Download to read offline
More Related Content
![John de wit_point_loma_may_4_2011[1]](https://cdn.slidesharecdn.com/ss_thumbnails/johndewitpointlomamay420111-110509114449-phpapp02-thumbnail.jpg?width=640&height=640&fit=bounds)
Similar to Supersize that IDA: How enhancing your programs with credit building can achieve even greater impacts.
Supersize that IDA: How enhancing your programs with credit building can achieve even greater impacts.
- 1. Supersize that IDA: Howenhancing 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 managingfinancial 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 BuildingCommunity 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 paymentreinforces positive financial habits! Implementing Credit Building Initiatives: Non-Lenders
- 8. Reactivate/rehabilitate existing creditlines 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 LoanCharacteristics 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 LoanCharacteristics, 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 yourIDA 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 ofdollars 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 elsecares about credit Good credit increases access and options!
- 15. From self directedto nudged CB loans Since 2010 350+ borrowers IDAs Since 2013 130+ savers 13
- 16. Promoting the goodbehaviors time discount and present bias Value of frequent feedback Status quo bias
- 17. Promoting the goodbehaviors Social norms and self concept Betrayal aversion Consistency and self image
- 18. CB with IDAPilot 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 withIDA 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 asseamless 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 asseamless 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 asseamless 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 ofCredit 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 andCoaching 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 • Patienceand good communication • Coordinate document collection • Funding levels • Systems and scale • It’s early yet, we have more to learn
- 26.
- 27. • New fundsfor 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 intouch Nancy Yuill [email protected] Sarah Chenven [email protected]