An Evaluation of the Boston Youth Credit Building Initiative

The BYCBI was developed by the Boston Mayor’s Office of Financial Empowerment (OFE) and implemented by Working Credit NFP over the course of one year from March/April of 2016 through March/April of 2017. The goal of the program was to help individuals build strong credit scores by increasing their knowledge of credit building, supplying them with credit building and saving products, and providing individualized advice through coaching over the course of one year. The treatment included a financial workshop, one-on-one coaching, and the opportunity to enroll in the CW-3™ credit building product, a secured loan and savings product if they met certain criteria. The following program components were delivered by the same Working Credit staff across 18 different sites:
• Financial literacy workshop. A one-hour session was delivered at or near the individual’s worksite, or as part of a mandatory staff meeting or a previously-scheduled training. The content focused on the information contained in a credit report, how the credit reporting system works, the consequences of having no or poor credit, and how to use different financial products to improve one’s credit score. In addition to making payments on time, specific rules of thumb were given for keeping one to four open lines of credit, having a mix of installment and revolving credit, having a sufficient amount of available credit for emergencies, and keeping the utilization rate for each line of credit below 30 percent. At the end of the workshop, participants were urged to sign up for a one-on-one coaching session with a credit building counselor, either immediately after the workshop or at a later date.
• One-on-one coaching. The initial coaching session was a one-hour in-person meeting that included a review of the participant’s credit report and the development of an individualized budget and credit action plan focused on increasing the participant’s credit score. The plan was put on paper during the session and also emailed to the participant afterwards. The counselor also assessed the participant’s eligibility for the CW-3™ product. If eligible, the counselor enrolled the participant immediately. If not yet eligible, the participant received clear direction about what he/she needed to do to qualify. Regardless of whether a person was enrolled in the CW-3 product, the counselor continued to support participants with credit coaching following the first appointment. At a minimum, the counselor pulled individual credit reports at six-month intervals and shared the results, along with additional credit building guidance, in person or by email.
• Enrollment in CW-3™ matched savings account. The CW-3™ product is a “locked” savings account where the individual opens a 12-month $300 Installment loan but does not take the loan proceeds; instead they are kept by the lender in an account until the loan is paid off. The individual makes 12 monthly payments of $26 that is reported by the lender to the credit bureaus, building a positive track record for the participant. At the end of the 12-month loan term, the individual has accumulated $300 in savings as well as an improved credit score. There was no risk of delinquency or default. If an individual fails to make a loan payment, Working Credit pays off the loan with money from the “locked” savings account, and shuts the product down. To be eligible to enroll in the CW-3™ product the counselor confirms that the individual has a budget that shows he/she could afford to save $26 per month and that taking the product would be the best way to increase the individual’s credit score aside from other possible courses of action.

2016-03-01

2017-04-30

We employed a mixed-methods approach using both quantitative information from administrative data and surveys, as well as more narrative qualitative information gathered from focus groups. Using the administrative data, we evaluate the program’s impact on a range of outcomes related to building an optimal credit profile, including specific practices conveyed during the workshop and financial coaching. These include the individual’s credit score and credit rating (e.g., poor/fair/good/excellent) as well as the factors that affect one’s credit score such as the number of open lines of credit, having a mix of types of credit (e.g., revolving and installment), the amount of available credit, the utilization ratio, the number of delinquent lines of credit (e.g., 30 days past due), and the number of outstanding negatives (e.g., collections, charge-offs, or judgements). We also assess loan history, including whether the individual has a student loan or a car loan, the interest rate on the car loan, and whether the individual has a history of sustained on-time payments or a history of any loan delinquencies. We used the survey data to assess a wide range of self-reported outcomes regarding changes in their financial situation as well as their financial habits, literacy, and self-efficacy.

Individuals were asked to assess their own financial situations with regard to future planning (e.g., setting aside money regularly for saving, applying for a mortgage or car loan) as well as adverse events (e.g., collection, repossession, eviction, foreclosure and bankruptcy). Financial habits were quantified using a series of questions regarding budgeting, banking, credit use, and use of alternative financial services (e.g., check-casher, payday lender, pawn shop, borrowing from friends and family). Financial literacy was evaluated based on the percent of correct answers to a series of true/false questions related to budgeting, saving, borrowing, and use of credit, including what is reported on a credit report and how that information is used. Self-efficacy, shown to be important in the context of financial decisions, was assessed using a measure based on questions about one’s confidence in one’s knowledge and skills as well as satisfaction with one’s ability to save and manage debt. To compare impacts across our constructed measures of financial habits, literacy, and self-efficacy we constructed Z-scores based on the responses to the underlying questions that are standardized to have a mean of zero and a standard deviation of one.

We also assess secondary outcomes related to having access to credit and a favorable credit rating. These include more favorable borrowing terms as measured by the interest rate on their car loans as well as the likelihood of negative financial shocks such as eviction or foreclosure as well as having one’s wages garnished, utilities disconnected, or car repossessed.

The Boston Mayor’s Office of Financial Empowerment (OFE) recruited participants for the study during the two months prior to the start of the program, targeting low-income young adults, age 18-29, who were currently working or in a workforce development program. Most of the study participants were recruited from various organizations at a pre-arranged meeting where the program was explained in a five minute presentation and application forms were distributed. Additional individuals were also recruited by OFE directly via a marketing campaign over twitter.
Working Credit’s program is typically delivered to a group of employees within a large firm where participants have both a steady income for the duration of the program as well as regular and strong attachment to their employer, which helps to ensure a high take-up rate. However, large firms serve only a small share of the low-income young adult population targeted for this intervention. In addition, there was interest in delivering the BYCBI to individuals in the context of a workforce development program to pilot the use of such interventions under the new WIOA requirements. As a result, it was necessary to cast a wider net for recruitment, resulting in a total of 18 different organizations participating in the study (see Table A1). While these educational and community-based organizations serve low-income young adults, they often do not conform to the model that Working Credit developed for delivering the program. To take this into account, we characterized organizations as “typical,” “near-typical,” and “atypical” based on the following two criteria:
• Regular/strong contact with individuals
• Employment duration that is roughly equivalent to that of the credit program
A total of 171 individuals were recruited from “typical” or “near-typical” organizations accounting for roughly half (53 percent) of all participants. The remainder were recruited from “atypical” organizations, primarily from a local community college and through OFE’s general marketing campaign. Although somewhat complicated, this recruitment method allowed us to test the delivery model of the program.
To evaluate the impact of the BYCBI, we compared the outcomes of randomly selected individuals in the treatment group to those in the control group over time. Since the number of individuals applying for the program exceeded the number ultimately selected for participation, we were able to randomly assign participation in the program so that those individuals who applied but were not randomly selected to participate were used as a control group for the evaluation. Individuals in both the treatment and control groups received a $150 financial incentive to participate in the study for one year, which included completing both a pre- and post-program survey as well as having their credit report pulled every six months.
As part of the application process, individuals supplied information to assess their basic eligibility, which required that they be at least 18 years of age and currently working at least part-time. To be able to participate in the study, individuals also were required to provide a written request to perform the baseline credit check for the one-on-one coaching as well as for the subsequent credit pulls every 6 months.

Developed by the City’s Office of Financial Empowerment, the Boston Youth Credit Building Initiative brings together a number of key partners to help recruit participants, deliver the program, study the program, and provide funding. These include:
 Educational and Community Based Organizations: To help with recruitment, OFE has engaged with a host of local educational and community based organizations that provide workforce development targeted at youth and young adults. These include BEST Corp. Hospitality Training Center, Boston Cares, Boston Day & Evening Academy, Boston Housing Authority, Boston Public Health Commission, Boston Division of Youth Engagement and Employment, Catholic Charities, CityYear, Dudley Street Neighborhood Initiative, Hyde Park YCD, LISC AmeriCorps, Madison Park Housing Development, ROCA, Roxbury Community College, Roxbury YouthWorks, and YearUp.
 Working Credit NFP: To implement the credit building program, OFE has contracted with Working Credit NFP to deliver its credit building model, including access to its innovative CW‐3™ credit building product, a secured loan and savings program. Working Credit is a nonprofit
organization that brings credit building services and products to workers in the form of an employee benefit. The organization helps individuals establish and sustain strong credit scores, and then use those scores to reduce personal or household expenses inflated by poor credit or no credit. The overall goal of Working Credit is to reduce financial stress among employees, so they can concentrate on their jobs and advance in the workplace.
Working Credit’s program is a comprehensive intervention that is tailored to the individual needs of the participant and requires minimal assistance from the educational and community based organizations for implementation. OFE was responsible for all recruitment activities, and recruited most of the study participants from these organizations at a pre‐arranged meeting where the program was explained in a
five minute presentation and application forms were distributed. Additional individuals were recruited by OFE directly via a marketing campaign. Once all applications were collected, individuals were randomly assigned to the treatment and control groups, and OFE invited participants to a one hour credit building workshop and a one‐on‐one counseling session, often at or near their work site. Working Credit then stepped in to deliver its credit building program. They delivered their credit building workshop, and signed up participants for the one‐on‐one counseling, either immediately after the workshop or at a later date. Through the counseling process it was determined whether an
individual participant was eligible and would benefit from enrolling in the CW‐3™ credit building product.

Of the 300 individuals eligible to participate in the study, we randomly assigned applicants to one of the following two groups:
• Treatment Group: This group of 150 individuals were assigned to receive the financial workshop and the one-on-one coaching. They were also offered the CW-3TM product if it was deemed appropriate given their current financial situation and credit history (a total of 19 participants were ultimately enrolled in the CW-3TM product).
• Control Group: This group of 150 individuals received no intervention at all.
Based on initial indications of the sizeable treatment effects observed by the Working Credit staff in other settings, it was expected that these two groups would yield a sufficiently large sample for comparison to detect program impacts. In addition, we stratified our random assignment by age (18-24 versus 25-29), race (African-American versus non-African-American), and gender (male versus female) to test for heterogeneity in treatment effects, which have been shown to be important from prior studies.

Due to concerns about fairness, we were required to randomize individuals into both treatment and control groups within each organization. This has the advantage of ensuring that program impacts are not driven by a particular site given the different settings in which the program was delivered.

No

None

300

300

Based on the experience of employer programs with similar models, we anticipate that the Boston Youth Credit Building Initiative has the potential to improve outcomes for young adults along several dimensions. These include direct outcomes such as building credit, maintaining credit, and gaining skills and knowledge that follow directly from the program’s financial workshops, one‐on‐one coaching, and enrollment in the CW‐3TM secured loan and savings program. For example, among the first 500 people enrolled in a similar LISC product called Twin Accounts, 85 percent completed the 12‐month credit builder loan – and saved $300 in the process. Among unscored participants (people with no credit score at program entry), the average credit score at 6‐months was 650. Among scored participants, the average increase in credit score was 30 points in 6 months. http://www.liscchicago.org/news/2561