Making Visible the Credit Building Impact of IDA Programming
Most IDA programs require and provide general financial education, credit counseling, and ongoing support to assist participants to improve their credit; however, little research is available on the impact of IDA programming on credit. In this study, the following research questions are addressed: 1) Has there been a significant change in IDA participant credit score after one year as compared to non-participants?; 2) Are there significant differences in change in credit score among participant sub-groups?; 3) Has there been a significant change in participant credit history elements after one year as compared to non-participants?; and 4) Are there significant differences in change in credit history elements for participant sub-groups after one year? The authors present data from a longitudinal research study initiated to study the impact of IDA programming on financial credit.
Three community agencies recruited low-income people who had been initially screened for the IDA program for eligibility and were invited to an orientation, at which they were invited to participate in the study. Participants gave written permission for researchers to access their credit report annually over four years, and use IDA program information and information from their credit reports for the study. Using a convenience sample of IDA participants (N = 165), this presentation will provide findings of a longitudinal, four-year study of participant credit within an IDA program. Participants are compared to non-participants, who attended orientation, but did not participate in any program elements. Descriptive statistics, paired sample t-tests, and independent sample t-tests were computed to compare the credit scores between the participant and non-participant groups. A one-way ANOVA was conducted to explore whether or not there were significant changes in credit score attributable to participant program status. Mann-Whitney U Tests were conducted to test for differences between credit history elements on the change score for the participant and non-participant groups. Wilcoxon Signed Rank Tests were conducted to compare elements of the credit histories with each group at two time periods.
Findings include a significant increase in the mean credit score and the number of positive elements of credit history for program participants. While both participants and non-participants experienced positive changes, participants experienced many more positive impacts than non-participants, such as an increase in credit scores, the number of active tradelines, and the number of active revolving tradelines.
Conclusions and Implications
The data provide promising results to support the hypothesis that IDA programming has a positive impact on financial credit of participants, particularly those who complete the program within a year, independent of the positive impact of asset purchase. Therefore, asset development programming should continue to institutionalize tailored approaches to financial capability by providing financial education, and facilitating and encouraging participants to engage in strategies to improve credit and assist in the acquisition of appropriate loan products so the credit improvements can be sustained. Policy-makers and program administrators may wish to expand the allowable uses of the IDA savings to include credit improvement through debt reduction.