Many clients who seek assistance from Laurel Advocacy and Referral Services — a Laurel nonprofit that helps 2,000 homeless and low-income individuals each year — are in trouble because of credit. Credit scores impact their lives, from the ability to rent apartments or obtain insurance to employment opportunities.
To help clients, and others in the community, learn about the impact of credit scores, LARS staff members and finance professionals held a forum on consumer credit March 7 at the Laurel Police Department's Partnership Activity Center.
"It's not just credit, it's not just banking. … If a credit score's higher (or) lower, that's going to affect us in a lot of parts of our lives," Deanna Booker, community outreach manager at Consumer Credit Counseling Service, said at the forum.
Booker joined Kelly White of Revere Bank, Bernie Robinson of PNC Bank and Gyssette Isom of Capital One in presenting a briefing on credit basics. They explained what constitutes a bad credit score; the ways individuals can hurt, or improve, their credit score; and how long it takes for a poor credit score to recover.
Credit scores range from 400 to 800, with a score of 400 to 500 considered a bad score, and 800 deemed near perfect. When scores approach 700, individuals can get the loans they need at low interest rates, Isom said.
She said one way people tend to damage their credit scores is failing to pay bills on time —repayment history accounts for more than a third of an individual's credit score. Isom recommended keeping the balance owed on cards at 30 percent of their credit limit to keep payments in check.
Another way individuals damage their credit scores is holding too many credit cards at once, she said. Avoiding the deal-traps retailers use to lure customers into high-interest store credit cards is one way to minimize your number of cards, she said.
And while a bad credit score blocks options, having no credit at all can be just as damaging.
"It actually does help to keep a small balance on your account," Isom said. She described a "judicious use of credit" as having one mortgage loan, one car loan and two credit cards, for example.
Once a credit score is damaged, the only fix is to repay debts and let time pass.
"There's no magic bullet," Booker said. "It's not a quick fix."
After outstanding credit is repaid, a credit score will recover over the course of one or more years, depending on the individual situation.
The best way to improve credit scores is to plan ahead and avoid problems in the first place, the panel agreed.
"Think rationally," Robinson said. "Never jump into a sale."
LARS intern Kim Guidara, a graduate student at the University of Maryland, hopes events like the forum will help LARS clients.
"They've never had the education or exposure to know the impact of their decisions," she said.
Intern Taryn Gauthier agreed that "uninformed decisions" make up the bulk of clients' problems.
The Laurel community helps LARS through donations and other forms of support. The almost $1 million-a-year organization receives the rest of its funding from federal aid, grants and fundraisers, LARS Executive Director Nancy Graham said.
"What makes this such a special job is the support from the community," Graham said. "Whenever there's a need or a crisis that we can't meet, the community is there."
To learn more about LARS, go to laureladvocacy.org or call 301-776-0442.