In an effort to help women escape from abusive households and gain financial independence, the Kentucky Domestic Violence Association has given 41 women interest-free micro-loans since 2009. Ranging, on average, from $200-$800, these loans not only provide temporary financial security for women who have recently fled hostile home environments, but they also help to build and/or improve their credit scores.
In order to qualify for a micro-loan, the Kentucky Domestic Violence Association requires each woman to create and add funds to an “ ‘individual development account’” that serves as collateral. After six months, the Kentucky program then uses grant money to match the total amount of money each borrower saved up in her account.
While credit bureaus typically do not keep track of repayments made on non-traditional loans, the Kentucky Domestic Violence Association has become a member of the Credit Builders Alliance, an organization that helps to ensure that micro-loan repayments are reported to a credit bureau. As many of the women seeking loans have no credit history in their name, building a credit score is crucial to establishing financial independence.
Reports have shown that after one year, fifteen of the 41 women have added 50 points to their credit scores, two have enjoyed increases of more than 100 points, and a mere three women who have failed to make repayment. In the event that a woman neglects three successive payments, the rest of the loan is paid off using the funds already in the borrower’s savings account. While missed payments are recorded, they do not negatively affect one’s credit score, thus ensuring none of the women will default on their micro-loan.
The Kentucky Domestic Violence Association is the only member of the Credit Builders Alliance that specifically works with women seeking to escape an abusive household. Despite the relatively small amount given to each woman, the program offers resources and counsel that allows these women to gain financial security and independence.
WCI supports the work of both Kentucky Domestic Violence Association and the Credit Builders Alliance who have empowered many women helping them achieve economic independence.
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