Credit solutions for those who need it most
Like it or not, credit scores play an important role in our daily lives.
From loan decisions to decisions on everything from insurance and car payments to cell phone bills and rent, bad credit can take a toll on a person’s ability to grow economically.
That’s why First Fed is offering several new credit options for people with low or no credit scores.
“As a bank, we feel responsible to our community,” says Christine Walsh Rogers, Head of Product Strategy for First Fed. “Our position is to help foster economic growth or economic justice for people, and their ability to fully participate in the economy of our community.
About 15% to 17% of residents of Whatcom County are underserved by banking institutions in one way or another, according to First Fed research.
“There is a need in the community to help with this,” says Walsh Rogers. “These little programs can really help hold someone accountable along their financial journey.”
One of First Fed’s financial solutions is the Compass Account, an entry-level checking account certified to state and federal standards from Bank On, a program designed to ensure banking access for the unbanked and underbanked. in American communities.
Many of those who do not have access to bank accounts are instead forced to resort to predatory payday loan services. Access to a bank account and the accompanying debit card is therefore a great help for their financial situation.
The Compass account offers no overdraft facility, no insufficient funds charge and only a monthly maintenance fee of $ 5. A valid driver’s license is not required to open a Compass account, nor a Social Security number or permanent address, as long as you have a verifiable mailing address such as an employer or social service agency.
This makes it a great type of account for those with non-traditional forms of identification. Any form of government approved, state or federal identification is accepted, including tribal membership cards, other country IDs, and education-based ID cards.
Credit construction loans
The second option, the Credit Builder Loan Program, allows someone to take out a small loan by investing in a certificate of deposit (CD), repaying it over time as a way to build credit while developing discipline. savings.
“Someone who doesn’t have credit or money can come and get it, as long as they are qualified to make a monthly payment,” says Walsh Rogers. “The goal is for them to build their credit by paying off the loan, while this certificate of deposit secures the loan.”
Although the loan payments are designed to be a manageable monthly amount, if a person is not able to make the monthly payment at any time during the loan payment, they can work with First Fed to redeem the CD at this stage, says Walsh Rogers. Anything they paid for that loan is then considered equity in the CD.
As an example, Walsh Rogers says a recent client spent eight months in the program before they had to close their loan. Once the loan was closed, they had access to the amount paid on the CD plus the interest that amount had generated.
“Even though they couldn’t keep making these monthly payments, they started to understand what monthly discipline was,” she says.
Even if you resolve the loan sooner, your credit will not be negatively affected and in most cases it will improve. The very design of the program is to create a low risk way for people to build and improve their credit scores.
The only truly disqualifying exception for participation in the Credit Builder program is a lien, such as for taxes or the enforcement of child support. “They can’t have the kind of privilege that would have priority and could withdraw the funds from the certificate of deposit,” said Walsh Rogers.
A better future
The benefit of providing bank accounts to marginalized people has many examples.
Recently, Walsh Rogers heard the story of a man recently released from prison. As most of the landlords needed some sort of credit to secure a rental, the man was lost. But when he finally found a landlord who told him proof of a bank account would do, he opened a Bank On account and got a rental.
A permanent address can often lead to a person’s next step in financial and personal well-being. The gaining foothold gained through building credit can also help them pay less for insurance or a credit card, while helping them gain the financial discipline that could one day lead to home or business ownership. a vehicle.
“That kind of stability – knowing the homelessness crisis our community is facing – makes us all better,” she says. “We want to uplift everyone. “
First Fed is an equal mortgage lender and member of the FDIC