Workforce Development

FIELD Director on the Power of Formalizing Informal Credit to Boost Credit Scores

October 15, 2013  • Joyce Klein

Joyce Klein is director of the Aspen Institute Microenterprise Fund for Innovation, Effectiveness, Learning and Dissemination (FIELD).

Many of us know that our credit scores are important in helping us to access credit. But few know how pervasive they have become as a tool for judging our overall trustworthiness and character, especially for those who may be the most challenged in our economy. Today, employers, landlords, cell phone companies, and financial institutions alike pull credit reports as they seek to decide whether to hire, rent to, or lend to us — or what price to charge for their products.

For lower-income families with limited resources and strained budgets, having a low credit score — or not having a score at all — can be a serious impediment to economic mobility. It can affect their ability to get a better job, or an apartment in a safer location or with a shorter or more reliable commute to work. And having a low score can cost serious money — as I noted in a recent interview with NPR’s “Marketplace,” one analysis estimated that over the course of a lifetime, an individual with a credit score of 650 can spend over $200,000 more in interest and fees on items such as a car loan, mortgage, student loan, and credit card, than someone with a 750 credit score.

Enter Mission Asset Fund (MAF), a community-based organization in the Bay Area, which has found a rather ingenious way to help individuals to build their credit. It builds upon an informal financing mechanism found in many ethnic communities across the US — informal savings and lending circles. Members of these circles each commit to contributing a specified amount of money — say $50 — at every group meeting. Each week, one of the group members takes home the pot. Mission Asset Fund has devised a way to formalize the agreements among the group members and report their payments to the credit bureaus. Although the credit bureaus are quite protective of the algorithms that determine their credit scores, we do know that the fastest way to build credit is to have active lines of credit that are paid on time.

Mission Asset Fund is now working with nonprofits in other communities and cities to replicate this approach. At FIELD, where we are focused on innovative and scalable strategies to improve financial access for entrepreneurs and low-income individuals, we look forward to watching MAF’s progress.

To learn more about FIELD and its iniatives, visit


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