NWX-CFPB HQ Moderator: Heather Brown January 28, 2019 2:01 pm CT Coordinator: Welcome and thank you for standing by. At this time, all lines will be on listen-only mode, until the question-and-answer session of today’s call. At that time, you will need to press star followed by the 1, to ask a question. Today’s conference is being recorded. If you have any objections, you may disconnect. I’d like to introduce Dr. Heather Brown. Ma’am, you may begin. Dr. Heather Brown: Thank you so much Operator. I appreciate it. Welcome everybody. Hopefully everybody sees my note, in case somebody has audio trouble, that you should be able to hear now. If you are, you know, you should be dialed in so, you shouldn’t have any problems. You’ll be muted until the very end, and then we will take questions as time allows. We’re going to - I’m going to roll through my introductory stuff pretty quick, because last time we ran short of time and had a lot of questions, and we have a lot of people on the line so, far, so, I’m going to move forward. But I did want to tell you that you should be able to download the slides. I know some had trouble last week, but most people indicated they could. So, if you go to file at the top left of your screen, and click transfer, you should be able to download slides. But if you can’t, you can actually send an email to CFPB - I’m going to write it right now, CFPB_FinEX@CFPB.gov, and we’ll send you a copy of the slides. So, actually, for those - if we have so, many people that I would say if you don’t want copies, if that - well that’s okay, just - if you write me, I’ll send you a copy. Last time I sent copies to everybody, but we have such a large number, I don’t want to send them if some don’t want them. So, okay, so, hopefully most of you can download them. Let’s get started. So, welcome to the session today. This session is on using credit scores and reports as a financial coaching tool, and this is part 2. We had part 1 in December. I know some of you were looking for that recording, and we expect it to be up in the next couple of weeks, so, thank you for your patience on that. And we look forward to also, getting this one up shortly, for anybody that wants to refer it to a colleague. We’re very fortunate today, to have Carmina Lass with us, presenting on this topic. And Carmina is the Chief Program Officer with the Credit Builders Alliance. And Carmina is a national expert. A lot of, you know, people who have been trained by her and had her training, and the Credit Builders Alliance as well, is well known for the training they provide in this area. So, we’re very grateful that they’re willing to share their knowledge and information with us. The last session was a good one. This session, I just want to let everyone know, I’m actually going to try to save the questions that are written in our Q&A, and questions in the chat, so, that we might put together, in the future, something on some sort of frequently asked questions, because we’ve gotten a lot of feedback and questions and, you know, people requesting more information as a result of the first one. So, let me just quickly run through my introductory slides. For those that were here last time, they’re the same. And I’m going to fly through them because I want to save time for our speaker. This presentation is being made by the Consumer Financial Protection Bureau, and me, Heather Brown, as a representative, on behalf of the Bureau. The comments that we discuss do not constitute legal interpretation guidance or the advice of the Bureau. Any opinions or views stated by myself or the presenter, are our own and do not necessarily represent the Bureau’s views. And this document obviously is a live discussion, so, if you send it to your colleagues, we have this disclaimer there, so, that they understand that it’s sometimes difficult to get that was presented, in a document. And we just want to make that known to people. The Bureau regulates the offering and provision of consumer financial products and services under the Federal Consumer Financial Laws and educates and empowers consumers, to make better informed decisions. The program that’s providing this, the CFPB (FinEX) Financial Education Exchange. Our program is targeted at adult educators, coaches, social workers, anybody that trains consumers on - adult consumers, on financial literacy topics. So, we’re hoping to multiply our reach, by reaching you all and helping to make your job easier. So, we’re always open to feedback and suggestions on ideas you have, on ways we can do that. And at the bottom of this slide, you see our email address, and when you have inquiries, questions as well as suggestions or if you need additional information, feel free to write that email address and I will respond as quickly as I possibly can. Okay. I have listed some additional pages that we have on our Web site that might be of interest. I’ll just go quickly because many of you have seen these before, and we want to save time. This is the - a page where we will upload our next webinar and we are starting to do that fairly closely after the - first, the one that just finished. So, that’s a great place to check back if you haven’t heard anything. But you should be getting an email with an announcement if you’re on our list. And we also, have some tools on credit reports and scores. And rather than, you know, stop at each one of these for now, I think a great way to do it, is go through ConsumerFinance.gov and you could actually search credit score, credit report, and you’ll get more information what’s on these slides. But this just highlights some of the actual links that we have and for those that want them, you’ll have a copy of this so, you can refer back to them. Okay. So, we’ve provided our Web page, we’ve provided our email address. We do have a LinkedIn page. We’re encouraging people to post things on it, articles that are of interest to other financial educators, and anything that you would be interested that’s relevant to financial education, even can post a job there if you’re interested in doing that. And then everybody - I want everybody online to know that we can order free - you all can order free brochures and publications in bulk, from our print center, by the last email address that’s on this slide. So, always reach out to me if there is anything, I can do for you. In the meantime, I’d like to move forward with our presentation from Carmina Lass. So, we’ll let her get started and afterwards, we’ll have questions. I will follow the chat and questions as closely as I can. And at the end I’ll try to read some of those as well. If we don’t get to all of those, we’ll try to put together something and follow up to everybody with the answers to their question. All right. Thank you, Carmina. I’m going to hand it over to you now. And just let me know when you want me to advance slides. Carmina Lass: Wonderful. Thank you so, much Dr. Brown and thank you to the CFPB for having us here to present on this topic. And welcome to everybody on the line. So, as Heather mentioned, this is the second of a two part series on the use of credit scores and reports as effective financial coaching tools. And it’s part of the first part of the series - after the first part of the series we’re going to focus on strategies and techniques for integrating credit scores, reports and your client’s goals, into existing financial coaching processes and making the case for credit reports. So, just a brief summary of what we’re going to cover today. We are going to start by talking a little bit about Credit Builders Alliance and how we might be able to serve as a resource for you as we continue to build out your credit building toolkits. We’re also, going to recap some of the high level points that we’ve discussed in part 1 of the webinar series. And then while, you know, while we only have an hour together today, we will try to cover some high level points around reading a credit report, specifically with a lens for assessing credit building readiness and to inform the design of the credit action plan as we’re working with clients. So, go ahead and go to the next slide please. Dr. Heather Brown: Operator, this is Heather. Are you there? Coordinator: Yes, I am. Dr. Heather Brown: I’m sorry. My screen has hung up and it’s telling me I have to close or, you know, to get out and come back in. Are you able to take control and move the slides until I can, you know, get going again? Coordinator: Yes. Or we can - do you want me to pass the ball to Carmina? Dr. Heather Brown: That would be great. If - and if I log out I’m not going to - everybody is not going to get shut out correct, if I log off now? Coordinator: No. Dr. Heather Brown: Okay. Wonderful. Coordinator: Yes. Just don’t… Dr. Heather Brown: Thank you. Coordinator: …say - don’t press close session. So, okay, I’ll… Dr. Heather Brown: Okay. Coordinator: …give her the ball. Okay? Dr. Heather Brown: Okay. Thank you. Coordinator: All right. There you go. Carmina Lass: Okay. Looks like I’ve got it. All right. Thanks so, much. So, I would like to begin by briefly introducing Credit Builders Alliance. At Credit Builders Alliance or CBA, we are an innovative, nonprofit social enterprise dedicated to building the capacity of a diverse and growing network of nonprofits across the country, who help low and moderate income households build strong credit and other financial aspects. Our credit building community is constantly growing, so, we have a - we currently have a network of over 500 nonprofit members serving diverse communities across the country. Our mission at CBA is to help organizations move people from poverty to prosperity, though credit building. CBA fulfills this mission by serving as a bridge between the nonprofit sector and the credit industry. And we support our members with access to bureau services including credit reports as well as credit reporting for consumer and commercial lenders. CBA also, serves as a thought leader in the field of credit, disbursing best practices for training, consulting and technical assistance services aiming to strengthen the credit building program products and education provided by our stakeholders. Underscoring our philosophy, is that a good credit file is really essential to achieving financial stability. And our belief is that mission driven nonprofit organizations and other municipal and other community based organizations, are uniquely positioned to help individuals and families build credit as an asset. We really believe that credit is often the necessary asset to get and stay ahead. And we appreciate and look forward to connecting you to highlight all of your great work on the ground, through our network that you’re interested in joining us in the work that we do. So, just a brief discussion for those of you who were not able to attend the webinar that we offered in December, which was the first part of this series. I just wanted to provide a quick summary of those key points that we covered. And that webinar was delivered by my colleague, (Maria Sennett). And I would definitely encourage you to, if you weren’t able to attend that webinar, check it out once that reporting is made available. So, in last month’s webinar, (Maria) discussed the difference between a consumer disclosure and a business division credit report, and how those reports could be used as coaching tools. And so, just a quick reminder, because I will be referencing this throughout the presentation today, is that consumer disclosure reports are credit reports that are designed to be provided directly to a consumer. So, for example, when you request a credit report through AnnualCreditReport.com, you receive your consumer disclosure report. This is distinct from business division credit report, which is the type of report most typically used by lenders and other businesses, to evaluate consumers in connection with a loan or service. Business division credit reports can also, serve as helpful tools in credit coaching programs, for a variety of different reasons as we explored in that previous webinar. But notably, because they can provide a way to make credit report and score information, more accessible to clients. But also, serve an organizational purpose of helping your organization track client progress and outcomes over time. So, if you’re interested in learning more about how you can access for your program, business division credit reports, definitely feel free to get in touch with us and learn more about our access service. Another point that we discussed in the last webinar, was one of the ways that credit reports can provide key opportunities to engage with clients. And so, of course, that success is across more different types of programming, including but not limited to, workforce development, housing and rental services, social services, monthly cash flow and budgeting, small business development and savings programs. And finally, it covers some key updates from the credit industry that we believe are important to reinforce, that may impact your clients. And if you - again, if you weren’t able to attend that previous webinar, definitely check that out as soon as that is available. Okay. So, moving forward, now we’re going to really dive into today’s presentation. And while we just don’t have quite enough time to provide an exhaustive training on how to reach a credit report, we really use the sample credit report in order to gain a high level understanding of the different sections and information that’s included, in a credit report and how you might use this information to help your clients develop a credit action plan. For the purposes of today’s webinar, we will be using a sample credit report based on the consumer disclosure format. Throughout the webinar I will try to call out some of the ways that the report differs from what a lender might see, which is again, a business division report. I also, just want to quickly note that the report that we’ve used here, the screen shots that you’ll see, from the sample report, is completely sectional. All consumer information and references to businesses have been fabricated and is for instructional purposes only. So, to begin, credit reports generally contain four key sections of information. So, this is personally identifying information, credit history, public records, which has become - recently become more limited to primarily bankruptcy. And finally, inquiries are also, a request for credit reports. So, we’re going to go ahead and unpack each of these sections a bit, in the coming slides. And we’ll get started with personally identifying information. Okay. So, the personally identifying information that appears on a credit report, can include name, current and previous addresses, employer information, spouse or co-applicant information, social security number, date of birth, and other pieces of contact information. It’s important to think about how credit reporting agencies receive the personal information that is populated on credit reports. So, consumer reporting agencies receive personally identifying information from a variety of different sources. They receive records of account information from creditors on a regular basis. So, when you have an account with a creditor that is reporting, separately they get public records information directly from the court, and they also, gather information based on what has been used to request a credit report. So, whatever information for names and addresses are entered into a request for a credit report or when somebody signs up for an account this could be attached to their consumer file and show up on their report that’s pulled. As a result, as you can imagine with all these different mechanisms for inputting that type of data, it’s easy to imagine how misspelled names or variations of names, as well as incorrect information or incorrect social security numbers, could get attached to a consumer’s identifying information on the report. Additionally, if a consumer has not had access to credit recently, or has used credit maybe inconsistently in the past, it’s not uncommon for this section to be outdated or seem incomplete. However, if the information appearing in this section is completely unfamiliar to the consumer, this could be an error or sign of identity theft, indicating that someone has fraudulently open or has opened credit using our consumer’s information. So, in looking at, you know this section of the report, it’s really critical for consumers to always take care in reviewing that personal information, to make sure it looks correct. There are some pieces of information that should never appear on the credit report, and that includes gender, ethnicity, religion, political affiliation, and other beliefs or affiliations that could be used in discriminatory ways. Okay. So, here we can kind of take a look at what some of this - the type of information might actually look like on the credit report. Of course, you know, with all of the - with this example and, you know, in your experience, you might be familiar with the fact that information is often displayed or formatted differently when looking at credit reports from different credit reporting agencies, about resellers, different versions of the report, is the permission might appear in different places and be formatted a little bit differently. So, the most important thing that you can do as a coach or a counselor, if you’re working with clients to review this information, is just look at it in a detailed way and make sure that you’re going over all the information and flagging anything that appears incorrect or could indicate fraud. For example, if you look, you know, at the example that you see on the screen right now, is - this report has been generated for (Geneva Smith), but you can also, see that another name has been reported on (Geneva Doe). So, is this a name that has been previously used by (Geneva Smith). For example, this was a married name or a maiden name. Does (Geneva) recognize all of the other addresses and other details that have been reported? So, going through that is really critical, especially if you want to make sure that there is no signs of identity theft or other fraud. So, that’s just a brief overview of the personally identifying information. And now I’ll really move onto the meat of the credit report, which is credit history. So, this is really main section of the credit report that provides information about what types of credit accounts a consumer has used in the past, or is using currently, and how well they have managed these obligations. Frequently, you will find that information in the credit history section to be organized into different categories, such as positive or (derogatory) statuses, whether the account are open or closed and potentially based on types of accounts such as installment versus revolving. This is helpful to - in this grouping, is helpful in understanding what is going to be the impact of these different records on that consumer’s credit score. So, we’ll start with looking at accounts that would be maybe grouped into a category of having a positive status or account in good standing, as they’re often called. Accounts in good standing generally refers to credit accounts that have no history of negative information. So, these accounts could be potentially closed or open accounts that will still be in use or able to be used. Accounts that are open and continue to be reported by a creditor, will remain on the report indefinitely, even if they’re not being used regularly. Once an account in good standing is paid in full and closed, however its record will remain on the credit report for ten years following that date of closure. So, let’s go ahead and take a look at what - how that might appear on the credit report. Here you can see an example of an account that has no negative history and that is listed as an account in good standing. And as you can see, this account is a mortgage account. You can see that it has been opened in 2011. If you look at the pay status field on the right hand side of the screen, you can see that in this example it indicates that the consumer has paid the obligation as agreed. You can also, find further detailed information at the bottom that shows the history of payments on a monthly basis. So, this is just a good general example of what type of information might appear for this type of account. So, obviously we want to see accounts in good standing. This is what we want to see on the credit report. Right? This is evidence that a consumer has demonstrated that he/she has been at trustworthy and reliable borrower. However, lenders are most concerned about a consumer’s current ability to manage new credit obligation, unless recent activity on a credit report is a critical component to a consumer’s ability to build their - establish and sustain a good credit score. So, as a coach or a counselor, you can definitely celebrate a positive account that you find on a consumer’s credit report, but also, make sure to evaluate whether those positive accounts are also, active, granting your client the ability to continue long term credit opening success. And we’ll unpack that a little bit. Okay. So, again, coming back to this example, as you can see, while fully paid as agreed, this mortgage account is currently closed. Thus, in about four years, when the account will approach the ten year mark, since the closure, the account will be removed completely and will no longer contribute positively to the consumer’s credit score. Plus, for best results and ongoing credit building success and in order to build and sustain good credit scores, it’s essential to have active credit. This account is great. It’s a mortgage, it’s been paid, but there’s a limitation to how long it’ll actually help this consumer to build their credit score. Okay. So, next - I’m sorry. I think I jumped ahead. Okay. There we go. So, let’s talk a little bit more about what we mean by active credit. So, CBA defines active credit as an account that is open that has not been closed by either the consumer or the creditor. And it reflects recent activity, meaning that a payment has been made within the last six months. But ideally, payments are made monthly. Regular on time payments on active credit accounts, is the key to credit opening success and a key driver of strong credit scores. It’s not enough to have an open credit card, even with no history of late payments and a zero dollar balance because the consumer has not been using it regularly to reflect the positive behavior that lenders really want to see. In addition, for credit cards in particular, creditors may automatically close these accounts after long periods of inactivity. I just wanted to give you that sense of what we mean by active credit. And I think we have a poll set up, but I’m not exactly sure how… Dr. Heather Brown: Operator, this is Heather. Would you be able to help run the poll or… Coordinator: I can go ahead and give you the ball back. One moment. Dr. Heather Brown: Okay. Thank you. I logged in on a second machine, so, hopefully it’ll… Coordinator: Okay. I’ve got you as the presenter… Dr. Heather Brown: Okay. Coordinator: …now. Dr. Heather Brown: All right. Let me see if I can get it. Carmina Lass: So, while they’re figuring that out, I see that there was a question that came in asking about when the timeframe had gone from seven years to ten years for accounts staying on the credit reports. And so, the ten years for items staying on the credit report, is for items that are in good standing. There’s a different timeline for items that are - that have a negative status. Dr. Heather Brown: Okay. Operator, this is Heather. I see that the poll little logo is by you, the little icon. Coordinator: Okay. I’m going to go ahead - I think it’s - I see two Heathers in there, so, I’m going to try the other one and see if that works. Carmina Lass: You know what? Why don’t I just ask the poll question and then people can just type their responses into the chat box? And then we could keep going. Dr. Heather Brown: Sounds good. Carmina Lass: Okay. So, the poll question is which is a following type of account with the potential for most - the most potential for long term credit building - a closed mortgage account that was paid in full five years ago; b, an open credit card account that is used monthly and paid as agreed; and c, a collection account that is being paid through a monthly payment plan. I’m just looking at our chat box. And I do see - go ahead and type in your responses. And I do see some coming through. I see lots of Bs and those of you who have selected B, that’s correct. So, while the mortgage account, like we just reviewed is having a positive impact, while it’s on the credit report, once it’s, you know, once it’s no longer there it’s not going to continue to have that same positive impact. Whereas, a credit card that’s being used responsibly, is going to have the potential for really that long term credit building opportunity. And then a collection account is by definition, a negative account that either cannot, even under a payment plan it cannot really be active credit. So, thank you all for your responses. So, I don’t think - I don’t know if you want to pass the ball back to me, or Heather, if you can advance the slides. Dr. Heather Brown: I’ll advance the slides now. Thank you. Carmina Lass: Okay, great. So, it should be on the credit history side. So, now I want to shift and talk a little bit about credit history that might not be in that positive status, that may have a potential for a negative impact on the credit report. So, first, we might have open or closed accounts that might either be currently delinquent or going to have some kind of pass history of missed or late payments. But they are going to be summarized in a different section of the credit report indicating that they might have that potential for negative impact. In addition, that account that becomes seriously delinquent, may appear on the credit report as accounts in collections. And generally, this type of information that can have a negative impact on the credit report, remains on that credit report for a period of about seven years from when the consumer was first 30 days late on that account. This seven year timeline is defined by the Fair Credit Reporting Act. And contrary to some common myths and misconceptions, the seven year clock cannot be reset due to consumer activity, such as contacting the creditor or making a payment. It remains based on that that consumer was first late on the account. And even if the consumer does pay an old debt however, that history of negative information, will still remain reporting on that credit report up until it can come off for the FCRA. I also, want to note that a consumer’s credit history does not always reflect the full picture about how they have managed their monthly bills and obligations. So, we’re talking about information that shows up on the credit report, but also, many - there’s a lot of information that does not show up on the credit report. Non-delinquent accounts such as cell phone contracts, utility accounts or other household bills are not currently routinely reported by businesses, to appear on the credit report. And also, as mentioned previously old accounts that are closed reports will no longer report within the timeline dictated by the FCRA. Okay. Next slide please. Okay. We can spend a lot of time understanding all of the nuance and detail of what can appear in the credit accounts or trade line section of the credit reports. And unfortunately, we don’t quite have the time to go over all that in detail and talk about different permutations of how that information might paper. Furthermore, information does appear differently depending on what type of credit report you’re looking at and from which credit reporting agency. Business division credit reports tend to use more codes than abbreviations, so, you want to ensure that whatever report you’re looking at, you’re consulting the key or user guide to really understand what that information that you’re looking at, is. So, generally, here are some of the key pieces of information that you want to look for when you’re looking at trade lines or accounts on the credit report, to help your clients understand their credit history and how that information that has been reported, will impact their credit for. So, first, you want to identify the creditor - so, who is reporting the account and is this the original creditor? Who should the client contact with questions about the account? Generally, consumer disclosure reports, again those that are accessed through AnnualCreditReports.com are going to provide more details about creditors and creditor contact information that you might find in a business position report. You also, want to make note of the responsibility or liabilities sealed off from the (CTOA) code. And this is where on the credit account they’re indicating the responsibility that a consumer has to pay the account. For example, an individual responsibility indicates that the consumer is solely responsible for the account, whereas a joint responsibility indicates that another borrower may share that liability. Also, you want to pay attention - there’s a lot of important dates that you want to pay attention to, that can be helpful for consumers in identifying, you know, when that - where that item came from and how long it’s going to impact their credit score. So, looking at when the account was opened, amount reported, can help that consumer identify the account and verify that the information has been correctly reported. Those dates along with balances and payment history, can be cross referenced with account statements, to insure accuracy. And finally, the type of account will indicate details about whether the account is installment, revolving or another type of credit. So, all of these pieces of information, you will have to go over and make sure that that matches with what a consumer has in their records. Okay. Next slide please. Just a couple of quick definitions. There is a lot of, you know, I think terminology that we want to make sure that we’re clear on. It can be confusing. So, I just wanted to outline he difference of charge offs and collection. So, a charge off or a charge off account is a status that a lender may list on the trade line, to indicate that a debt has been deemed unlikely to be collected due to a substantial delinquency. An account that has been charged off could mean that the creditor has - could then send that account to collections. It definitely does not mean that the consumer does not - no longer owes the debt though. That is still definitely owed. So, a collection account is one that has been moved out of routine account processing due to delinquency, to either an internal collection department, or to a third party debt collection. Okay. So, next slide. So, again, thinking about this section of our report where we’re looking at accounts that have a potential negative information that could impact the credit score. You know, here is an example that we can look at, of an account that has been categorized as potentially negative. So, as you can see here, this account, you know, appears to be an auto loan account that was opened last year. You’ll notice the account is open. It’s not been listed as closed, as we saw in the mortgage account that was reviewed. We can also, see that the account lists out pending balance of $10,695. And you might be confused as to why this account is listed as potentially negative, especially since the pay statues indicates current, paid or paying as agreed. Next slide please. But as you look closer, you will see that the notation of 30 under the July field, in the payment history. So, this indicates that at the time the consumer’s loan was reported by the credit reporting agency, in July, their account was 30 days past due. But the good news is, is that it appears that this individual was able to get back on track in August and resume regular on time payments. So, such an event, such as a single missed/late payment might affect that consumer’s credit score. Next slide. Okay. Dr. Heather Brown: Okay. Carmina Lass: So, another poll question, but we can just go ahead and - oh, it looks like you can display it. So, the poll should be open for you. So, which of the following are true? And think about the example you just saw. A single late payment on a credit account can drop a credit score significantly. That’s answer A; B, the negative impact of a single late payment will decrease over time as long as the consumer resumes regular on time payments. So, do you think A is true or B is true? Or do you think that both A and B are true or neither A nor B are true? I’ll just give you maybe another 15 seconds. And Heather, are you able to display those results? Dr. Heather Brown: Yes. I just closed the poll. Carmina Lass: Okay. Dr. Heather Brown: Can you see the results? Carmina Lass: I can’t, but if you can share… Dr. Heather Brown: Okay. Hang on. Carmina Lass: …then that would be great. Dr. Heather Brown: Okay. Hang on. One more button. There we go. All right. We should be able to see it now. Carmina Lass: Okay. I see them now. Yes, great. Okay. So, we had, you know, a few people selecting A and C; about 43% selected answer C; and just a couple selecting answer B. So, great job. Yes, it is answer C, so, both A and B are true. So, a single late payment can have a significant impact on the credit score. And that significant impact is reported right when that payment is missed. So, it has the most severe impact on the credit score immediately after it’s first reported as a late payment. But the good news is that while we do of course want to always encourage to pay on time, we also, know that life happens, so, and if you can go to the next slide please, So, you know, in this case that this person did miss a payment, ideally they wouldn’t have missed it at all, but since they did, we know that getting back on track is going to actually help them. That’s the best thing that they can do is resume regular payments as quickly as possible. And eventually the impact of that late payment will fade over time and their score will begin to recover. So, again, this also, speaks to the importance of maintaining an active credit, so, that you can kind of weather that storm of challenges, ideally always encourage that on time payment. Okay. Next slide please. Okay. So, that was an example of an open account that had a potentially negative status. Here you can see an account that would appear an account in collections. So, again, accounts with a collection status are by definition, a derogatory account. So, before appearing in this category on the credit report, creditors have typically been attempting to recover delinquent accounts, with delinquent amounts owed for at least six months or so. These accounts have a negative impact on the credit score and collection accounts can never constitute as active credit, as we have defined previously. If a consumer does begin to repay or fully repay an account in collections that can definitely serve to lessen the negative impact from the credit score. And in fact, some of the newer credit scores on the market completely ignore collection accounts that have been fully paid, even if they do remain on the report. And here you can see we have a collection account with a balance of just over $1000, originally owed to the cable or cellular provider. It appears that the original creditor has sold the debt to a collection company and this credit report lists the date that this account will be removed from the credit report per the Fair Credit Reporting Act. So, make sure your clients understand and reinforce that once the account is removed from the credit report that doesn’t necessarily mean the debt is no longer owed, it’s just no reporting any longer. Of course the statute of limitations of how long a creditor has to take legal action, related to it, that is going to depend on individual state laws. And next slide please. I recognize that was a very quick summary of credit history and there is a lot more that we can explore there, but I wanted to give you a kind of overview of what you want to look for, what they’re looking at with some of these different types of accounts. So, now we’ll move on and talk about public records. And as we learned in the previous webinar in this series, up until recently, public records that appeared on the credit report did include civil judgments, tax liens as well as bankruptcies. However, due to some you know, changes in the industry, notably the National Consumer Assistance Plan, civil judgments and tax liens have now been deemed to have a high potential for inaccuracy and have been removed completely from consumer credit reports. We’ll no longer see that type of information reporting on credit reports from the major consumer credit reporting agencies. Plus, bankruptcies are now the only type of public record that will appear. And depending on the type of bankruptcy, these records will remain for up to seven or ten years on that credit report from the filing (agency). Chapter 7 bankruptcies remain for a little bit longer due to the fact that the consumer does not make payments on the debt that is discharged. Next slide please. Here you can see an example of how a bankruptcy might appear on the credit report. You will note that this record indicates also, again, when the record will be removed. Okay. Next slide please. Okay. So, moving onto the next section which is inquiries, I have a quick poll question for you. So, true or false, pulling your own credit report can have a negative impact on your credit score. Okay. And I’ll just give you just a couple more seconds. Great Heather, can you go ahead and display the poll results? Dr. Heather Brown: Sure. It should be coming up now. Carmina Lass: Okay. There it is. Okay. It looks like the majority of you answered false, and that is correct. So, when you pull your own credit report, you don’t have to face any penalty for that. So, pulling your own credit report does not impact your credit score. So, - and that leads us into our discussion of inquiries, which is the final section of the credit report that we’ll cover. Please go to the next slide please. So, pulling your own credit report is an example of a so, inquiry. One of the two types of inquiries that can appear on a consumer’s credit report. So, inquiries are initiated by consumers and some businesses for educational and informational purposes. Some common examples of so, inquiries, are when you pull your own credit report, when a business pulls your credit report for financial education purposes, when an employer pulls your credit report for employment purposes, with your permission, and when businesses pull your credit report for promotional and account monitoring purposes. So, pulls or, inquiries, do not impact the credit score, and in fact, these requests for the credit report, don’t even show up on the business division credit report, the version of the credit report that a lender would see. However, when a consumer accesses their own consumer disclosure report, they will be able to see the records of those so, inquiries for the past 24 months. Next slide please. Hard inquiries on the other hand, are distinct in that they were lender requests for a consumer’s credit report in conjunction with an application for credit. Hard inquiries can have an impact, though generally not a significant one, on the credit score. And only hard inquiries within the past 12 months impacts the credit score of those the report will display all hard inquires for the previous 24 months. Next slide. And here you can see an example of a couple of hard inquiries, as they may affect - here on the credit report. You can see the credit that requested the report, the day requested, as well as the indication that this request was in conjunction with a credit application. While it might be easy to skip over this section of the report or just kind of gloss over it, it’s really important to review this section of the report, just like any other section of the report, to insure the accuracy of the information being reported. If you have unfamiliar inquiries here, you know, requests for credit that were not initiated by the consumer you’re working with, this could definitely be an indication of identity theft and should be investigated. Next slide. So, now that we’ve had a chance to kind of go through the main sections of the credit report, you can start to think about how to translate that into action with your clients. While we don’t have time today to go through all of the factors that impact credit scores, we will just cover some key best practices for building strong credit scores. The first, keep it active, because we’ve learned the key to building strong credit is by establishing and maintaining a mix of active installment or revolving credit trade lines, and always paying on time. Next, keep it low. So, for those who have outstanding debt owed, especially on revolving credit it’s best for the credit score to bring those revolving balances down. And finally, keep it up. So, another key to good credit scores, is maintaining that ongoing activity. So, the best practice here is to maintain at least six months of credit history and activity on your credit report at any one time. Next slide. Okay. So, when you’re working with a client, a credit report can be a really great tool to help identify incremental steps that can be taken to improve the credit profile and translate that progress to support other financial goals. So, first, we want to assess an inventory, what’s on the report. Identify and celebrate that good information or even the accounts that could be brought into that current status, and become positive active credit. Understand the more challenging information and how it can be addressed, as well as inaccurate information that may need to be disputed. And next, sometimes that’s missing from the credit report, is just as important as what is on it. Identify opportunity to add new positive accounts that can jumpstart or accelerate credit opening. And this of course is a whole other conversation for another webinar, but find a (score-able) responsible credit building activity that you can connect clients to in your (community). We also, want to connect your action items with your client’s goals. Make sure that the steps that you identify, are realistic and aligned with what your clients are trying to achieve. This is also, critical to fostering trust with your clients and keeping them motivated. And finally, work with clients on the credit report - your work with clients on the credit report, should go really hand-in-hand with their budget and cash flow activities and conversations. The budget is critical in informing capacity to repay debt, but also, capacity to take on new obligations. Next slide please. At CBA we believe that good credit is an asset that can only be achieved through credit building activity and this means focusing not only on paying off or paying down a debt, but insuring that a plan is in place to continue to build new positive credit by establishing and (initiating) active trade lines that are being reported to the major credit bureaus. And traditionally, these types of trade lines have been installed on accounts such as auto or personal loans or revolving accounts such as credit cards, but now also, include limited instances of rental payment reporting and other types of alternative data reporting as well. Next slide. Anytime that you’re helping somebody evaluate whether they can take on a new credit obligation or open a new credit building account, we want to make sure that we’re helping them asses their readiness for that product. And the first and most important piece of this, is their readiness, is that ability to make contract payments, the benefit of adding new active lines will be lost if a consumer is not able to pay as agreed. In addition, to assessing your ability to make on time payments, I just want to note that it’s important to understand how the starting credit profile will impact their ability to improve their credit score. So, what is on their credit profile and how that will impact their ability to either establish or improve their credit score, through new lines. So, in our work at CBA, we have seen the most potential for credit building, among those who are starting with no credit file at all, to those who need to establish credit in the first place as well as those who have limited credit records. A thin file consumer might have a few active lines or only old information on the credit report. So, in this case, adding new positive information, can really help them to establish the credit score or improve on that as well. For those who have thicker files, you know, it’s really a case-by-case basis and there might be slightly less potential for immediate or rapid credit building improvement and - because they just might have - they have more information that is weighing on the credit score. So, for those cases, you want to assess what are the opportunities to build out a fuller file and know - understanding what different factors impact that credit score. Next slide. Of course, we want to make sure to watch out for a red flag that would indicate that a consumer is definitely not ready to open new credit trade lines. For example, those who have a strong tendency to miss payments, are struggling to pay their basic bills, or those who have a high credit utilization may need to focus on financial stability goals, prior to opening new lines of credit that may be unsustainable. And in addition, those who have high collections balances are at the risk of wage garnishment, or those who are constantly being in foreclosure or bankruptcy, should definitely hold off on applying for new credit for the purposes of credit building, until more serious issues have been resolved. So, I’m not going to - we’re coming to the end of the webinar so, I’m not going to go into this (stuff), but CBA has developed what we call our credit strength roadmap and it’s an action plan framework for helping your clients to strategically build credit. We have five steps and we believe that really - the starting point is always with that goal. And then while the (unintelligible) linear as you see, you know, on the illustration, these are some of the key pieces that we found that coaches can work with their clients around. And so, we have a lot of different resources on (unintelligible) and training these different areas as well as consumer facing tool that you can use. So, this is an introduction to what we have to offer as you continue to think about how you might build client credit action plans. Next slide. So, hopefully we have a couple of minutes for questions, but I wanted to just summarize a couple of key points from this webinar and I hope you see it as a call to action to incorporate some of what you’ve learned in the work that you do. So, first, get comfortable with leading and understanding different types of credit reports that you review with clients. Second, really think about that action planning framework, to help clients take meaningful and incremental steps to achieve their goals. And finally, track and leverage progress to help clients bolster long term financial security. At CBA, we would love to continue to support you in the work that we - you do, whether it’s through training, through our training institute, you can see the URL here; or through our CBA access service to actually access those so, (pull) credit reports. So, feel free to reach out if you have questions about our membership and services. And then I also, just wanted to point to the excellent resources that are available as Heather mentioned at the beginning of this call, from the CFPB, in particular the credit report and score portal. There are a lot of really great tools and resources that you can use there, to implement your work. So, with that, I just want to say move to the next slide where you can find our contact information. I just want to again, say thank you for our - for all of you who have joined us on the webinar today, and thank you to CFPB for inviting us to present. Dr. Heather Brown: Wonderful. That was a great presentation, and it was really informative and a lot of information. Thank you so, much for taking time to prepare it and to deliver it to us. For those that are asking about getting a copy, we are going to have this posted to our Web site with all of the back recordings, within the next couple of weeks. So, if you check back by next Friday, I’m hoping they’ll be there by then. But if not, you can reach out to me as well as the CFPB underscore. We have - Operator, would you like to give - by the way, anyone that needs to drop off, because I know we are running over time a little bit, feel free to do so. It won’t disturb the rest of us. And Operator, can you give instructions for giving questions? Coordinator: Yes. At this time, if you do have a question from the phone lines, please press star followed by the number 1. Please unmute your line and record your name clearly as prompted, to be introduced. Again, with questions from the phone line, please press star followed by the number 1. Dr. Heather Brown: Thank you Operator. In the meantime, while we’re queuing up some questions there are some questions online. One of the questions was if they can give a copy of the credit report to the client. They work of a nonprofit that provides financial coaching. And I know CGBA does have some services around that. Did you want to comment Carmina? Carmina Lass: Sure. So, that’s going to depend - if you’re purchasing credit reports from a bureau, or CBA access program, your ability to share that information and the information on the report, essentially other details but the score, is going to depend on the agreement that you have with whoever your pulling the credit report from. So, one would need to review that agreement and understand your permission in sharing that information. If you’re a CBA member and you’re pulling reports through our access program, we can definitely provide you with guidance and support on your responsibilities and how you can share that information. Dr. Heather Brown: Thank you. Another question says will medical bills be scored the same? Carmina Lass: Yes. So, let’s take this question. So, medical bills when they appear on a credit report, are typically appearing - they are appearing as a collection item. And the good news for consumers who are facing medical debt and have medical collections on their credit report, is that some of the newer credit scores are actually looking at medical debt as distinctly different from other types of consumer debt, and so, they are factoring that difference into their scoring model and understating that medical debt should be treated differently, that it’s not something that’s planned or anticipated in one’s budget. Dr. Heather Brown: Thank you very much. (Carol), I see you had audio problems. I hope it worked out later, but you could always catch the recording. I heard it clearly, so, I didn’t want to interrupt anything and ask her to speak louder. We see that we have a question about judgments, whether they all are removed or only the judgments that couldn’t be verified, are removed? Carmina Lass: Yes. So, there was definitely a process for how some of the civil judgments and tax liens that came off the credit report. They have now been - all of the credit - major credit reporting agencies have removed all civil judgments and tax liens from the payer report. But there were definitely some steps up until that point where at first they were just moving some of those records, and now they are moving all of those records. Dr. Heather Brown: Okay. I thought maybe we could go to the phones for some questions now. So, since we have these in writing, I might answer them and send them to everybody that provided their email on the call. I’m going to go ahead and send slides to everyone that left their email when they dialed in. So, if you don’t’ want them, please just hit delete and, you know, I’m sorry. I don’t want to, you know, cram your inbox, but I think it’ll be easier that way. But in the meantime, Operator are there any questions? Coordinator: Yes. One moment please for the first question--your line is open. You may ask your question. (Tree Andrews): Thank you. For the debt ratio on a credit card balance, it used to be back in the day it’s okay to carry below 50% of the limit and then it’s gotten lower. Is it now suggested if you do carry a balance, maintain below 30% of the limit so, that it doesn’t affect the score? Is that true or false? Thank you. Carmina Lass: Yes. That’s a great question. So, generally, the lower the better for the credit score. So, there has been a lot of, you know, benchmarks around, you know what percentage is ideal, and there was a study at Experian several years ago, that found that generally people who have good credit scores are using less than 30% of their available limit. But in addition to that, those who have the best credit scores are generally using less than I believe 7% or 8%. So, ultimately, while the 30% rule is maybe a good benchmark that you can help your clients move towards, there is no hard line of how that influences your credit score, if you are, you know, one day at 31% and one day at 29%. We just generally want to shoot for as low as possible and not maxing out any one line. So, even if you have a 95% utilization and you can get that down to 60%, you’re improving your credit score. If you can go from 60% to 30%, you’re improving your credit score. And if you can go from 30% utilization down to 5% you’re definitely going to be moving in that right direction. So, we just recommend always shooting for, you know, as low as possible. That’s where that 30% kind of rule came from. Dr. Heather Brown: Thank you Carmina. Operator, are there other questions? Coordinator: Yes. One moment please. Your line is open. Your line is open. ((Crosstalk)) Coordinator: Yes. (Jemay), I’m sorry about that. (Jemay): That’s okay. So, with the tax liens and civil judgments, do we know when those are going to start being removed, because I had a client last year that there were some out there for him, and I’m wondering if I re-pull his credit, if they’re going to disappear for him. Carmina Lass: Yes. They should now all be removed. So, if - I believe it’s around April of 2018 is when they were all coming off of the credit reports definitively. So, they should no longer appear. Of course, it doesn’t mean that those individuals no longer owe those debt and they may still have those obligations. So, it’s important to message that as well. And there are other reports because of the Lexis-Nexis risk to you report that still contain those public records. It can also, search, you know, local court databases to identify some of those details around those (tax) records. Dr. Heather Brown: Great. Thank you so, much. How are you doing on time Carmina? Do you need to wrap up, or do you want to take a couple more questions? Carmina Lass: I’m good if you’d like to take some more questions. I mean… Dr. Heather Brown: Okay. And again, anybody that needs to drop off, feel free to. But since we have so, much interest, I’d like to address as many questions as we can. Operator, do you have additional questions? Coordinator: No, I don’t. But at this time, if you do have a question, please press star followed by 1. Please unmute your line and record your name, so, that I’ll be able to introduce you. Again, with questions, please press star followed by the number 1. Dr. Heather Brown: Okay. I see a question here from (Charlene). It says that I would like to have a copy - oh, that’s the - they want a copy of the slides. I’m sorry. I see another question from (Mary). Could you pull a credit report from each credit bureau for review, each time? Carmina Lass: Yes. I guess it just depends on what the objectives are and how you’re pulling those reports. So, when you’re pulling a consumer disclosure report from the AnnualCreditReport.com, from, you know the consumer perspective, let’s say you haven’t looked at your credit report in a really, really long time and you’re just wanting to kind of get a big picture of what all is on your credit report, you might want to pull reports from each of the three bureaus at that time, to just get that full picture. That being said, after that sometimes it’s a best practice to share - to look at your credit report from each bureau every four months, so, that you’re able to see your credit over the course of the year and really keep an eye on anything that’s cropping, since each consumer is entitled to only one credit report from each bureau every year. If you are, you know, working with your client and you’re able to pull business division reports, you might have a different strategy based on whether you’re helping with (meeting) their goals or what type of service you’re providing them, we can get those prior reports. But from a general, you know, managing your credit and monitoring your own credit, I would say, you know, if you’ve never pulled your credit or you haven’t seen it in a long time, you can start out by pulling all three and then get into a regular habit of pulling one report from each bureau every four months or so. Dr. Heather Brown: Thank you Carmina. Coordinator: And we do have a question - oh, I’m sorry about that. Dr. Heather Brown: Okay. Go ahead Operator. It’s okay. Coordinator: All right. We have a question from (Sandra). Your line is open. (Sandra): Thank you. If you’re paying off a collection or having it removed from your credit report, does that improve your credit score? Carmina Lass: Yes. So, if you have a collection account and you pay that off, so, you pay the balance in full, that doesn’t necessarily mean that the collection account will be removed for the credit report. That means that the collection account will likely still appear on your credit report for the full seven years that it can, for the FCRA, but it should be updated with a status that shows that it’s been paid in full. And that paid in full status is going to be generally better for your credit score than having a collection account with an outstanding balance. So, the answer is that, you know, yes, it can - paying off a collection account can improve your score because you, you know, have reduced your debt and that status is improved because it shows as paid in full. It doesn’t necessarily mean that the collection account will be removed until it’s reached that full time period. (Sandra): Okay. Thank you. Coordinator: Thank you. We have another question here from a (Cara). Your line is open. (Cara): Yes, hello. Can you hear me? Carmina Lass: Yes. We can hear you. (Cara Stanley): Okay. I don’t know if I missed it, but I wanted to know how can a client get their credit score for free? Carmina Lass: Great question. So, if you go to AnnualCreditReport.com, you can get one free credit report every year from each of the bureaus. And that does not include a score. There are ways to purchase a score through that platform, from, you know, from the bureaus. If a client is wanting to track their score, there are other services that they can use. There is, you know, services like Credit Karma, Credit Sesame, Nerd Wallet. There’s a variety of different services that offer free credit scores. Oftentimes you just want to pay attention to what type of credit score that is. So, oftentimes those are - frequently they’re Vantage scores from, you know, one or more of the bureaus. Occasionally you might find a free FICO score. Sometimes credit card companies will provide an ongoing - every month you can get your credit score for free. Those are free in terms of you’re not paying for them, but you may have to exchange personal information for those scores. But it’s just important for consumers to really pay attention to what score they’re actually seeing, and know that that score might not be the same as a lender might see. Another opportunity for - another time when a consumer can get their free credit score is if you are applying for a loan and you’re not approved for the most favorable terms or the loan at all. The lender will need to provide you with the credit score at that time. And I will again point to the CFPB has in their credit report and scorecard, some really great resources on how to understand and how to get your - how to understand where free credit scores can come from and how to understand what version of the score or what types of scores consumers are seeing from those different places. Dr. Heather Brown: Wonderful. Thank you. We also, did a webinar on credit that’s going to going up soon as well. And we did a little session that talked about what we heard from the request from information on how consumers were using some of the free credit reporting vehicle. So, that might be of interest to some of you. Okay. Well I think we are running out of time. We’re quite a bit over and I appreciate Carmina’s generosity in sticking with it, but I think we’re going to maybe take one more question and then we’re going to wrap up. Operator, is there one more question on the line? Coordinator: Yes. We have another question from (Jenay). (Jenay): Hi. One thing. I have heard the Discover credit cards were giving everybody a copy of their score, customers or not. But my question is about the paying off paid collections. Does it also, initially hurt your score, but will then eventually rebound to the positive? Carmina Lass: Excuse me. Yes, so, you’re correct in terms of Discover. I believe it’s called Credit Scorecard. And they do have free credit scores that you could sign up to receive. So, thanks for calling that out, and I believe it is a FICO score in that case. So, then your question about paying off a collection - so, it is your - it used to be that when you paid a - made a payment on a collection, whether paying it in full or, you know, making a payment on that collection, it used to - some of the credit scores would actually refresh the negative impact on the score. So, basically, you know, you have this old collection and you - it has new activity and it would bring it back up to the surface and re, you know, re-hurt the score or re-damage the score. But that is no longer the case and so, FICO - we confirmed from, you know, FICO that in all of their score models they have actually taken that out. So, there is not a negative impact from refresh, you know, new activity refreshing the impact of that account on the score. Dr. Heather Brown: Wonderful. Thank you so, much Carmina for the great presentation and for your patience and thoroughness of answering all of the questions. It’s really been a wonderful session that I know we’ll get a lot of hits later. I did post our site for where to get access to free credit scores if you want to. And there are a lot of credit card companies that offer them, as well, as one of our participants mentioned. I will send out slides to everyone that’s on the call who provided their email when you logged in. You can reach out to me if you need any additional information at CFPB_FinEX@CFPB.gov. Thank you so, much and we look forward to having you on our next webinar, which is going to be on the 31st at 2:00 and it’s on financial wellbeing. And (Irene Skricki) will be making that presentation. Have a wonderful day and we’ll hope to see you at the next webinar. Thank you. Bye-bye. Coordinator: And thank you. This does conclude today’s conference call. You may disconnect your lines and thank you for your participation. END NWX-CFPB HQ Moderator: Heather Brown 1-28-19/2:01 pm CT Confirmation # 8718725 Page 1