LISC commits to offer expanding programming and training to help 6,000 people improve their credit score over the next two years, specifically targeting 600 people to obtain a credit score over 650. The strategy is a scaled expansion of a pilot initiative that includes an increased focus on training, and performance management of financial coaches and utilization of a new product called LISC Twin Accounts. LISC developed Twin Accounts, a credit builder loan and savings program, as a tool for FOC clients to practice on-time payments through an account that reports directly to credit bureaus. This product is designed to help individuals build credit, savings, and a foundation for asset building.
Over the past year LISC has piloted a strategy to improve the credit scores of FOC clients in Chicago by building capacity of the FOCs to help clients improve credit by 1) providing financial coaches with training in credit building strategies; 2) administering knowledge assessments and certificates to those who pass; and 3) by providing credit building products which are offered at the FOCs.
LISC will expand the pilot to include at least 8 new metro areas over the next 2 years focusing in the following regions: Cincinnati, Detroit, Houston, Indianapolis, Philadelphia, Minneapolis/ St. Paul, San Diego, and the San Francisco Bay Area. These cities were chosen to launch the credit building program within the FOCs based on the existing infrastructure of FOCs, and based on their capacity to implement new elements within their local FOC networks. LISC will train local network coaches in credit building practices, develop a web-site for ongoing credit building expertise, and provide a new emphasis in reporting and grant-making relationships on improving credit. The FOC's will offer the LISC Twin Accounts product to engaged FOC participants who can pay the $26 Twin Account monthly payment fee, and who otherwise have little or no access to credit.
Credit Building Training and Assessments of Coaches:
LISC will provide the financial coaches of the FOC networks with credit building training, assessment, and certification, to help individuals improve their credit. The following local areas will receive coaching training in the following planned schedule:Summer 2013: Detroit, Houston, Cincinnati and Minneapolis/St. Paul; Fall 2013: Indianapolis and Philadelphia; Winter 2013: San Diego and the Bay Area in CA.
Focused Twin Accounts Product Launch for FOC Clients:
LISC will provide FOCs with a credit builder loan and savings product to be distributed through the FOCs. LISC will focus its product launch efforts in the following timeframe consistent with the financial coach training schedule.
Summer 2013: Detroit, Houston, Cincinnati and Minneapolis/St. Paul; Fall 2013: Indianapolis and Philadelphia; Winter 2013/Early 2014: San Diego and the Bay Area in CA (based on product availability in CA).
By Summer 2015, LISC plans to enroll 500 individuals into Twin Accounts.
Data Collection to Assess Impact of Credit Building Program:
LISC will review FOC network data monthly, through the duration of this program to assess the impact of this credit building training program for the FOC network. The assessment will include reviewing Family Financial Tracking Efforts to Outcomes (FFT ETO) data to determine whether clients are achieving credit score increases at higher rates and evaluating product usage and success. Specifically LISC will help 2,700 people improve their credit scores by Summer 2014, and cumulatively help 6,000 people improve their credit score, of which 600 will have a score of 650 or greater, by June 2015.
61 million Americans have a sub-prime credit score; an alarming statistic given poor credit can create a negative spiral into worse personal finances and opportunities, while good credit can lead to positive movement towards greater financial security. A strong credit profile has become vital to increasing long-term assets. Studies show that people with good credit will save $250,000 in interest and fees over their working life as compared to those with bad credit.
The pull on the resources of individuals who lack good credit is pervasive, including requirements for significant deposits for cell phones and with utility companies, higher expenses for auto-financing and car insurance, and limited housing options usually regulated to poorer quality housing. Many banks and financial institutions also incorporate good credit as criteria for opening depository accounts. As a result, people with poor credit have higher daily expenses, limited opportunity to utilize mainstream banking vehicles which makes it harder to save and ultimately build assets. The effects of poor credit are not only on individual resources, but also can impact future earnings as recent reports have shown that 50-60% of employers have begun incorporating credit checks in the hiring process, limiting the opportunities individuals have to obtain quality employment. An individual can build or improve credit by maintaining accounts that report to credit bureaus and by paying those accounts on time. However, for individuals with no credit or poor credit history, there is limited opportunity to access fairly priced credit that is reported to the bureaus.
Local Initiatives Support Corporation (LISC) currently operates a network of 71 Financial Opportunity Centers (FOC) in 30 cities throughout the United States. These centers are focused on helping individuals increase their financial stability by improving their net income, credit score, long term job retention and ultimately net worth. This is done through the integration of three sets of services: financial coaching, job placement and training, and access to income supports. The median score of LISC's Financial Opportunity Center clients upon program entry is 575. The FOC financial coach addresses each client's finances by meeting one on one to develop a budget, document a balance sheet and review and address their credit report. They also discuss the client's financial habits and goals and how finances play a role in achieving those goals.
While managing its national network of FOCs, LISC has identified many individuals that face barriers to employment, safe and affordable rental housing, and pay more for basic expenses (such as banking, car insurance, or utilities) when they have poor credit or no credit. By building the capacity of the community based organizations that operate FOCs to provide actionable credit building strategies to their clients, LISC anticipates more individuals will improve their credit and over time, will be able to benefit from their good credit through reduced expenses, and have the ability to build assets.