Uncertain Futures: An Evaluation of the Boston Youth Credit Building Initiative

Modestino, Alicia; Modestino, Alicia

Having good credit is vital for an individual to access loans during times of financial emergency, to maintain financial stability, and to achieve several of life’s major milestones. A good credit score allows one to access auto loans, mortgages, and other financial products at reasonable interest rates. This paper uses a randomized control trial of 300 individuals to evaluate the impact of the Boston Youth Credit Building Initiative, a 12 month program that targets young adults and encourages the development and maintenance of good credit through a credit workshop, one-on-one coaching, and a secure loan product offered to participants. Using a combination of focus groups, self-reported survey data as well as administrative data collected from individual credit reports, we assess both short- and long-term outcomes. In terms of short-term outcomes, our survey measures changes during the program in self-reported financial situation as well as individual knowledge and beliefs, confidence and concerns, and good and bad habits associated with credit. At baseline, there were no significant differences between the treatment and control group in terms of observable characteristics or pre-survey responses. However, the first round of focus group interviews revealed that individuals in the treatment group already exhibited better coping mechanisms regarding credit and financial stability after attending the workshop but before the one-on-one coaching.

In terms of long-term outcomes, our administrative data provides a snapshot of each individual’s credit report at 6, 12, and 18 months after the program starts. Initial results from the six month credit pull indicate that indicate several positive results regarding both credit use as well as loan payment history. In terms of credit use, those in the treatment group were more likely to establish a credit history over the past six months and also improve their credit standing relative to the control group. In terms of loan history, more individuals in the treatment group had taken out loans over the past six months and fewer had become 30‐days delinquent on their loans compared to the control group. While the six‐month credit pulls show positive improvements in other measures of credit use and loan history, they were not statistically significant. However, this is perhaps not surprising given that participants are only halfway through the program and it presumably takes time to implement changes and adopt new habits. Twelve month credit data will be available in April 2017 and those results will be incorporated into the final version of the paper that will be presented at the conference. To our knowledge this is the first study to use an RCT design to evaluate credit building among young adults. As such, the results are likely to be of interest to other state and local policymakers as well as national agencies such as the Consumer Financial Protection Bureau.

Association for Public Policy Analysis & Management

Panel Paper: Uncertain Futures: An Evaluation of the Boston Youth Credit Building Initiative