January 01 2008
Successful Financial Literacy Program Improves Consumer Credit Scores by an Average of 68 Points
Operation HOPE Banking Center Network programs help members make dramatic changes in credit score and lending favorability
LOS ANGELES, CA, August 14, 2008 – A recent study released by Operation HOPE (HOPE) revealed low-income consumers who participate in financial literacy programs see a meaningful increase – on average 68 points – in their individual credit scores. The study also revealed those consumers who sought financial counseling from Operation HOPE have a lower ninety-day delinquency rate than borrowers with “equivalent observable characteristics” who did not receive counseling, according to data from the Federal Reserve.
The three-year statistical study released today by Operation HOPE showed low-income consumers who participated in the non-profit organization’s financial empowerment programs saw their credit scores on average transition from the high-500’s to the mid-600’s. Improved credit scores greatly impacted the participant’s ability to qualify for more favorable interest rates on mortgages, student loans, and other forms of credit-based lending, and for better jobs, as more employers look to credit reports for information, before hiring candidates.
“The current state of lending affairs in America shows the desperate need for increased financial literacy across our nation, especially people who live in underserved communities,” said William Walbrecher, president and chief operating officer of HOPE. “The data we released today proves financial empowerment programs can make a difference particularly in light of the growing mortgage subprime crisis and credit crisis. Results such as these show how higher credit scores can equal a lower cost of funds for everyone from the poor to the middle class, and we are pleased that Operation HOPE is able to help affect positive changes through our financial empowerment programs.”
The study, which catalogued data from 5,544 Operation HOPE Center lending and counseling clients across the country, including five California centers and Harlem, NY, and Washington, D.C from January 2005 to January 2008, also showed:
• Average income of lending clients - $43,000
• Average income of counseling clients -- $34,200
• Average counseling client credit score at program enrollment – 571
• Average counseling credit score at program graduation – 639
• Average credit score of loan origination clients – 657
Through its banking centers HOPE provides financial literacy tools, case management, and financial management programs. HOPE clients learn how to lower their debt ratios, as well as how to secure lower interest rates and pricing on mortgage and business loan programs.
HOPE also supports school-based financial literacy programs through Banking on Our Future. The study released today also showed that former students who received counseling had a 34 percent lower delinquency rate than those who did not.
“These outstanding results only further illustrate to us the importance of financial literacy programs and counseling,” added Lance Triggs, executive vice president of the HOPE Banking Center Network Operations.
To illustrate his point Mr. Triggs described a typical client scenario of the HOPE Center programs. “Annette Winston was a client who found that many banks were reluctant to trust a home mortgage loan to her after she lost her first home in a bitter divorce,” continued Triggs. “We were able to assess the situation and work with her to help her become a homeowner once again by assisting her in building a budget that would help to improve her credit score. That we were able to help Annette achieve her goal of homeownership and really affect positive change in her life is all a part of our mission to give people a hand up, not just a hand out.”
In addition to the mortgage lending and financial counseling programs, HOPE centers provide area residents with free financial seminars, digital literacy classes, access to a state-of-the-art ATM, and online banking services provided by E*TRADE Bank. Each center offers a digital empowerment cyber café, complete with state-of-the art computers, Microsoft Office programs and high-speed internet access.
Continued Walbrecher: “We deeply appreciate the support of E*TRADE FINANCIAL Corporation to help us expose, educate, empower, and ultimately inspire people in underserved communities and make a difference in their lives.”
“Operation HOPE’s approach to delivering economic independence to low-income individuals is to affect change one person at a time through financial counseling and literacy – this data proves they are succeeding,” said Celie Niehaus, Senior Vice President, E*TRADE Bank. “E*TRADE is proud to support Operation HOPE as a partner in the communities of Harlem and Washington DC, affecting real change each and every day.”