Learning About Strong Credit Can Help You Weather a Financial Crisis

During the COVID pandemic, Maria Catalina managed to increase her credit score from 0 to 700+.    

How did she do it?  

Armed with financial knowledge and credit-building strategies that she gained working closely with a Boston Builds Credit financial coach, she was able to stay on track with her finances, even when she lost her job during the shutdown last spring.  

Coming on the heels of the one-year anniversary of the COVID shutdown, Financial Capability Month is a timely opportunity to review your credit, take stock of your finances, and take steps to strengthen your financial position, so that when a crisis like the pandemic hits, you’ll be able to ride out the storm like Maria Catalina did. 

 When she arrived in the U.S. five years ago, she found a much different financial landscape than the one she’d left behind in her native Colombia.   With dreams of becoming the first in her family to own a home, Maria Catalina set out to learn how to manage her finances. 

She found what she was looking for in NOAH, a Boston Builds Credit partner.  NOAH is a community development organization that works to increase access to affordable housing, create social and economic opportunities, and empower Boston residents to become community leaders.   

Building credit was a key step in her financial journey. When she started working with her financial coach, she had no credit history. Together they explored the different credit-building tools to determine her best options. Because she had a savings account with a credit union that partnered with her employer, she was to get an unsecured credit card with a $1,000 limit. Keeping balances low and making payments allowed her to obtain a second credit card and expand her credit history. In addition, through financial workshops she learned to look at her finances in a different way, by examining her spending, cutting back on the small unnecessary items, and focusing on the larger more important expenditures. As a result, her savings grew. 

Her 0 to 700+ credit score was the culmination of hard work, careful planning, and a new perspective on her finances.  Putting her financial knowledge to work, she was able to stay on course when the COVID pandemic shutdown the economy last March, and she lost her job.  

For many millions in our community, the COVID-19 pandemic dealt a devastating blow, and economic repercussions persist to this day. But having the tools to weather the financial shock helped many people avoid catastrophe. Good credit can provide a lifeline during uncertain times by enabling access to safe and affordable credit cards and loans, as well as measures to relieve financial stress during emergencies.  

Inequitable policies and systems have created barriers to achieving financial stability and building good credit for low-income residents and people of color.  Boston has one of the highest rates of income inequality in the country. Even before the pandemic, the average net worth of a Black family in Boston was $8 compared to $247,000 for a white family. Compounding this disparity, more than 200,000 Boston residents, disproportionately people of color, had limited or no credit history or a poor credit score. 

That’s why Boston Builds Credit brings together community advocates, nonprofit organizations, and businesses to make credit building accessible to every low-moderate income Boston resident. We also advocate for the power of credit to improve the city’s income inequality and close the racial wealth gap.  Since 2017, over 8000 Bostonians have participated in credit building activities at partner sites located throughout the city. 

What You Can Do 

Maria Catalina has advice for others: “People should always educate themselves and understand how they can better manage their money. It’s not just about NOT spending money; it’s about knowing HOW to spend it.” 

Boston Builds Credit partner organizations offer free and low-cost financial check-ups, workshops, and one-on-one financial coaching to help you learn about credit building and develop strategies to increase your credit score and manage your finances.  We also offer free online resources to help you work on your credit.  

The pandemic has created financial challenges for many Bostonians. A few key strategies can help you to protect your credit score and weather the financial impacts of the pandemic. 

1. Pay your bills on time if possible. If you are unable to pay the full balance, try to make the minimum debt payments by their due dates to avoid hurting your credit score. On time payments are the most important factor in credit scoring models and a late payment can have long lasting negative effects on your credit score.
2. Ask your lender for help. In the event you are not able to pay your bills on time, contact your lender.  Many lenders have put policies in place during the pandemic to help customers who may need extra time to pay their bills. In some instances, lenders may even be able to place your loan in forbearance without any impact on your credit score. 
3. Check your credit regularly. Through April 2022, the three major credit bureaus (Experian, TransUnion, and Equifax) will allow you to request a free copy of your credit report weekly (normally you can only request your credit report annually from each bureau). Checking your credit report regularly will help you to identify whether any potentially fraudulent activity has occurred.
4. Contact your service providers. If you are unable to pay your bills, reach out to service providers such as your utility, cellphone, or cable companies to see if they offer flexible payment options during this time.
5. Protect your identity. According to the Federal Trade Commission, identity theft and related scams have doubled during the pandemic. If you believe that you have been the victim of identity theft, you can place a free security freeze on your credit file with any of the three bureaus, which will prevent scammers from accessing your personal information and applying for credit in your name. You can also lift the freeze at any time at no cost.  

Credit Building Takes a Village 

To create a culture of credit building that works for everyone, we all have a role to play:  

• Individuals and families can work with a financial coach to learn about credit building.  
• Employers can offer credit-building assistance as an employee benefit through the Working Credit program.  
• Financial institutions can offer safe and low-cost products accessible to people with no or low credit scores to help them build credit. 
• Lawmakers and advocates can fight for policies that create a fair and equitable credit landscape.  

Join the movement!