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Chicago Nonprofit Wants to Make Credit Work for Everyone | Chicago News

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About a year ago, forklift driver Dominiece Douchee was dismayed to see her credit score had just dropped 100 points. “At the time I was trying to increase my credit limit on my credit card and because the score was lower than the initial one I wasn’t approved,” Douchee said. So when she learned that her employer, People Against Dirty Manufacturing on Chicago’s South Side, was offering credit-building services as a benefit to employees, she was delighted. “I really needed their help to get back on track,” she said.

Douchee says she knew her credit score was important, but that she didn’t know how many ways a low credit score could cost her money – from inflated car loan interest rates to being locked out of rental properties in desirable neighborhoods. Douchee also says she didn’t understand all of the rules in the credit system generating the score that mysteriously governs her financial life.

Working Credit co-founder and President Amanda Carney says that people like Douchee, who are good money managers but under-informed about the credit system, are extremely common. “From our data, 40% of U.S. adults have subprime or no credit score. In low-income neighborhoods, that number is 84%. So there’s this widespread problem of people being unable to access market rates and terms,” Carney said.

Dominiece Douchee Dominiece Douchee

Douchee says the credit-building services offered by Chicago-based Working Credit have helped her get closer to her goal of owning a home in just a few months. The nonprofit organization partners with employers to teach workers of all income levels the ways credit can affect their financial lives through group workshops. After the workshops, counselors meet one-on-one with clients to offer a customized, detailed plan of action for improving their scores.

“In my one-on-one session, Niki highlighted the main factors impacting my credit score,” says Douchee. “She told me to pay down one of my credit card balances and gave me tips on how to get the derogatory marks off my credit. Using her advice I paid down my balances, settled one of my collection bills, and removed a collection because I wasn’t the responsible party.” Douchee also opted to continue counseling for 18 months. “Once Niki emailed me my updated scores and I saw that her suggestions were helping, I continued to pay down my balances more aggressively,” she said.

Prior to launching Working Credit in 2014, Carney and co-founder and CEO Ricki Lowitz had years of experience working with low- to moderate-income families to improve their personal finances, so they’ve seen first-hand the damage myths about credit can do. But they say that for most people, once they understand the rules, building credit is a straightforward process that can have outsize benefits, especially for those on a tight budget. “You can move someone’s score enough to have a very high impact in six to 12 months. So, someone who goes from 580 to 710, the car payment goes down to 5%, the car insurance goes down, refrigerator bought on credit card [instead of at a rent-to-own store] it’s one-third the price. That’s a swing of $3,000 a year, $1.50 an hour. There’s never been anything that’s had this kind of impact on someone’s bottom line. It’s not the silver bullet, but it’s a silver bullet.”

Carney is quick to make a few distinctions about Working Credit’s services. First, they don’t repair credit, they build it. She cautions against for-profit credit repair services that simply dispute all negative marks on credit reports to boost scores, saying the lift will only last a short time. With Working Credit, clients are educated on the rules of the credit system, so Carney says they’re armed with strategies to maintain good credit for the rest of their lives. Second, she says this isn’t the “knock it off with the expensive lattes” kind of budget advice people are used to receiving from their employers – they focus exclusively on how to leverage the credit system. And third, Working Credit’s nonprofit model means they have no motive to do anything but help their clients.

Those latter two points were especially important to Bilinda Pringle, director of operations at The Floured Apron and Working Credit client. For Pringle, Working Credit’s counselors’ lack of judgment about her expenses made her feel comfortable revealing the particulars of her financial situation. “There can be a lot of emotion based around money. I found my counselor nothing but professional and neutral. He explained my options and since they do not get paid by selling you anything, you know they only have your best interest in mind. I’m not far enough along to see improvement yet but it took the shame out of it and make me be able to face my credit issues,” she said.

Rush University Medical Center Vice President and Treasurer Patricia Steeves O’Neil agrees that Working Credit’s nonprofit status gives them credibility with their diverse employee base. “We heard of the work [Working Credit was] doing at universities and health systems on the East Coast. These institutions had similar demographics as we do. We particularly were interested in their work as a nonprofit that had no products to sell,” O’Neil said.

O’Neil admits that carving out the time for a program like the one Working Credit offers presents logistical challenges for a hospital, whose round-the-clock workers are constantly engaged in patient care. “These employees needed the time to step away from their daily work and have others fill in on patient care. It would not work with only email communication of the program. The key to the success of this program is the support of the managers and supervisors of these areas,” she said.

But if the employer is committed to the process, they can reap benefits too. O’Neil says as Rush employees have seen boosts in their credit scores, Rush has seen a boost in morale and productivity. “We have heard of some successful stories of many employees. The benefits are profound for an employee, particularly as they look to secure competitive rates on key investments: a car and home. Financial stability will allow the employee to come to work focused on providing the very best care to our patients and students,” she said.

Bilinda PringleBilinda Pringle

Clients Douchee and Pringle both say they’re impressed that their company offers Working Credit’s services as a benefit. Since she’s seen her credit improve, Douchee says she’s motivated to work harder and even overtime to help increase her savings.

Pringle says the benefit gives employers a competitive advantage in a tight labor market. “The economy seems to be on the upswing. Employees have more options. Whatever a company can do to show that they care about their employees should be considered. Why should they work for you as opposed to your competition?”

Now in its fifth year of operation, Working Credit is working on improving its own bottom line by scaling up to provide services to more large employers in Chicago and on the East Coast. “Right now and for the next couple of years, philanthropy is largely supporting our growth. The Community Development Group at Citibank provided a critical early grant to us that gave us the room to build out our program and begin to scale. As we increase our customer base in the next few years, earned income from employer customers will become our primary revenue source – so we’re a nonprofit with a revenue stream,” Carney said.

Almost a year after starting with Working Credit, Douchee reports that her credit score has improved by more than 100 points, putting her closer to her homeownership goal. “I have increased my savings. Niki has referred me to some homeowner workshops that I am looking to attend. Overall, having good credit has released a lot of stress off me. I no longer have collection bills coming to my house and I feel confident that I can get approved to buy anything that I may need. I think this has the potential to change a lot of people’s circumstances.”


More on this story

Working Credit co-founder and President Amanda Carney offers three rules for building credit.


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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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