Research Article Credit Building in IDA Programs: Early Findings of a Longitudinal Study

Objective: This article reports on the impact of the Individual Development Account (IDA) program on credit. Method: Using a convenience sample of IDA participants (N 165), data were analyzed using paired sample t tests, independent sample t test, one-way analysis of variance, Mann–Whitney U Tests, and Wilcoxon Signed Rank Tests. Results: Results indicate that participants improved their credit history and score, as compared with nonparticipants, and those who completed the program within a year experienced the most positive change in credit score. Conclusion: IDAs facilitate improvement in credit score and history. Keywords financial education, financial credit, asset development, individual development account (IDA), credit score Credit plays an increasingly important role in the lives of Americans, to include a central role in purchasing assets. A myriad of asset development programs, including Individual Development Account (IDA), assist low-income families to gain wealth through asset purchase and/or maintenance. The IDA program is a unique asset development program in that it provides matched savings toward the goal of asset purchase. For many IDA asset purchases, a combination of personal savings and loans is needed. Lenders use credit history and score in their decisions to set the pricing and terms of bor-rowed funds (Loonin, 2010). Therefore, the credit history and score, an indicator of risk of nonrepayment to potential lend-ers, are crucial to the success of asset purchase and long-term ownership. Many low-income families, including those seek-ing to gain assets, struggle with low credit scores. Given the importance of strong credit, many asset development pro-grams, including most IDA programs, provide assistance to participants to improve their financial capability by helping them to improve their credit histories, save, and gain access to appropriate financial products (Beverly et al., 2008; Mills