Providing access to affordable credit to the poor: Evaluating the effectiveness of credit counseling for building assets

Asset building has become an increasingly important component of social welfare policy in recent years. For families seeking to build assets through home ownership, raising credit scores is often a key element of their prepurchase efforts. Low income and minority families in particular can struggle with poor credit scores and seek Homeownership Education and Counseling (HEC) services to assist them to raise their credit score and access affordable mortgage credit. This dissertation examines the effectiveness of credit counseling within HEC services on credit scores. Using data from one nonprofit agency that delivers prepurchase credit counseling, pre- and one year post-counseling credit scores were analyzed for 203 clients who obtained pre purchase credit counseling. While client age, step in service delivery system after one year and initial credit score were significant variables, diagnostics suggest that the model needs further theoretical work to uncover variables that predict the second credit score. Qualitative findings from a focus group of HEC credit counselors suggest the central role of credit counseling in HEC services, the difficulties of empowering clients to work to clean up their credit and uneasiness with the growth in and referrals to the subprime home loan market.