What we will cover today
Program overview of the Ways to Work Program
Our credit building “recipe”
3 program participant profiles
Program Overview
• National Program Model
• 35 locations throughout the US
• All programs housed at local non profit organizations
• National loan pool
• Vehicle loans only
Program Eligibility
Resident of Multnomah, Washington, Clackamas (and some others) in Oregon or SW Washington
18+ years old
Valid drivers license
Involved parent(s) of dependent child(ren)
Challenged credit (score of 640 and below)
Ability to repay the loan
Program Eligibility (continued)
Employed at least three months, and working at least 20 hours/week.
Yearly household income less than 80% of the area median family income (see below)
Household size Income limit
2 person $44,400
3 person $49,500
4 person $55,500
5 person $59,950
6 person $64,400
Types of Auto Loans
•Purchase loan at 8% interest–$5,000-$6,000 with 24-30 month term
–$6001-$8,000 with 30-36 month term
•Repair loan at 8% interest–$500-$1,500 with 12 month term
•Refinance loan at 8% interest–$5,000-$6,000 with 24-30 month term
–$6001-$8,000 with 30-36 month term
Ways to Work Loan vs. Regular Car loan
Ways to Work Loan: Market Rate Loan:
LoanAmount
Interest Rate
Term Total of all payments
Total interest paid
$5000 8% 30 $5545 $605
$6500 8% 36 $7331 $891
Loan Amount
Interest Rate
Term Total of all payments
Total interest paid
$5000 20% 30 $6394 $1,394
$6500 25% 36 $9,303 $2,803
Having a car means….
At work
At home
For your family.
•Financial goal setting•Budget education•Credit review and education•Credit report planning•Client relationship building
Ongoing credit building and repair
Three Real Ways to Work Participants
•Participant one: •Loan entry588 6 months534 End of loan700
•Participant two: •Loan entry462 6 months526
•Participant three: •Loan entry n/a 6 months634
•Participant four:•Loan entry560 6 months588 End of loan523
Questions?
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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.
Credit as an Asset
Neighborhood Partnerships, October 30, 2014
What you will learn
• How to describe how credit as an asset and the specific ways that improved credit can impact an individual’s financial stability.
• A basic understanding of credit building and how it differs from credit/debt counseling, and credit repair.
• How CBA enables nonprofits provide credit building opportunities to their clients in order to achieve those goals
Credo: (kreed’ o) v. trust
Credit: (kred’ it) n. value; worth
What is Credit?
Dette: (Det) n. A sum of money that is owed or due
Debitum: n. Something owed
?!@
“Credit is the passport to the new economy”
--Andrea Levere, CFED
Why Credit Building?
Having no credit or poor credit usually brings individuals to the same place: application denial.
Underserved populations, such as low-income households, households of color, immigrants, and younger consumers, are more likely to have no or low credit histories. Often times this is because they are not connected to the financial mainstream with a savings or checking account, which makes it much tougher to get a traditional credit card or bank loan.
Credit is a deficit
Credit is an ASSET!
Shifting the Paradigm
Paid in Full each month =
30 day 0% loan
400%+ APR =
cycle of debt
Without access to affordable credit it is difficult if not impossible to achieve or maintain financial stability or security
Why Credit Building?PRODUCTS MATTER
Where we live
How we store & manage our money
How we get around
What and how much we pay for credit
The cost of household/ personal needs & wants
Why Credit Building?OPTIONS & OPPORTUNITIES MATTER
$10,000 auto loan5 year term
Score Interest
RateMonthly Payment
500 17% $249.00
620 11% $217.00
720 3% $182.00
Potential Savings each month = $67
over 5 years = $4,020
Source: www.myfico.com
Why Credit Building?CASH FLOW & SAVINGS MATTER
$100,000 mortgage30 year fixed
Score Interest
RateMonthly Payment
<620 N/A N/A
620 5.6% $1,153
760 4% $960
Potential Savings each month = $192
over 30 years = $69,280
Why Credit Building?ASSET BUILDING MATTERS
620+ 650+
Lenders generally require a personal credit history
What is Credit Building?
CREDIT BUILDING is fundamentally different from Credit Repair and Credit Counseling:
CREDIT REPAIR: Reducing current debt loads and paying off historical accounts in collections.
CREDIT COUNSELING: Addressing urgent current credit challenges.
What is Credit Building?
CREDIT BUILDING:The act of making on-time monthly payments on a financial product such as an installment loan or a credit card that is reported by the creditor to the major credit bureaus
780
513
657
824
456
Credit Repair = fixing negative history
Credit Counseling = dealing with current crisis
Credit Building = creating opportunities for the future
What is Credit Building?
How do you build credit?
ESTABLISH & MAINTAIN ACTIVE TRADE LINES =
ON-TIME payments
REPORTED to a credit bureau
EVERY month
BUILDS credit
What is Credit Building?
3 ACTIVE trade lines always paid ON-TIME!
MIX of installment and revolving Installment: assess affordability of monthly
payment
Revolving: maintain below 30% & don’t use for general consumption
6 months of history and activity
PAIR with credit education & support
What is Credit Building?Best Practice
The Catch?
BUT…
Individuals, families and communities with no, thin or
poor traditional credit histories have few opportunities to build
good credit
Opening and successfully managing financial products is
key to building and maintaininga good credit history
Credit Builders Alliance400 Members and Growing
CBA’s Credit Builder Platform
CBA Business Reporter
CBA AccessCBA Rent Reporter
CBA Reporter
Reported to consumer and business credit bureaus every month by over 160 members
For financial counseling, underwriting & outcome
tracking in the last 12 months
Join our CBA Credit Builder Community©
Invest in your Credit Building Capacity!The greatest source of credit building
expertise lies in the combined experience and knowledge of practitioners on the ground.
http://creditbuildersalliance.org/become-member
ConclusionCBA’s Advantage
Get Started with CBA!
CBA 202-730-9390
[email protected]@creditbuildersalliance.org
Write or call to get started!
