Workplace Financial Coaching: Credit Outcomes Among Lower-Paid, Entry-Level Workers

Background. Employer-based financial wellness programs are an opportunity to make it easier for low- and moderate-income (LMI) workers gain access to products and services that may improve their financial security, such as financial counseling and coaching, small-dollar loans, and emergency savings programs (Frank-Miller et al., 2017). Financial counseling and coaching have been studied in community-based settings and found to be effective in improving clients' credit scores and other aspects of credit health (Collins & O'Rourke, 2012; Theodos et al., 2015). The value of these services may not translate to workplace settings due to various implementation barriers such as a lack of time to engage in services, lack of employer support, and irregular work schedules (Frank-Miller et al., in press). This study aims to fill a gap in the literature by assessing the effectiveness of workplace financial counseling and coaching among LMI workers.

Method. The sample for this study is comprised of 2,849 employees in 22 companies in a large metropolitan area that employ mostly lower-paid, entry-level workers. Study data came from an administrative service database of a nonprofit community development financial institution that offered financial coaching to these employees. Dependent variables included credit scores and other credit report data measured at two time points. The independent variable of interest was the number of coaching sessions received. Covariates included employee demographic characteristics, baseline credit scores, length of service receipt, employer, and coach. Multiple regression analysis with robust standard errors was used to assess changes in various credit outcomes, controlling for demographic variables, length of time between credit scores, banked status, employer, and coach.

Results. On average, workers increased their credit scores by 5 points over a 12.5 month period and decreased the number of collections and delinquent accounts by 0.68 and 0.61, respectively. Workers who received three or more coaching sessions had a change in credit scores that was 18 points higher than workers who received just one session (p <.05). Among workers with subprime (<660) and prime (660 and above) baseline credit scores, receiving three or more coaching sessions was associated with 20 (p <.05) and 1 point (n.s.) differences in credit scores. Receiving three or more coaching sessions was also associated with a decrease of 0.57 collections accounts (p <.05) compared to receiving one session. However, there was no statistically significant difference in the change in delinquent accounts based on the number of sessions received.

Implications.  The receipt of workplace financial coaching may be an effective strategy for achieving modest improvements in the credit health of LMI employees. Greater changes in credit scores were associated with receiving a higher number of sessions, suggesting that workers need more than 1 or 2 coaching sessions to take actions that can improve credit health. Greater changes were also associated with subprime baseline credit scores, suggesting that LMI workers with low credit scores may benefit the most from coaching and may increase the chances these workers can access more affordable forms of credit such as car loans.