five questions with dara duguay executive director credit builders alliance

Five Questions with Dara Duguay, executive director, Credit Builders Alliance

Date: June 24, 2020
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Five Questions

Dara Duguay is the executive director of Credit Builders Alliance (CBA), a national nonprofit that connects nearly 500 nonprofit members to the three national credit bureaus to access credit reports for use in financial counseling and to report loan portfolios to help their clients build credit. Previously, Duguay was the director of Citi’s Office of Financial Education and oversaw a $200 million global commitment to fund financial education around the world. Prior to her work at Citi, she was executive director of the Jump$tart Coalition for Personal Financial Literacy and director of education for the Consumer Credit Counseling Service (CCCS) of Los Angeles. She is the author of three critically acclaimed personal finance books, including Please Send Money: A Financial Survival Guide for Young Adults on Their Own. A conversation with her at the recent Most Powerful Women in Banking and Finance dinner inspired this Five Questions profile.

You are a proponent of financial education for employees in large companies— even banks. What discoveries or surprises have you found when training financial professionals about finance?

When I was at Citi, I managed a financial education training program for Citi employees. I was told that people who work in financial services don’t need financial education—that they are already financially literate. In fact, the program was wildly popular. Most of the sessions offered throughout the country were oversubscribed. Just because you are a bank teller, an investment advisor or a mortgage specialist doesn’t mean that you know how to manage your personal finances. Everyone, regardless of income, job title or educational background found that they benefited.

In the news today, there seem to be conflicting ideas when it comes to Millennials and their financial awareness. Some studies seem to suggest they lack even rudimentary knowledge of credit issues, while others indicate they are good at budgeting and basic financial management. You’ve written a few books about helping young adults understand finances. Can you set the record straight?

Although we have made great strides in getting financial education mandated in a required public school class before graduation from high school (in 1997 only 4 states had such a requirement, now 22 do), it is not schools that are the primary educator of youth, it is still their parents. Whether this is a good or a bad thing depends entirely on the parents. So the personal finance education that young people received is spotty at best. What worries me the most is the current data showing disturbing trends in lack of credit use among youth. If they are not using credit cards (they prefer debit), if they are not purchasing cars (they prefer taking Uber) and if they are not purchasing homes (still living with their parents), how are they going to build a credit history?

Credit Builders Alliance provides financial counselors with a number of resources to help them educate consumers about credit. What credit questions do your counselors receive the most?

The most common question is “How do I find affordable and responsible credit products that are available to people with no, limited or poor credit histories?” Among these individuals who have need of credit, they often find themselves turned down for credit when they apply. Financial educators are often not aware that there are nonprofit lenders (i.e., Community Development Financial Institutions) who serve this population. CBA works hard to spread the word about its lender members and their mission to lend in distressed communities. They serve as stepping stones that allow their borrowers to one day be able to qualify for mainstream credit.

According to your “Power of Rent Reporting” white paper, 35 percent of Americans are renters. Can you discuss how rent reporting helps renters achieve financial stability and build credit?

Although not making housing payments can damage the credit of homeowners just as much as it damages the credit of renters, historically only homeowners have been able to build positive credit histories when they make mortgage payments on time. Now, the major credit bureaus (Experian, Equifax and TransUnion) allow positive rental payment data to be included on traditional consumer credit reports. CBA conducted a multiyear pilot program among residents in affordable housing. After isolating the impact of the inclusion of the rental payment history on participants’ VantageScore 3.0 credit scores, we found:

  • All (100 percent) of residents in the pilot who initially had no credit score had either a high nonprime or prime score with the inclusion of their rental payment history.
  • A large majority (79 percent) of pilot participants experienced an increase in credit score,with an average increase of 23 points.
  • Rent reporting in combination with financial coaching can incentivize residents to increase their rates of on-time rent payment.

One of your many roles at Credit Builders Alliance and through your consulting business Dara DollarSmart is “training the trainers”—helping fellow financial educators apply best practices in their programs. It’s said that there is no better way to learn than to teach, so have you learned from that experience?
When I was hired at Consumer Credit Counseling Service (CCCS) of Los Angeles to head up their Education Department, I was very nervous. My job entailed going out into the community and sharing wisdom as to how to better manage your money. I remembered thinking when I got the job that it was a good thing that CCCS hadn’t pulled my credit report before hiring me! What they would have discovered was an unhealthy amount of debt. The combination of lots of student loan debt, the consumerism culture in Los Angeles and a nonprofit salary was lethal to my credit utilization ratio. However, what I soon learned is that as I taught people what they should do, I started taking my own advice. Before I knew it, my personal finances improved. So financial education really does work. Don’t listen to anyone who tells you otherwise!