Boost Your Credit Score and Transform Your Life

Your credit score can open doors to opportunities or slam them shut, impacting everything from where you can live and work to how much you pay for insurance. In this episode, we talk with Kerri Smith from Self-Help Credit Union and Dr. Mark O'Rourke from the MICAH Project about what makes up your credit score and why it matters. They discuss practical ways to build and repair credit, including local resources that can help you escape high-interest predatory loans. Learn how you can get involved as a donor or customer of an innovative community program that's already saved Greenville consumers nearly a million dollars while helping neighbors achieve financial success.

Links:

St. Anthony Catholic Church office phone number: 864-233-7717

MICAH Program website

Self-Help Credit Union website

Transcript

Sponsor: This episode of Simple Civics: Greenville County is sponsored by Self-Help Credit Union. Self-Help is a family of member-owned, mission-driven credit unions, a non-profit loan fund, and a policy advocacy organization. They work every day to expand ownership and economic opportunities for all. The mission is large, but Self-Help believes that much of it is accomplished by small acts. A member's first bank account, a loan for a small business, helping families buy their first car or first home, or reduce high-cost debt. Together with more than 188,500 members around the country, Self-Help Credit Union is increasing ownership, creating jobs, revitalizing neighborhoods, and building stronger communities. To learn more and to find a branch near you, visit self-help.org.

Katy Smith: Or if you're a certain age, the phone number of your childhood best friend. But do you know your credit score? All adults have them, and this three-digit number has enormous importance in your life. It either opens doors or closes them in your face. But it's a number that can change, and you have the power to make it change for the better. I'm Katy Smith with Greater Good Greenville, and on this episode of Simple Civics Greenville County, I'll talk credit with Kerri Smith, the South Carolina President of Self-Help Credit Union, and Dr. Mark O'Rourke, a parishioner at St. Anthony of Padua Catholic Church and founder of the MICAH Project. They'll discuss what credit is and why it matters and how you can repair yours for greater opportunity. You'll also hear about a really remarkable project for neighbors helping neighbors to get out of debt. You'll want to be a part of it and you won't want to miss this episode. Kerri and Mark, thanks so much for joining me today to talk about this really important topic that not enough people understand. I appreciate you being here.

Kerri Smith: Thanks, Katy.

Dr. Mark O'Rourke: A pleasure, yes.

Katy Smith: Kerri, what is a credit score and why does it matter?

Kerri Smith: Well, Katy, thanks for asking that. And it does feel like a bit of a mystery because you hear it all the time. But a credit score is basically a score that demonstrates how people handle credit. And there's five components to the credit score. One is length of credit. So the longer you have credit, say your mortgage, and you've had the same lender for 20 years, that's going to be very favorable in your credit score. Then you have revolving debt, which is like credit cards and credit utilization. So if you have a credit card for, say it's $3,000 and it's always at the limit or at your credit limit, your score is going to be diminished because of that. Because the algorithms take that into account and it will ding your score. And then you also have repayment. Are you making your loans on payments on time? Are you staying ahead of that and not continually being delinquent? And those are the big ones in particular that we see that folks get dinged on. There's things like judgments and collections will ding your score as well. So what we do is each of the credit bureaus, there's three credit bureaus in the United States. We have TransUnion, Equifax, and Experian, and they all score a little differently. But generally, somebody can have a zero credit score if you've never had any credit.

And it can go from zero up to 800 or 850. So each of them, the algorithms are similar, but the scoring is going to be different. So there's several factors that impact your score. One piece that doesn't impact your score anymore, which has helped South Carolina in particular is medical debt. So that is no longer calculated in the score.

Katy Smith: That's great. So we all like to have a high score on things, right? But it really matters with credit. Can you tell folks why having a high credit score is important and what it can impact if you don't?

Kerri Smith: That is one thing that I didn't even realize until, because credit scores have been around for a while, but they haven't always impacted everything like they do today. Credit scores have kept people from getting jobs. Employers now pull credit. And if you're in a bonded position, if you have poor credit, you can't get bonded. I was working with a company that hires engineers, and they had a government security clearance. And if you do not have a good credit score, you can't get a government security clearance. So it also impacts where you live, because if you don't have good credit, then you can't buy a home, or sometimes you can't rent. It impacts your car insurance. So if you have poor credit, then you're going to pay higher on car insurance. And sometimes it also impacts your life insurance. And the reason for that is because of debt, stress around finances is just as bad as heart disease and obesity and diabetes as far as the impact to your health.

Katy Smith: But all of it makes sense because it's telling a potential extender of credit, if you're a good chance, if it's worth taking a chance on you, and if others took a chance on you and it didn't go great, they would want to know that. Or if you don't have much bandwidth to pay back because you're already overextended, they wouldn't want to know that. But it can be probably a little bit of a mystery for folks. So how do people keep their credit strong?

Kerri Smith: Well, one is to know what you have on your credit report, because we find out every day, folks that have had fraud, somebody's taken out a loan in their name, or maybe it was an old bill and they didn't even realize that they didn't make that last payment. There's things in collections, for instance, maybe you were on Spectrum and you didn't return the equipment, they'll put a collection on there. So we see a lot of things like that that negatively impact folks' scores.

Katy Smith: All right. So we know how to keep it strong, but what can result in poor credit?

Kerri Smith: Well, I do want to say the credit scoring system is a rigged system. There is no benefit or credit given for people that save and purchase without taking out loans. And so we see a lot of people that have poor credit, not because they haven't paid their bills, or they're not managing their credit well. It's because they don't have any credit.

Katy Smith: Oh, my gosh.

Kerri Smith: And so, for instance, if someone comes out of incarceration, nine times out of 10, they don't have a credit score. You have kids sometimes, unfortunately, parents have used their social security number. So we see that we're an 18, 19, 20 year old, they come out of college, they're ready to buy their first car, and they already have poor credit. And it wasn't their doing. So your credit score is one very valuable, we need to protect it. But two is to understand that not all poor credit scores mean that they're not necessarily a good credit risk. But that credit score is used to determine what interest rate you pay on a loan. So if you have really good credit, you may pay 6%. If you have really poor credit, you could be paying hundreds of, you know, 100% interest. So it's a big gap in that it's very valuable to have good credit.

Katy Smith: This was a really helpful overview of what credit scores are, why they matter, how they can result in being either excellent or poor. So if someone finds that they have poor credit and have a lot of debt, that is making it difficult for them to do the things you said, get a great job, live in a place they want to live. There's a great resource out there in the MICAH program. So, Dr. O'Rourke, I wonder if you could tell us about the MICAH program, what it is, how it got founded, and how you've seen it work.

Dr. Mark O'Rourke: Thank you. I'd be glad to. In 2020, the MICAH program began at St. Anthony Catholic Church when parishioners recognized that many of our neighbors are in financial distress and become vulnerable to these high-cost loans that are sometimes called predatory loans. To deal with that, we created this charity to help with mentoring, that is, support and advice and counseling, but also we set up a program with Self-Help Credit Union. To be able to facilitate low-cost loans to people to help them over a rough spot. There are a number of programs for people in financial distress, and some people need a grant or other benefits in their programs in town. But MICAH focuses on helping people who can help themselves with a loan and are able to pay back a loan. And we can facilitate the low-cost loan and provide counseling and advice to get them through a difficult time.

Katy Smith: That's outstanding. What kind of folks do you see taking advantage of the MICAH program?

Dr. Mark O'Rourke: Oftentimes, the issue may not be such a bad credit score as impulsive decisions and feeling like something has to be done right this minute. And one of the ways the predatory lending industry works is by catching people at an emotional moment and making decisions without thinking everything through. Some of the people we encounter in MICAH, they have a low credit score and they would have a hard time getting credit. So our low cost loan really helps. Other people, their credit score may be okay, but they just hadn't thought it through, didn't know about the resources that were available. So ironically, when a MICAH mentor sits down with someone, frequently we can get through the situation without even having to take out a loan to find other solutions.

Katy Smith: Can you share any success stories from the program over the last couple of years?

Dr. Mark O'Rourke: Yes, I can, and I'm happy to. One neighbor who I'll call Rose was able to borrow $1,100 at 5% for a car repair and pay it off over 12 months with a low payment of $95 a month. During that time, she also organized her spending and got on a personal budget. She began to save a small amount of money each month. She saw her credit score improve, and she told her mentor that she now felt so much better and so much more in control of her life. So it made a big difference in terms of the quality of life as well as solving a financial problem.

Katy Smith: There's a couple things I want to note about that. So you said it was a 5% loan.

Dr. Mark O'Rourke: Yes, we have an arrangement with Self-Help Credit Union, so we are not lenders ourselves. But they allow us to facilitate loans through Self-Help that are 4% above the savings rate. So I'm just rounding off the savings rate at about 1%. And so the loans that we give people are 5%, and that compares to 10%, 15%, 20% for car loans, and 30% for credit cards. And for these predatory loans, sometimes they're 100% or 200% or 400%.

Katy Smith: That in and of itself is incredible. There is so much complexity, wonderful complexity to this, because those of you who have invested in the MICAH program, what I love is you've made a transformation in Rose's life and people like her. But the money comes back to you to then pour into others because Rose paid back that loan. And now those dollars can go to the next Rose and the next one and the next one. Am I right?

Dr. Mark O'Rourke: Yes. So, donors who have given us money to put in our reserve fund, which is now about $60,000, that money stays there. And as people pay back their loans, that fund is built up so we can loan more money out.

Katy Smith: Wow. How do people find the MICAH program who are in need?

Dr. Mark O'Rourke: So people find us a number of different ways. There is a food pantry at St. Anthony's that sees a lot of people. But the people in service positions around town, whether it's at SHARE or United Ministries or Triune Mercy, a variety of programs are aware of each other and each has their special niche. And so when people spot someone like this, then they suggest you go over to St. Anthony's.

Katy Smith: This is amazing. If someone felt like they could benefit from the MICAH program, how might they find out about it?

Dr. Mark O'Rourke: Yes, that phone number for the St. Anthony office is 864-233-7717, and we have a website, www.MICAHprogram.org, and that's spelled M-I-C-A-H-P-R-O-G-R-A-M.org, and that has our contact information and the MICAH story on it.

Katy Smith: Well, that's great, and in case someone's driving, they can just click on the show notes later, and we'll have all that information repeated for them. Now, I can imagine some folks are hearing, and they think, this is the kind of work I want to give money to. So, how can folks get involved as a donor?

Dr. Mark O'Rourke: Donors have allowed us to have this reserve fund and allowed MICAH to function, and we have our contact information on the website, and you can actually donate directly on the website. And we very much appreciate the people who have supported us and made this possible.

Katy Smith: That's great.

Dr. Mark O'Rourke: You mentioned the idea of empowering, and one of the things we've noticed in dealing with people in financial distress is the amount of shame that is associated with finances. People realize they may have made some bad decisions or borrowed money that they couldn't pay back, and they find themselves in an awkward situation, or else they've borrowed money from one of these predatory lenders who's charging an outrageous amount and adding the charges each month, and they're embarrassed.

So the first and most difficult hurdle is to get over that. And so the MICAH mentor develops a relationship with someone to be a personal support. From there, then we can talk about the first two or three steps and work on an approach and then perhaps work on budgeting and financial habits down the road.

Katy Smith: That's wonderful.

Dr. Mark O'Rourke: The MICAH program has developed a relationship with Miracle Hill Ministries to help their overcomers in their program make a car loan to facilitate buying a low-cost car. So we have a way that a person can buy a $5,000 used car, put together $1,000 down, and then pay off $4,000 over two years, 24 months. That has been quite helpful for people who have difficult credit. Sometimes they have to struggle to get their driver's license back. Sometimes it's an effort to get health insurance. And the MICAH mentor walks with that person who already has a good relationship and good support system at Miracle Hill, and that has been quite rewarding.

Katy Smith: That's great. How does someone become a MICAH mentor if they're interested?

Dr. Mark O'Rourke: So the volunteer mentors are the heart of the MICAH program. The requirements to be a volunteer are adult common sense and a desire to serve. One does not have to be a financial expert. If one of our listeners would like to consider being trained to be a MICAH mentor, you can call our number at 864-233-7717 and start the conversation. We periodically have classes that train a group of mentors, and then we meet once a month just to talk about what's going on and update our skills.

Katy Smith: So if someone's listening and they're thinking, okay, I have a little hope that I can bring my poor credit score up and that there are people who want to help me do that. Kerri, can you talk about how someone can repair their credit score?

Kerri Smith: Absolutely. And it's actually, we have a couple of different products at Self-Help to help people build credit. One is called a credit builder loan. You take out the loan and the proceeds from the loan go into a locked savings account and you pay that off over six months or 12 months and we report to all three credit bureaus so that takes care of that installment loan piece and then we also have a share secured Mastercard and you just put whatever you want your credit limit to be 250 and above and we'll do that credit card for you. And then you pay on it over 6, 12, 18 months.

Kerri Smith: And again, we report to all three credit bureaus. And individuals that we worked with, with MICAH or others, we have seen their credit scores increase 20 points, 30 points, and even as high as 60 points in six months. Just those two simple loans can get people through the really rebuild their credit. And I think the biggest thing too, is having partnerships like MICAH and others in the community really does bring a tool to their toolbox and what they do, and they can do what they do well. And we're here to support them and be able to really get folks onto the financial success story.

And I don't even know that I've shared lately with Mark and his crew, but our early members through MICAH, we had somebody in the office today that was getting a regular car loan with us after being in the MICAH program for a couple of years, made a great choice on a very nice car. And their interest rate was instead of 12%, they're in the 7% or 8% interest rate, all because of coming through the MICAH program. And with MICAH and a couple of the other revolving loan funds that we operate here, we have saved consumers almost a million dollars in Greenville over helping people get out of predatory loans.

Katy Smith: That is so amazing. That is so amazing. Congratulations and thanks to both of you. I mean, my takeaway is if someone is listening and is really feeling that shame that people have around money and regret about the credit score that they have or don't yet have good credit, have a credit score because they're young or any of the situations you described, there are partners out there that want better for you. And they want to walk alongside you and help you have the life you deserve and don't feel alone and don't feel ashamed. Reach out to folks like those at Self-Help Credit Union, like those at St. Anthony or many of the wonderful nonprofits that we have in town who you can find just by dialing 211 on your phone and know that we want the best for you. We want abundance for you. And so please take advantage of that. Mark and Kerri, thanks so much for joining me today and for all that you do for our community.

Kerri Smith: Thank you, Katy. It was a pleasure to be here.

Dr. Mark O'Rourke: A pleasure. Thank you.

Catherine Puckett: Simple Civics: Greenville County is a project of Greater Good Greenville. Greater Good Greenville was catalyzed by the merger of the Nonprofit Alliance and the Greenville Partnership for Philanthropy. You can learn more on our website at greatergoodgreenville.org.