Using credit to expand opportunity: A Q&A with Ricki Granetz Lowitz, recipient of the Janice Nittoli Fellowship
Ricki Granetz Lowitz is on a mission to help people struggling financially use credit to improve their circumstances. In 2014, Lowitz cofounded Working Credit NFP, a Chicago-based nonprofit organization that partners with employers to provide an employee benefit to help low-wage workers build and sustain strong credit scores.
The Urban Institute selected Lowitz for the 2018 Janice Nittoli Practitioner Fellowship. Funded by the Rockefeller Foundation, the Nittoli Fellowship pairs leading practitioners with senior researchers at Urban to advance evidence-based solutions that alleviate inequalities.
Working Credit has been tracking data and outcomes on program participants since its inception, but it has limited in-house abilities to tap into these data fully. A team of Urban researchers, led by senior research associate Diana Elliott, will work with Lowitz and her staff to explore the data and examine how variations in program delivery matter for participant success and how credit improvements affect participants’ financial well-being.
Lowitz recently spoke with me about the importance of credit and how the Nittoli Fellowship can help her serve Working Credit’s mission to improve people’s financial health.
Financial education programs aren’t always effective, so what differentiates your program’s efforts to help people improve their financial circumstances?
Unlike financial education programs that are more general in nature and that often prioritize saving, we focus on improving credit scores, which makes it easier for low-income families to avoid predatory lenders, to lower their expenses, and to become more financially stable. Many people don’t see credit as their biggest problem—they’re worried about how to pay their bills every month and which bills to pay if their money runs short—but they might not know that having poor credit or no credit at all can make those bills far more expensive than they need to be.
Our Urban Institute colleagues have found that families with as little as $250 to $749 in savings are “less likely to be evicted, miss a housing or utility payment, or receive public benefits after a job loss, health issue, or large income drop.” Even small cushions can help families avoid costly harms. Are you suggesting that savings aren’t important?
Not at all. But we do believe that if you have a good score, you can lower your expenses and potentially have a better chance to save. When you have a good credit score and buy a car, for example, you can get a 3 percent or 4 percent loan instead of a 25 percent loan, and that saves real money. You can also use that good score to rent a better-quality apartment or qualify for a mortgage.
People have come to us with no score at all, and within six months, we’ve been able to get them to prime scores. A better credit score can reduce the interest rate on credit cards, lower the premiums on car insurance, and free people up from having to leave a deposit when they turn on their utilities. The savings add up.
What else distinguishes Working Credit from other financial education programs?
Our service is an employee benefit, so rather than waiting for people to come to us for help, we bring our services to them, with the help of a company’s HR department. We work to make sure there’s no stigma connected to using our benefit. It’s pitched to workers just like a 401(k) or a 403(b).
We hope employers see our program as a missing piece of the employee benefits package. We currently work with about 18 employers who together employ roughly 10,000 employees. The benefit starts with a workshop about the credit scoring system and credit myths, and then employees can sign up to work with us one on one. Over 70 percent have done so.
Benefits conversations usually involve talking about saving for retirement. But for people living paycheck to paycheck, they can’t prioritize their long-term needs. Our program gives employees something they can do now to make their financial lives better. People want to buy homes, and they know they need a good credit score to do that. We’re providing a way for them to get one by helping them understand how the FICO score works.
Employers benefit from this, too, because they can build a more financially resilient workforce. If an employee’s car breaks down and they have good credit, it’s easier for them to recover quickly and affordably, without having to turn to payday lenders. They can get back to work sooner and with less stress. If they’re not losing their wages to predatory lenders, employees are more likely to contribute to retirement plans, which is something employers want to see.
Why is it important to educate people about good credit habits?
So many people who have no score or a low score are excellent money managers. They don’t have a score because they don’t use any products that report to the credit bureaus. We explain that the only way to generate a credit score is to open at least one credit card or one installment loan, and people are shocked. It’s difficult to get that message across because many of the people we serve take great pride in not using credit cards or having any loans. What they don’t see is how much it increases their expenses to have no score.
Our participants also need to know what rates and terms they can and should get as soon as they have good credit. This is critical because predatory lenders can offer terrible rates to people with good credit. They’re banking on these consumers not knowing what they can get from mainstream financial service providers.
How can working with an evidence partner like the Urban Institute help you serve Working Credit’s mission to expand opportunity through credit?
Urban researchers can help us look at how participants’ credit scores change over the 18 months of our program, whether those changes are sustained, and how improved credit translates into quality-of-life improvements like better rental housing, more saving for retirement, and increased homeownership. We can look at patterns based on where people start to see how they move from no score to scored, from subprime to prime, and how people with good scores get better scores. I’m very excited to work with Diana Elliott and her team and to understand what is working in this program and what can be strengthened.
What’s so interesting about Urban’s work is that it explores how credit health affects cities and municipalities. All boats can rise if we get this message out. Although race and income are correlated with credit scores, there isn’t causation. We want people to know they have agency to take control of their financial lives. On a large scale, we could affect a whole geography like the city of Detroit, where you have companies that hire many residents. We can give people the tools they need, let them see they have agency, and change the narrative around credit.
Ricki Lowitz. Photo illustration by John Wehmann/Urban Institute.