What We Learned About Integrating Credit-Building Services and Products into Youth Programs

Credit has a significant impact on Americans’ financial security and capacity to build wealth. A strong credit history deter­mines eligibility for financial products, employment and housing. Without favorable credit profiles, consumers are at a significant disadvantage in the marketplace. Those with unfavorable or nonexistent credit scores could pay $200,000 or more over the course of their lifetime for financial services and products. About 20 percent of Americans have no credit score, deeming them “credit invisible.”

The solution to this challenge is credit building, which is defined as creating access to products or programs that help people build credit. Considering that mainstream financial products are more costly or difficult to access for people with nonexistent or limited credit, several products have been designed to help people safely and affordably build their credit history. These products include credit builder loans, secured cards, lending circles, rent reporting and Twin Accounts.

For the particularly economically vulnerable population of “transition-age youth”, a positive credit history and favorable credit score can support a path to independence and long-term financial stabil­ity. With more than 26,000 youth transitioning from foster care every year, there is a substantial oppor­tunity to equip young people with resources to en­gage in stabilizing life activities, such as attaining short-term housing; reaching employment goals; accruing long-term savings; and securing overall financial security.

Integrating credit-building products and services into youth-focused programs provides an opportunity for organizations to engage them at key moments. As a result, young people gain con­fidence in planning for their financial future, accessing safe and affordable housing, capitalizing on their work­force readiness training, and building critical life skills.

Given the importance of credit-building for transitioning youth, Prosperity Now is excited to release a new brief, Starting Strong: Credit Building for Youth Transitioning from Foster Care. The brief highlights key lessons from an 11-month cred­it-building fellowship, in which Prosperity Now’s Savings and Financial Capability team supported five organizations that added credit-build­ing products and services to their existing programs. Each organization focused on programs that support youth transitioning from foster care to independence.

The brief provides specific recommendations for organizations serving this specific youth population on how they can best partner with state and local policymakers, financial institutions and funders. It also aids readers by contextualizing credit building for foster youth through the lens of racial wealth inequality, offering suggestions on how to integrate credit-building products and services in a way that acknowledges persistent racial disparities and tailors services to foster youth of color.

Prosperity Now is also debuting several new tools that organizations can use to integrate credit-building services and products into their programs. These tools will help programs identify which services are the best fit for their clients; decide who can provide those services; and develop a plan for delivering the services. For example, one of the tools is a primer that features starter products, including product examples, product descriptions and core product suggestions. 

We encourage you to explore both resources, and we welcome your feedback by contacting Jennifer Medina, Associate Director of Savings and Financial Capability, at jmedina@prosperitynow.org.

We are grateful to JPMorgan Chase & Co. for their support of the credit building fellowship and the brief. 

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