Building Credit, Building a Business!

Donna Rockin Director Mike Cohen Manager Financial Services IL SBDC at The Duman Entrepreneurship Center at JVS Chicago (312)

Dara Duguay Executive Director Credit Builders Alliance

* 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???

* Purposes of a credit report and how it can be used * Ordering credit reports * What is contained in the credit report? * Identifying ways to build and repair a credit history.

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

Negative InformationTime on Credit Report General civil judgments7 years from date filed Tax liens Collection accounts 7 years from date paid 7 years from most recent activity Chapter 13 bankruptcy7 years from date of discharge Chapter 7 bankruptcy10 years

* 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.

* Equifax, based in Atlanta, GA * Experian, based in Costa Mesa, CA * TransUnion, based in Chicago, IL

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 credit score is: * A three-digit number that predicts how much of a credit risk you will be * The FICO score range is * 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

* 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

Source: myFICO.com

Approximate Weight of Credit Factors on the FICO Score

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

* No credit history * Past credit problems * Negative information in public records

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

* 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

* 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

* 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 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.

* 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

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.

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: Requests for permissions beyond the scope of the license should be directed to Credit Builders Alliance, Inc., at 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

Credit Builders Alliance, Inc. Some rights reserved. CBA’s Credit Builder Platform CBA Business Reporter CBA Access CBA Reporter

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.

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.

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.

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.

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.

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

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.

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.

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

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: $ $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: $ $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

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DONNA ROCKIN Director MIKE COHEN Manager Financial Services The Duman Entrepreneurship Center at JVS Chicago Phone Mike

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