Building Credit with Opportunity Fund Small Business Microloans

Having a good credit score opens the door to affordable terms for new credit and enables families to avoid high-cost and predatory loan products in times of need. At Opportunity Fund, we strive to help traditionally underserved entrepreneurs access capital and build (or re-build) their credit. Many of our borrowers come to us with little to no credit history, and the loan from Opportunity Fund is their first opportunity to build credit and establish a credit score. A recent report released by the Asset Funders Network also sheds new light on the importance of credit-building tools to enable consumers and small business owners to take control of their financial lives.

To see what impact our loans are having on these borrowers’ scores, we recently partnered with Experian to see how borrowers’ FICO scores changed after they received a loan from us. Borrowers who had no FICO score when they came to Opportunity Fund had a median score of 626 within just 12-18 months of receiving their loan. Clients who had a low score saw a median increase of 23 points in the same time frame.

We anticipate that as clients continue to make on-time payments, their scores will increase even more. For example, Lola qualified for a loan for her crepe shop based on her reliable cash flow history and strong character, despite having no credit history. Lola now has a score of 626 and recently received a second loan from Opportunity Fund, which is helping her increase her score even more.

These findings back up data presented in the AFN report, which showed that on-time payments reported to credit bureaus can help move an individual with no credit score to a “prime” credit score (generally defined as a score between 620-780). By establishing a credit history with Opportunity Fund, these families are more likely to qualify for favorable terms on future credit, avoiding the debt trap of payday lenders or high-cost revolving loans.