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A new city goal: Boost credit scores of 25,000 Bostonians

Martin Meissner/Associated Press/File

Bad credit can wreak havoc on a person’s life.

Landlords and employers who run credit checks may pass over someone with a low score. Car dealers and mortgage lenders will charge higher interest rates. And forget about starting a business.

In Boston, an estimated 236,000 people, a third of the city’s residents, have either a poor credit score or none at all.

In an attempt to open more doors for those who are struggling, Mayor Martin J. Walsh on Wednesday is launching a credit-building program, with the goal of helping at least 25,000 Boston residents get a score of at least 660 — out of a possible 850 — by the year 2025. The initiative, created in partnership with LISC Boston and the United Way of Massachusetts Bay and Merrimack Valley, is thought to be the first of its kind in the country.


As part of the program, called Boston Builds Credit, more than 25 nonprofits will host free credit-building workshops, and participants can sign up for one-on-one financial coaching.

Along with learning the importance of paying bills on time, participants will be introduced to products such as secure credit cards and credit-building loans, in which people are loaned small amounts of money that is held by the lender while the borrowers pay it off — improving their credit scores in the process.

The initiative also includes a pilot program with Boston Medical Center to offer credit-building assistance as an employee benefit, starting next year, with plans to expand it to other employers.

A poor credit score can cost someone up to $200,000 in higher interest rates and fees over the course of a lifetime, according to Credit Builders Alliance. People with poor scores tend to have low incomes, meaning those facing the highest costs are the ones who can least afford it.


“This is the flip side of income inequality, which is expense inequality,” said Gail Sokoloff, senior director of community impact at United Way. But, unlike many aspects of inequality, she noted, anyone can improve their credit: “You can be a low-income person and as long as you engage in certain habits and behaviors, you can have a perfect credit score.”

The magic number in many cases is 660 — the threshold at which interest rates often go down and loans and credit cards are more likely to be approved.

Barbara Harris, 48, of Dorchester, isn’t there yet, but she’s on her way. Harris’s problem was credit cards — about seven of them, actually, on which she ran up $5,000 in debt while she was in college — some of which she never paid off. “I was footloose,” she said. “I charged everything constantly at the mall, paid the minimum balance . . . it was bad.”

Since she started working with a financial coach at the Roxbury Center of Financial Empowerment , Harris, who is currently unemployed, has improved her credit score from 549 to 604 over a year and a half. She has stopped applying for store credit and charges only small amounts on her two credit cards, so she can pay them off each month.

“I’m back on the scene now,” she said.

A home buyer in Boston with a credit score between 660 and 679 trying to borrow $300,000 could qualify for a 4.15 percent interest rate, with a $1,454 monthly payment, according to — about $65 a month, or $23,000 over 30 years, more than someone with a score of 740 or above.


“You probably won’t qualify for a mortgage with a credit score less than 620,” said Ted Rossman, public relations director at the financial comparison site, referencing a report by analyst Jeanine Skowronski.

Boston Builds Credit, which has a $4.5 million budget for the first three years, has a short-term goal of helping 3,000 people improve their credit scores by an average of 30 points over the next three years. Success will be evaluated by tracking credit score changes of program participants, as well as by analyzing citywide data provided by credit bureaus.

If the program is successful, the hope is that it can serve as a model for other cities.

Even a few minutes of financial training can help improve credit scores, the city has found. The Boston Tax Help Coalition has a 20-minute financial checkup to help build credit that includes reviewing a person’s credit report and drawing up a one-year financial plan. That short amount of time boosted credit scores by an average of 15.5 points within a year and reduced their debt within two months by an average of $487 more than those who got no financial counseling.

Within the course of a year, a client at Roxbury Center for Financial Empowerment went from having no credit to having a score of 724, said financial coach Mattie Deed — in part through a LISC program called a twin account. The nonprofit loaned him $300, and for each on-time payment of $27 a month, which is reported to the credit bureau, he earned a matching amount, leaving him with $600, and a higher credit score.


Now he’s saving to buy a home.

Trinh Nguyen, director of workforce development for the city, noted that while it’s common to calculate the cost of helping people, considering the savings these programs can generate is a better way to measure their effectiveness.

“Conventionally, we see programs operating as if, ‘Oh, it costs X amount of dollars to provide services for residents,’ ” she said. “But we never really think about what cost savings can we provide to residents, as well as to the city, if we provide preventive measures.”

Katie Johnston can be reached at Follow her on Twitter @ktkjohnston.