Informal lending circles can help low-income consumers move into the economic mainstream.

Published in The New York Times | October 10, 2014

In lending circles, a roundabout way to a higher credit score

By Patricia Cohen

Shweta Kohli has always paid her own way. Her straight-A average won her a full scholarship to San Francisco State University at the same time she worked a 40-hour week as a waitress at a cafe. But when she applied for a credit card after graduation, she was turned down because she had no credit history.

So three years ago, Ms. Kohli, now 34, joined a lending circle—a small group of people who chip in every month to lend money to one another at no interest. Managed by the Mission Asset Fund, a nonprofit group in San Francisco that works with credit-rating agencies, the circle offered Ms. Kohli something no bank would: a chunk of cash and a chance to build a credit score.

After faithfully making payments—and socking away enough to buy a 1997 Ford Mustang—she raised her credit score from zero to 789 in 26 months. Ms. Kohli, ever the striver, said: “My goal is to keep it at 850, the highest.”

The Ford Foundation

The Ford Foundation is an independent organization working to address inequality and build a future grounded in justice. For more than 85 years, it has supported visionaries on the frontlines of social change worldwide, guided by its mission to strengthen democratic values, reduce poverty and injustice, promote international cooperation, and advance human achievement. Today, with an endowment of $16 billion, the foundation has headquarters in New York and 10 regional offices across Africa, Asia, Latin America, and the Middle East.

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