By Sabrina Terry, Senior Strategist, Economic Policy Project, UnidosUS
Building credit is an essential part of economic security for any American, but especially low-income Latinos and immigrant families. Latinos, like other communities of color, have historically been shut out of credit-building opportunities and continue to face several obstacles.
Latinos’ financial background make it difficult for them to acquire credit through traditional financial institutions. Per the Consumer Financial Protection Bureau (CFPB), Hispanics are more likely to be “credit invisible” than their White counterparts, and have some of the highest rates of un-scored credit records. These challenges are exacerbated for Latino immigrants who must also overcome language, proof of income, and legal status barriers when navigating the U.S financial system. Despite their economic hardship, Latinos are avid savers and prefer to take a savings-based approach to financial challenges. Yet, savings alone will not help them bridge the gap between their earnings and their expenses or to take advantage of economic opportunities—they also need access to credit.
UnidosUS has partnered with eMoneyPool, an online lending circle system, to help underserved individuals save money for their short-term financial goals. eMoneyPool is a key partner in UnidosUS’s small-dollar credit pilot program that enables community-based service providers to pre-qualify their clients for safe and affordable small-dollar credit or lending circles. The service has modernized a centuries-old lending circle tradition, also known as tandas or cundinas, by applying technology. Users can participate with individuals online, automatically transact their payments through an Automated Clearing House, ACH, and the entire process is guaranteed.
We are happy to announce that eMoneyPool has begun reporting their payment history to the credit reporting agency Experian. This means that with each payment a user makes to save toward their financial goal will also go towards building their credit score.
“Money pools are a familiar and effective tool for helping Latino families overcome financial barriers,” said Luis Cervera, Co-Founder and President of eMoneyPool. “Our ability to report payments will further prepare our participants to meet their financial goals and position them to obtain larger lines of credit.”
Hispanic Unity of Florida (HUF), an UnidosUS Affiliate based in Hollywood, Fla., is a partner in the small-dollar loan program and excited about the credit reporting payments.
“Many of our clients are very low income and are not ready to take on debt, but would like to build their credit,” said Sandra Tobon, Financial Coach for HUF. “eMoneyPool’s lending circles are a great first step since the minimum monthly payments are so small.”
Felipe Pinzon, Senior Vice President of Strategy and Programs, Hispanic Unity Florida, has a first-hand experience with the savings tool. “I initially tried to the tool to see how it could benefit our clients. Now I use it regularly to help me save for upcoming expenses and keep my positive credit score.”
Good credit is critical to obtaining life’s important investments, such as a car, a home, and even a business. Credit is also used beyond the financial sector, and impacts Latino’s economic mobility in other areas as well, such as employment, rental housing, and insurance. As Latinos continue to become one of the fastest growing segments of the U.S. population, financial tech innovations like eMoneyPool are essential to ensuring they unlock their economic potential and achieve the American Dream.