In today's economy, credit is a valuable financial asset. Credit opens up doors to safe, affordable capital so we can obtain assets, manage emergencies and move ahead into financial self-sufficiency. Building, re-building, and maintaining a good credit score may be the single most important factor in obtaining long term assets - cars to get to work, homes, education, capital for business.
Families with a good credit rating will save approximately $250,000 in interest throughout their working lives:
However low and moderate income communities often face the negative side of our credit system - lack of access to mainstream lenders keeps them locked out of the mainstream credit system and drags them into predatory debt traps.
As an asset building practitioner, it is important to understand that building credit is an integral part of the asset building pathway, and not an obstacle or intrusion to building assets in low-income communities. We help our clients make monthly deposits into a savings account, and we can also help them make monthly payments to maintain active reportable lines of credit . We need to explain how the mainstream U.S. credit industry works -why credit has become so important, what gets reported and what doesn't , the many ways credit impacts our lives , and how not investing in good credit leaves us out of the mainstream financial system and vulnerable to predatory lenders.
As practitioners, we have a responsibility to:
-
Understand how and why the US credit industry works
-
Integrate credit building into asset building pathways
- Recognize credit as an asset and not an obstacle or intrusion to our asset work
- Recognize how important good credit is in our financial culture, and by contrast how debilitating bad credit is
- Recognize how poor credit profiles keep families in a cycle of poverty
- Impart the important cost-savings and asset building opportunities that good credit brings
- Understand the role of good credit in helping families move from unbanked and underbanked to bankable
- Convey information about how to get good credit and how to safeguard or improve her credit if hard times hit
- Encourage clients to invest in their credit future
- Help clients make monthly deposits into savings and monthly payments to reportable lines of credit
-
Implement an asset-based approach to credit building that recognizes that while bad credit will not disappear overnight, good credit - just like savings - can begin today!
There are numerous good resources to learn more about credit. Most importantly, you do not need to know everything about credit scores to help your clients build credit.
|
