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Mayor's Office of Financial Empowerment releases new report exploring potential power of youth credit building

May 31, 2019

Recognizing the consequential impacts credit can have on the lives of young adults, the Mayor’s Office of Financial Empowerment (OFE) in partnership with Citi Community Development and Working Credit NFP, today released a new report from the Dukakis Center for Urban and Regional Policy at Northeastern University that outlines recommendations for creating multi-faceted programs that help individuals establish good credit at an early age, in order to gain control of personal finances and establish economic mobility.

The report evaluates the Boston Youth Credit Building Initiative (BYCBI), a pilot aimed at helping low- and moderate-income young adults, ages 18-29, establish and/or improve their credit through credit building workshops, one-on-one financial coaching, and the chance to apply for a free credit building financial product. BYCBI’s success led to the creation of Boston Builds Credit, a first-in-the-nation citywide movement to help Boston residents achieve a prime credit score, build wealth, and remove barriers for success.  

“There can be real-life consequences to not having good credit. With the launch of Boston Builds Credit, we solidified our commitment to positioning Boston as a city in which every resident can improve his or her financial wellness,” said Mayor Walsh. “I am pleased to see Boston Youth Credit Building Initiative's positive impact, especially as it helps our city’s youth establish strong personal finance. My administration will continue to equip our residents with the financial tools and resources necessary for long-term success.”

The study assessed whether the BYCBI increased both access to credit as well as individual credit scores. Roughly 300 program applicants from organizations including Year Up, City Year, ROCA, Madison Park Development Corporation, Boston’s Department of Youth Engagement and Employment, Roxbury Community College and the City of Boston participated.

Since little is known about the benefits of financial coaching, researchers from Northeastern University’s Dukakis Center for Urban and Regional Policy saw a unique subject of study in the BYCBI. Alicia Sasser Modestino, Associate Director of the Dukakis Center, led the research.

"This study is one of the first to apply the most rigorous evaluation standards to study the effects of a novel financial coaching program aimed at building credit among young adults. The results are highly encouraging that with the right mix of information and guidance--tailored to the individual--we can increase access and boost credit scores. Policymakers in other cities can use the results of the BYCBI as a model to help guide the inclusion of financial capability in their youth workforce development programs,” said Modestino.

The study found the following:

  • BCYBI participants were more likely to gain access to credit, since the share of individuals enrolled in the program with no credit score had fallen by 11 percentage points. Those not enrolled in the program had a decline of only 4 percentage points.
  • BYCBI participants significantly improved their credit score, ultimately raising the likelihood of achieving a “good” credit rating by 8 percentage points.
  • Younger BCYBI participants (ages 18-24) showed the greatest benefits, improving their credit scores by 30.5 points.  
  • The BYCBI had meaningful impacts on individuals beyond improving their credit scores, including lower interest rates on car loans and increased financial literacy.

These findings show the potential power of youth credit building, as well as how Boston Builds Credit is promoting credit building to young people, among other target groups. OFE collaborated with a large network of community partners on this initiative, recruiting organizations that provide workforce development and other services to individuals ages 18-29 that were willing to incorporate credit building into existing programming.

“Having a good credit score is essential for things like qualifying for a loan, getting a credit card, or even being able to rent an apartment, or getting a job. Yet in the U.S. today, 26 million people are ‘credit invisible’, with black, Latino and low-income residents most likely to have a low or no credit score,” said Robert Burns, Senior Vice President at Citi. “By partnering with the City of Boston on the Boston Builds Credit program, we aim to demonstrate that innovative public private partnerships can result in scalable solutions for addressing widespread financial insecurity in America. We hope other cities and jurisdictions will be inspired and follow Boston’s lead.”

“Far more than just a number, a good credit score opens the door to renting a home, building assets, and avoiding high interest rates and fees,” said Michael K. Durkin, President and CEO at United Way of Massachusetts Bay and Merrimack Valley. “Right now, Bostonians with poor credit can pay up to $238,000 more in fees and interest rates over a lifetime than those with good credit. These findings and recommendations provide a clear path forward to close the growing ‘expense inequality’ gap in our communities and help ensure all Bostonians build assets, reduce expenses, and pursue their goals.”

The report offers recommendations for municipalities seeking effective ways to incorporate financial education into youth or other workforce development programs. These include:

  • The need to develop programs that focus on helping young people establish credit early in life, given that roughly one-third of individuals began the study with no credit at all.
  • The importance of addressing constraints, such as work schedules and childcare issues, that can pose a barrier for low-and moderate-income younger adults to access even free services.
  • The ability for even light-touch interventions to make a difference, given the large gaps in financial literacy that exist.

The report was released by OFE Thursday morning at a credit building convening that brought together employers, higher education and community based organizations, banks and credit bureaus, and local leaders from government.

“Boston Builds Credit is not only a program that can help alleviate the burden of expense inequality for Boston residents, but it is also a path to economic resilience and mobility that will have generational effects,” said John F. Barros, Boston’s Chief of Economic Development. “The Walsh Administration and the Office of Financial Empowerment are making strategic, meaningful progress in closing the wealth gap in Boston, and I’m proud of the tangible, long-lasting work our team has done so far.”

Mayor Walsh’s 2019 legislative agenda continues his administration’s work to create greater opportunity and economic mobility for all residents. Included in the legislative package is S.38 “Act to Promote Asset Building for Low-Income Residents”, sponsored by Senator Sal DiDomenico, which would remove the cap on assets for families receiving temporary cash assistance. The currently policy disincentivizes families to accumulate even moderate savings and makes it more difficult for them to access needed resources. Eight other states have enacted similar changes with positive results, spurring upward economic mobility for residents.

About Boston Builds Credit
Boston Builds Credit (BBC) is a citywide credit building initiative created by the City of Boston, United Way, and LISC Boston. BBC is leading a movement to make credit work for everyone. Drawing together partners from all sectors of civic life, we’re helping Boston residents achieve a prime credit score, build wealth, and remove barriers to success. And we’re working with the credit system to level the playing field and improve the financial health of every community in Boston.

About the Mayor’s Office of Financial Empowerment
The Office of Financial Empowerment (OFE) was created by Mayor Walsh in 2014 to connect City residents with access to credit building programs, financial education, individualized financial coaching, and income support. Residents who seek to improve their financial situation can use these tools to achieve economic well being and pursue financial prosperity. OFE is an affiliate of the Mayor's Office of Workforce Development and the Boston Planning & Development Agency (BPDA).

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