Building Credit = Building a Better Boston

By Trinh Nguyen, Director, Mayor's Office of Workforce Development and Office of Financial Empowerment, Boston

In the latest in Citi Community Development's Inclusive Cities Series, Trinh Nguyen from Boston's Office of Workforce Development and Office of Financial Empowerment discusses the new Credit Building Initiative for Young Working Adults.

Nayshia Scott, a 21-year old single mother living in Boston, Massachusetts, had a seasonal job and no credit score.

Nayshia is one in 26 million people – 11 percent of all adults in the U.S. -- who are "credit invisible," meaning that they do not have a credit record on file at one of the three nationwide credit reporting companies. When borrowers lack a credit record, lenders have a harder time assessing the creditworthiness of applicants who then often find it difficult or even impossible to obtain safe, affordable credit.

Recently, the Consumer Financial Protection Bureau (CFPB) released a new report revealing that millions of "credit invisible" consumers do manage to acquire credit records each year. The majority of consumers who are able to make this leap into credit "visibility" do so at comparatively young ages -- nearly 80 percent of these credit events occur before age 25.

That's why the City of Boston's Office of Financial Empowerment, in collaboration with Citi Community Development, has launched the Credit Building Initiative for Young Working Adults. This innovative program is specifically aimed at providing young people with the critical knowledge, skills and tools they need to become financially resilient while working to build a healthy financial future. The program teaches young adults (ages 18-28) the value of credit while helping them to improve their credit score over the course of a year. In addition to credit workshops and one-on-one financial coaching, the program offers participants a secured loan and savings product designed to help build credit in a responsible way.

Early results are very promising: participants were found to have improved credit scores and histories, while enjoying reduced delinquency rates. The number of young people who established credit for the first time grew by nearly three times that of the control group -- 11.3 percentage points versus 4 percentage points. The number of young people with good credit scores (>660) increased by more than 6 percentage points versus a decline of 0.7 percentage points for the control group, while delinquency rates declined by 13 percent as compared to an increase of under one percent for the control group.

These results demonstrate that by providing access to the right product at the right time, and pairing that product with the right skills and knowledge, it is possible to empower at-risk young people to build healthy credit while preparing themselves for a future of greater financial stability.

"I thank Citi for their partnership in helping our young people build a financial future by establishing good credit early in their careers. We are committed to improving the economic mobility of all Bostonians through programs that help residents of all ages prepare for good jobs at living wages, build personal wealth, and create a path to financial stability," said Boston Mayor Martin J. Walsh. "As Vice-Chair of the U.S. Conference of Mayors' Cities of Opportunity Task Force, I have pledged to confront the inequality that is holding back too many Americans and too many Bostonians. The partnership between Citi Community Development, Boston's Office of Financial Empowerment, and other key partners is helping us overcome these disparities."

As for Nayshia Scott, she went from being unscored to building an optimal credit profile through one-on-one coaching provided by the Youth Credit Building program. She was able to open a secured savings account and is now making 100% of her payments on time, after building a healthy credit score.

Thanks to our collaboration with Citi Community Development and Boston's community partners, Nayshia has joined the ranks of hundreds of other young Bostonians taking a critical step towards creating credit visibility, which can be the key to getting better jobs, housing, and more favorable interest rates.

If we want to begin to address inequality and household financial vulnerability, we must ensure that none of our residents are "invisible" any longer. Only then will Boston be a city that can be considered truly economically resilient for all Bostonians.

Read the complete report, "An Evaluation of the Boston Youth Credit Building Initiative: Baseline Report," or read the Executive Summary.

About the Inclusive Cities Series
Citi Community Development collaborates with America's most prominent local public officials, civil rights leaders and community organizations to expand financial access and build more inclusive cities. Through these innovative collaborations, we harness Citi's expertise, products, services and investments to ensure all residents and families have access to opportunity. Inclusive Cities is a new guest blog series where Citi's leading community partners bring to life, through stories of leadership and ingenuity, how their partnership with Citi is driving real urban progress in communities around the U.S.