Financial Inclusion: How Credit Building is Changing the Workplace
Ricki Lowitz, Working Credit NFP and George Wright, Citi Community Development November 13, 2019 04:00 PM
A low credit score can negatively impact nearly every aspect of a consumer's life, from car loan interest rates to the ability to get jobs or rent apartments. Low and/or no credit scores have become a huge issue for many adult Americans, 44 percent of whom have subprime scores of 600 or below, or in some cases, no credit score at all. In low-income neighborhoods, the percentage of subprime borrowers can easily surpass 80 percent.
In Cook County, IL, where we live, nearly 40 percent of households are liquid asset poor. That means they lack sufficient savings to live at the poverty line for three months if faced with a job loss, medical crisis, or some other form of income disruption. Having good credit can be an important way to help people withstand financial shocks without having to turn to high-priced payday lenders to stay afloat.
Working Credit NFP helps workers to build and sustain strong credit scores and then apply credit enhancements to reduce expenses inflated by poor or no credit. Since 2015, Citi Community Development has provided catalytic seed funding and expert guidance that has enabled Working Credit to grow and scale. Most recently, Working Credit led the charge in boosting credit for 1,000 workers across Cook County. This employer-based program embeds credit education and one-on-one credit building assistance into the workplace to help workers increase their credit scores and build financial security. The approach empowers employees to lower their expenses, increase homeownership, and build savings through employer-based 401(k) and 403(b) plans. On top of all that, having better access to credit when needed is a powerful alleviator of financial stress.
The results have been positive across the board. A 2019 research brief by the Urban Institute documents credit improvements across racial and ethnic identities and hourly wage levels: The median credit score increased for black participants by 44 points, for Hispanic/Latinx participants by 45 points, and for those making $15 to $20 an hour by 62 points from baseline until the conclusion of the 18-month program.
In Cook County, Rush University Medical Center is a key anchor institution and program participant. "The response to Working Credit has been overwhelmingly positive," said Michael J. Mulroe, Vice President, Hospital Operations, Rush University Medical Center. "The first sessions that we held for our employees had a great turnout, with almost 62% signing up for the individual counseling. We continue to hear that this is an extremely popular and critically important benefit."
That progress did not happen overnight. Working Credit today represents the culmination of over a decade of collaboration between the organization's founders and Citi Community Development. In 2015, Citi supported the first randomized control trial study of Working Credit's unique model through the Boston Youth Credit building Initiative, a pilot designed to teach young adults how to manage credit while helping them to improve their credit score over the course of a year. Two years later, Working Credit NFP and Citi Community Development collaborated with the City of Boston to launch Boston Builds Credit, the first-ever, citywide effort to boost credit scores at scale in the U.S. Working Credit NFP and Citi Community Development are partnering to help people in Cook County, Boston, and seven other states move from financial stress to resilience.