Moving rural Missourians into the financial mainstream
Lifelong St. Clair County resident Matt Anderson has worked for himself most of his life as a home remodeler. The 56-year-old has paid for most everything with cash and checks; everyone, including his local banker, knew he was good for it.
Yet, until recently, Matt was effectively invisible financially. Not using credit, he had no credit score. Without a score, he was locked out of more and more everyday things that require it. He couldn’t even get a credit card.
“You can’t do anything now without a credit card,” he said.
From zero to 700
Matt decided to do something about it. In fact, he is a proud homeowner today because he was able in just six months to build his credit score from zero to more than 700; a good score. He did it through the free credit building program offered by nonprofit organization New Growth Capital.
“Getting my credit score built up was a big deal because I decided to buy a house,” Matt said.
His lender needed more to satisfy home loan requirements than Matt’s reliable income, down payment, and 35 years in good standing with the local bank. “The local banker is not in charge of those decisions anymore,” Matt said. “They need a credit score to make a loan.”
Many people are in the same position as Matt. They have no credit score or they have a low score because they do not use credit enough to show up well with credit reporting agencies. Credit building helps establish and improve scores, and can help those working through negative credit histories to add new, good credit in the meantime.
Safe route to a strong score
Getting more rural people and entrepreneurs into the financial mainstream is the purpose of New Growth Capital’s credit building program. It provides a safe and easy way for clients to show up as good users of credit, and thereby establish or build scores.
New Growth Capital offers a small, one-year loan that includes a secured credit card. This generates two “trade lines” (installment and revolving) that show up and add up with credit bureaus. It is how Matt Anderson moved his score from zero to more than 700 in six months.
New Growth’s Give Yourself Credit loan is $500 for one year. New Growth uses $300 of this loan to secure a credit card with its partner Academy Bank.
The client makes on-time payments to New Growth for the $500 installment loan ($45 per month at 15% interest). The client makes on-time payments to Academy Bank for monthly use of the credit card that is secured with $300 of the $500 loan. New Growth and Academy Bank each report on-time payments to credit bureaus to make sure the client builds a good credit history over the year.
This type of product is offered across the country by nonprofit lenders focused on improving the financial capacity of individuals and entrepreneurs. Like New Growth, these organizations are members of the national Credit Builders Alliance.
Matt said the secured credit card part of the program was a great way to turn regular expenses into good credit history.
“I made a rule when I got it; I would use it for fuel only,” he said. He just paid the monthly secured credit card bill with money he would spend on fuel anyway.
Credit scores today factor into much more than home and car loans; they figure into everything from job applications to insurance rates. Credit is an asset. Without it, people lose out on opportunity, pay more in interest and fees, and become vulnerable to predatory lenders, which target those with limited financial options.
The need for credit building in Missouri is great. One indicator is the state’s crippling rate of “unbanked or underbanked” households; those that operate outside the financial mainstream.
Missouri has the third highest rate of unbanked and underbanked households in the nation after Louisiana and Mississippi. In fact, Missouri’s rate has increased significantly in recent years compared to the national rate.
The Federal Deposit Insurance Corporation’s (FDIC) most recent biannual survey shows that, between 2019 and 2021, Missouri’s rate of unbanked and underbanked households increased 1.2% to 7.4% while the national rate decreased .9% to 4.5%.
New Growth Capital’s credit building program is about preventing rural Missouri residents and entrepreneurs from falling through the financial cracks, and helping them climb back out if needed.
“I’m telling others about this,” Matt said. “There’s a lot of us in the same boat. A good credit score is what it’s all about now.”