5 Questions with Clarifi Financial Literacy Counselors

Date: May 30, 2018

Clarifi is a leader in financial capability services with a mission to create hope by helping people identify and secure the most important assets in their lives. The organization provides a number of one-to-one counseling and education programs to help consumers reduce debt, understand and improve credit, save for an emergency, and prepare for first-time homeownership. It also gives individuals the financial knowledge to become well-informed consumers in a complex marketplace.

A few weeks back, VantageScore was privileged to present at Clarifi’s “Tales of Triumph” Awards Luncheon, which celebrated clients who have benefitted from the support and insight of Clarifi’s credit counselors. This month, we invited Clarifi counselors to answer our “Five Questions with…”

At this year’s Clarifi Awards Luncheon, can you tell us a few of the most compelling stories that were awarded?

One of the most compelling stories recently was about a young woman who had recently lost her job of 5 years. She took this opportunity to learn the basics of money management so she could earn a business line of credit and start her own company. She had grit, and with Clarifi’s counseling and coaching and pushed herself for six months or so, so she could accomplish her mission of starting a her own business.

As a Clarifi counselor, what are some of the most common questions you receive from people who are looking to open up their own business in the Delaware Valley of Pennsylvania? And how do you address these questions?

Clients who have the goal of being a business owner often ask how they can secure funds to start their business, what tools they need and how to balance a budget. These questions are very similar to the questions we get from first time homebuyers, college students or people just looking to improve their financial literacy. I tell aspiring entrepreneurs to make sure to understand if their credit is in good standing, and if it needs work I help to identify what to prioritize so they can get a startup loan. As far as budgeting, just like with a household budget a client needs to know what is coming in and what is going out especially in the first crucial months of starting a business. Finally, I make sure that the client has access to other great resources like the Small Business Administration’s SCORE program or local initiatives like Philadelphia Industrial Development Corporation or Entrepreneur Works, which help fund small businesses.

For someone who is looking to reduce their debt, what happens on the first and consecutive appointments with a Clarifi Counselor?

In a first appointment with a client trying to tackle debt we have to answer a couple of key questions: What type of debt? What does the client’s budget look like? What have they done so far to reduce debt? The answers to these questions help establish what the rest of our relationship as client and counselor looks like. If a client has credit card debt and overall a pretty balanced budget we may steer them to a Debt Management Plan. We would negotiate lower rates with the client’s creditors and usually get them a reduced monthly payment that along with some budget tweaks can help them stop relying on credit cards. If a client is struggling with federal student loan debt, we may work to get them in a more affordable repayment plan with their lender. If the loans are private we will see about options for refinance or settlement depending on the status. Finally for clients who are looking to clear up old collections that are still haunting them from tougher times, we walk them through saving towards settlements and making those settlements with each creditor without relying on Debt Settlement Companies that may take additional fees.

How do you distinguish the clients who are ready to own a home between those who should continue to rent (for now)? And for those who should still be renting, how do you prepare them to become first-time homeowners?

Clients often come in being super enthusiastic about the prospect of buying their first home. It is one of the most rewarding things we help people to accomplish, but it is a huge step with serious financial obligations attached to it. The first thing I do to determine how ready a client is, is to identify their budget. If they are in the red every month, we need to make some tweaks to start building savings towards a down payment. Then there is a credit check to make sure that they are credit ready. Most clients, even those who reach or surpass the minimum score, still would benefit from improvement. Sometimes this means settling old collections, other times it’s just a matter of paying down a couple credit card balances or maintaining payment history on new lines of credit. Clients who come in with a balanced budget, good credit and some savings may be ready to make the purchase, but we still provide them with resources about the purchase process, home inspection, first-time homebuyer grants and maintenance costs after purchase. For some, hearing about all that is involved makes them decide to wait a little longer, while others feel ready to make the jump.

Many students who are looking to start their new lives post-graduation run into issues when it comes to obtaining their first apartment or securing loans due to a lack of credit history. What are the first steps these students should take when building their credit so they can start their new lives?

Student loans are just that, loans. They are installment loans with a fixed monthly repayment in a finite term for repayment. Each loan appears on a borrower’s credit report as a separate trade line starting when it is dispersed to the school. Federal student loans remain in deferment while the borrower is in school. Then the borrowers are issued an additional 6-month grace period after they finish before they have to start repaying that loan. Thus, the entire time they are in school they have active trade lines working to generate a score for the borrower.

At Clarifi we help young borrowers learn how to budget and manage that student debt along with their new obligations. We make sure they know about their eligibility to sign up for affordable payment plans based on their income level, if they have federal student loans. We also help clients see the big picture because sometimes the lowest monthly payment is not the best option depending on their financial goals. Managing student debt is one of the best approaches to ensuring a healthy credit score.

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