Understanding American Credit: Why is it important for immigrants?
Global Detroit routinely highlights community partners that are working to provide skills to our target populations, including those with limited English proficiency (LEP), immigrants, and refugees. The Federal Deposit Insurance Corporation (FDIC) approved the launch of the Alliance for Economic Inclusion of SE Michigan (AEI of SE Michigan) in 2011. The Alliance meets quarterly and brings together community organizations and lending institutions to discuss what products are needed in the unbanked and underbanked populations. The unbanked typically refers to those that do not have a bank account, and underbanked individuals may have a bank account, but are still using predatory check-cashing businesses, payday lending, or other harmful financial systems. The AEI works to understand the barriers that communities face to better serve and empower them.
A Center for Enterprise Development (CFED) recent report, Meeting People Where They Are, highlights the finding that the clients of human service organizations that integrated financial literacy components into their core offerings are 3 to 4 times more likely to not only attain a job, but also increase income and savings. When financial literacy is integrated into workforce development programs, participants have higher average monthly incomes, higher job placement, and a higher salary one year later.
These findings are staggering, and are strong indicators of both the success of and need for financial literacy programs. When historically underserved populations gain access to this kind of assistance, they’re able to not only build wealth for themselves, but because money is no longer bypassing the community and heading straight for banks, it is staying local and supporting the entire community.
Why is this important to Global Detroit? We care because immigrants and refugees are particularly susceptible to predatory financial service providers. Often, when immigrants arrive they cannot transfer the credit history they established outside of the United States. In some cases, their understanding of credit and lending systems is completely different from how American credit works.
Recently, our partner Upwardly Global held a workshop to help immigrants better understand the American credit system. An Iraqi participant stated that at home she would have had to have saved for about 5 years and pay cash for her home upfront. Another participant was advised to develop a credit history and subsequently opened more than 5 credit cards, which brought down his credit score. These workshops are an important intervention for immigrants that are often preyed upon, and a way to engage them in their own financial success.
Everyone working in these communities can be involved. Anyone that works with underserved communities, not only service providers or financial institutions, needs to be participating in the demystifying of credit issues. The more this information spreads the more effective it will be, and we can take a play from the financial literacy program playbook. Direct service providers, when talking to program participants, should add these questions at intake and encourage their clients’ participation in a financial literacy program:
- Did you know that more and more employers are looking at credit scores and low credit can stop you from getting a job?
- Did you know that a low credit score can make your insurance higher?
- Did you know that no or low credit scores can increase your mortgage rate?
- Did you know that you can start building or rebuilding your credit score right now?
The community outreach team of AEI of SE Michigan is now working on several ‘train the trainer workshops’ based on the Federal Deposit Insurance Corporation’s (FDIC) Money Smart program. We encourage all immigrant integration service agencies, especially LEP staff, to attend the ‘train the trainer’ workshop so that they can begin to integrate financial literacy alongside their services that can further empower residents.
The next train the trainer workshop is March 26th. FDIC welcomes all direct service partners to participate.
A waiting list will be created when the event is full. For more information on the train the trainers in English or Spanish, contact Raquel Garcia Andersen, Director of Partnerships and Community Outreach, Global Detroit, at (313)595-6492.
Photo from Google Image Search, courtesy of World Financial Group