The Boston Planning and Development Agency will partner with United Way of Massachusetts Bay and Merrimack Valley to support a Boston Citywide Credit Building Program, the BPDA announced in a press release on Friday.
A pilot of the program is set to begin in the coming months and will initially target Roxbury in particular, where there is an urgent need for the credit service, said Constance Martin, deputy director of Mayor Martin Walsh’s Office of Financial Empowerment, which is heading the Citywide Credit Building Program as part of their efforts to promote financial security.
Martin said the Credit Building Program is aimed at educating residents about the importance and logistics of building credit.
“We wanted to do something that would help people recognize three things: how important good credit is, how acquiring good credit doesn’t require your being rich … and learning about the resources that exist that can help you acquire at least the knowledge … to improve your credit score,” Martin said.
The program is largely based off of a citywide credit assessment funded by the OFE, along with several other partner organizations, and carried out last year by the Midas Collaborative, an organization dedicated to improving the financial security of lower and middle income families in Massachusetts.
The assessment revealed that about 250,000 of the total 650,000 Boston residents have either no credit at all or sub-prime credit scores.
Alarmed by these figures, Martin said bad credit can be punishing, making it more difficult to get a loan, credit cards and mortgages with good rates. Even everyday amenities like water and electricity are more difficult to acquire without having to pay substantial deposits.
“Having bad credit can cost you about $200,000 more in interest and fees over your lifetime,” Martin said. “You can’t even measure how a lack of that knowledge permeates that person’s family.”
Martin said many residents’ issues with bad credit stem from the fact that they are not well informed on the hidden rules of credit building. One of the biggest hidden rules, the 30 percent rule, maintains that in order to build credit, a maximum of 30 percent of available credit should be used in-between payments.
Martin said this fact left residents stunned at a credit building workshop led by Working Credit, a nonprofit credit building service that partners with the OFE.
“You could have heard a pin drop when the presenter started talking about the 30 percent rule, because all these people who had decent incomes and had thought they knew what was going on really didn’t know some of the basic facts about credit,” Martin said.
Martin said the focus of the program is not to solve all credit-related issues in the state, but to address this lack of information, provide the necessary instructions and then use this momentum to combat related issues like job security.
“It would be simplistic and condescending to think that we can help everybody, fix every problem,” Martin said. “But, once we have a relationship with someone to talk about things like credit, we can also hopefully recruit them to come to the Roxbury Center for Financial Empowerment for job assistance, for workforce development and long-term financial coaching.”
After initiating the pilot, Martin said building trust with the community is the next challenge the program will face.
“If people have had a tough time, and goodness knows lots of people have, they may not trust government, or they may not trust other organizations,” Martin said. “But once we can get someone to come and talk to one of our coaches, we can tell them about all sorts of different opportunities. The challenge is getting them in the door.”
Several Boston residents agreed that the credit system could be dangerous for those uninformed on the proper way to handle it, especially young people.
Aubrey Fiacco, 23, of Allston, said lack of awareness when first dealing with credit can do long-term damage.
“I think when most people sign up for their first credit card they’re like, ‘Oh s–t, I have a credit score,’” Fiacco said. “If you’re unaware and just start racking up credit charges or even student loans, all of that does impact your score, and not paying those loans or not paying your credit card bill really can hurt you long term.”
Rachel Robinson, 24, of Dorchester, said she thinks the basics of building credit should be taught early on.
“I think you need credit to do anything really as a responsible adult,” Robinson said. “I always thought it should be a life skills class in high school.”
Mark Mckinley, 39, of Allston, said he is still facing the consequences for the way he dealt with credit when he was younger.
“I’m 40 and I still can’t buy a house and it’s going to be a few more years before I can because I frankly screwed up my credit completely,” Mckinley said.