by Family Success Coach Manager Amelia M. Martinez C.
March is “National Credit Education Month,” and while staff at Mission Promise Neighborhood – and partner agencies — recognize the value of a good credit score, it is important to get out the message of the free services available to better the financial education of our low-income families.
That message is getting out: in 2015, 332 Mission Promise Neighborhood families received one-on-one financial coaching to reduce debt, increase income and savings, and better credit. The latter is vital and should receive special attention during “National Credit Education Month.”
Financial Seat Belt
Bad stuff happens … to pretty much everyone. It’s often not even your fault. You may lose your job, suffer an injury or illness, need a major car repair or face an eviction. Establishing a good credit score (ideally combined with an open, but largely unused, credit card) provides resilience, the ability to get through the hard times and bounce back. Think of it as a safety net under a circus performer – something you don’t need until you REALLY need it. You don’t need much income to buckle up and begin establishing or improving your credit score. The bad stuff still hurts, but not as much as it could.
Credit Reports Can be Wrong
It’s not intentional, but many credit reports are wrong. According to a 2012 Federal Trade Commission study, “one in five consumers (20 percent) had an error that was corrected by a credit reporting agency after it was disputed.” Those corrections alone can notably improve your credit score. Plus, no money is needed to fix these errors.
Find That Better Home
Whether renting or buying, moving into a new, better home will require a credit check. Landlords or mortgage brokers want to know if a tenant can be trusted to reliably make monthly housing payments, so they look at your credit report as the best predicator. Knowing what’s on your credit report allows you to address any concerns before a potential landlord or banker rejects you, and you may be able to make improvements before even applying. Good credit often reduces move-in costs, such as a security deposit, or the need for first/last month’s rent to be paid in advance.
Cheaper Car, Home or College Loans, and Cheaper Credit Cards
Improving your credit scores makes life less expensive. That same FTC study found that many people were charged much higher interest rates on loans and credit cards due to errors in their credit reports. Even when everything is accurate, a financial coach can help you increase your credit score and thereby decrease interest rates. So, you can pay less on those monthly bills.
Get Out of Debt Faster
Clients with significant credit debt can be immobilized, but ignoring the issue only makes it worse. Remember: the first step to getting out of a hole is to stop digging. A credit coach can help identify “good debt” versus “bad debt,” prioritize which accounts to first pay off and even discuss options for settling to debts for less than what is owed. In the worst cases, the coach can begin the difficult conversation about whether bankruptcy is a good idea and refer clients to legal counsel offered by Mission Promise Neighborhood partners who deal with such issues.
Immigrants Off the Radar
At MEDA, the lead agency of the Mission Promise Neighborhood, many immigrants who have been off the radar in this country have no credit score. Yes, none. How is that possible? They have neither had recorded monthly payments of any kind nor taken out a loan that would have been paid off in a timely manner, so the individual is off the grid when it comes to credit scores. Some clients are undocumented, with nothing but an Individual Taxpayer Identification Number (ITIN). That’s where a Secured Credit Card comes in. With this innovative card, the client puts their own money as a line of credit and pays off an automated bill each month, with a good credit score possible within a year.
When clients see even a single, concrete way in which credit directly impacts them — and they see that they have the power to change that impact — they are much more likely to take advantage of the free services available to them. The Mission Promise Neighborhood doesn’t need to convince families of all the benefits of credit coaching up front. By focusing on one benefit that is immediately applicable to their real life, every family will succeed so that every student achieves.
That’s an important thing to keep in mind this “National Credit Education Month.”
About Mission Promise Neighborhood
The Mission Promise Neighborhood is a citywide community partnership that was created to support kids and families living, working, and attending school in the Mission District. It brings together schools, colleges, community organizations and community leaders to help kids graduate and families achieve financial stability.