Supporting Returning Citizens in Credit Building
Time behind bars can cause severe economic and emotional stress. Upon release, returning citizens face many barriers to reentry including limited employment and housing options, health challenges, and social stigma. Many reenter their communities with few to no prospects for economic mobility.
Although credit building is not always an obvious solution for returning citizens experiencing immediate financial stress, a lack of or poor credit are both the result—and drivers—of financial hardship.
Returning Citizens: No longer bound but now financially restrained
While incarcerated, many incur large debts due to court fees, fines, public defender fees, and the like. Adding to this burden are previous debt obligations, incurred prior to incarceration. However, making timely payments on debt commitments while incarcerated may be challenging (or near impossible)—due to a lack of income and lack of family members or friends who are willing and able to assist in keeping the debt current. Consequently, most of these debts accumulate late payment fees and eventually end up in default and sent to collections.
Upon release, many financial institutions will not lend to returning citizens, or those who are justice exposed, because of their poor credit history and resultant low credit score or lack of a credit score at all.
Further complicating the situation is the fact that many returning citizens have been victims of identity theft while incarcerated. Credit cards and cell phone accounts in their name may have been stolen and used fraudulently by other people. Once released, the returning citizens then have identity theft issues to deal with. In cases of ID theft where the perpetrator is known, which is the case for the majority of identity theft cases, a police report is often required to address the problem. However, many returning citizens are reluctant to report to the authorities on someone that they know.
An exorbitant number of Americans are potentially affected by this reality, including:
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Between 70 to 100 million Americans who have a criminal record, which equals roughly 1 in 3 Americans
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Over 650,000 offenders who are released every year
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A disproportionate number of minorities who are in prison: 1 in 17 are white, 1 in 3 are black and 1 in 5 are Latino
A good credit profile is critical to short-term financial health and sustained wealth creation. Without a solid credit history and score, it is not only extremely difficult for returning citizens to qualify for loans, but also to achieve the basic stability necessary to achieve financial well-being. For example, without good credit, it is tough to access housing, affordable financial products, and meet other critical needs. An impaired credit history exacerbates susceptibility to the ubiquitous and predatory marketing practices of payday lenders and other fringe creditors. This only perpetuates cycles of debt and further instability. In addition to the implications for returning citizens individually struggling due to no or poor credit, the health and safety of our society depends ultimately on the financial health of all of its residents.
Nonprofit practitioners across the country offer support to returning citizens seeking to build financial resiliency as they reenter their communities. Our toolkit is designed to complement and augment these many ongoing efforts by more intentionally integrating credit building into such services for the benefit of these clients.
