, Inc. Some rights reserved.
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
www.creditbuildersalliance.org [email protected] © 2013 Credit Builders Alliance, Inc. Some rights reserved.
Get Started with CBA!
CBA Reporter Team202-730-9390
Write or call to get started!