Micro Lenders Can Make a Mega Impact

Study underwritten by Capital One reveals barriers to credit reporting among non-profit lenders
Dec 3, 2014 11:45 AM ET

Washington, D.C., December 3 2014 /3BL Media/ — Credit Builders Alliance (CBA) today announced that entrepreneurs without a credit history (termed a “credit invisible”) are hindered in their chances to secure business capital and often pay higher deposits for services such as cell phones and utilities.

CBA conducted a joint analysis with the Association for Enterprise Opportunity (AEO) on the barriers that prevent non-profit lenders from reporting loan repayments of their low-to-modest income clients to the major Credit Bureaus. Overcoming these barriers is critical since building a credit history is of paramount importance to financially marginalized communities.

Through Capital One’s support, CBA surveyed AEO member organizations and discovered that 89 percent of the micro lenders pulled credit reports for underwriting purposes but less than half (49 percent) reported loan repayments back to the Credit Bureaus. Before a lender can become a “reporter” they first need to become credentialed to report to the Credit Bureaus.    

“This first-ever national study of the barriers to credit reporting confirmed exactly what our experience has shown to be true — non-profit lenders believe in the value of credit reporting to help their clients build stronger credit reports and scores but they struggle throughout the credentialing process,” said Dara Duguay, executive director, CBA.

Some of the key findings from the analysis include:

  • Training:  The need for additional training is a top concern (i.e. understanding Fair Credit Reporting Act (FCRA) requirements, the dispute process, and the required Metro2 software).
  • Technology:  Many respondents stated that their primary concern was a technological barrier – that they did not have Metro2 format software that could create the right report. 
  • Staffing and funding constraints:  Both survey responses and interviews pointed to the importance of staffing/capacity issues in addition to funding constraints. 

“Underserved entrepreneurs with inadequate or invisible credit histories face added roadblocks on top of existing, systemic impediments to accessing capital and support services. The absence of credit reporting compounds their economic vulnerability and exclusion from mainstream lending opportunities. Our survey and report show that credit reporting is a critical component of widening entrepreneurs’ path to capital and services,” said Connie Evans, president and CEO, AEO.

The barriers unearthed in this survey are not insurmountable however and both CBA and AEO are diligently working to support micro lenders who wish to report. The benefits of creating a credit history and being able to enter the financial mainstream are worth the effort. This survey has allowed our efforts to be more targeted and the solutions to be aligned with the challenges. 


About Credit Builders Alliance
CBA is an innovative non-profit social enterprise dedicated to building the capacity of a diverse and growing network of hundreds of nonprofits (CBA members) that help low- and moderate- income households build strong credit and other financial assets.  CBA serves as a unique and vital bridge between its members and the major credit reporting agencies (CRAs), and through its core services - CBA Reporter and CBA Access - provide nonprofits with both the ability and critical technical assistance to report loan data to the CRAs and to pull low-cost client credit reports for the purposes of financial education, outcome tracking, and underwriting.  In addition to these services, CBA offers a wide range of practitioners’ hands-on credit building trainings, innovative tools, and forums for sharing with and learning from each other.


Association for Enterprise Opportunity (AEO) 
The Association for Enterprise Opportunity (AEO) is the voice of microbusiness in the United States. For more than two decades, AEO and its more than 400 member organizations have helped millions of entrepreneurs contribute to economic growth while supporting themselves, their families and their communities. AEO members and partners include a broad range of organizations that provide capital and services to assist underserved entrepreneurs in starting, stabilizing and expanding their businesses. Together, we are working to change the way that capital and services flow to underserved entrepreneurs so that they can create jobs and opportunities for all. 


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