A bad credit rating, or no rating at all, is a serious barrier to financial independence. The fees, deposits, and high interest charges demanded of people with low or no credit take a debilitating bite out of monthly cash flow and can make it virtually impossible to increase net income and build assets.
A good credit history and credit score, on the other hand, can pave the way to better jobs, lower interest rates and asset building. That’s why LISC Financial Opportunity Centers (FOCs) work closely with clients to remedy expensive debt and set up manageable payment plans that help grow a healthy credit rating.
LISC Twin Accounts™ is a tool designed to help low- to moderate-income people build credit and save money at the same time. Participants are issued a 12-month, $300 loan which is immediately transferred into a “locked” savings account, where it remains until the loan is paid off. Clients make monthly payments of $26.24 each, which are reported to the major credit bureaus.
LISC then matches each monthly payment–dollar for dollar–as long as it paid on time. At the end of the loan term, participants who make 12 on-time payments have $300 in savings and $300 in matching funds. They also have improved credit, as the credit bureaus have 12 months of on-time payments reflected in a new credit score.
Most clients pay off the loan in full within the 12 months, and to help them continue building credit beyond the term of the loan, they must use their matched funds to open a secured credit card. Clients who are unscored when they first begin working with an FOC usually achieve a FICO credit score of 676 within six months. And 60 percent of FOC clients have either acquired or raised a score.