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Study: Self-Help “Fresh Start” Product Improves Credit Scores

Self-Help Holding Webinar on Study March 3

Feb 23, 2016

David Beck, Self-Help, 919-956-4495,
Micheline Savarin, Self-Help, 415-572-2433,

Oakland, CA – Self-Help today released a study of its Fresh Start product offered by Self-Help Federal Credit Union in California and Chicago, finding that over 70% of borrowers improved their credit scores. The evaluation was conducted by the Center for Responsible Lending (CRL), Self-Help’s nonprofit, non-partisan research and policy affiliate. It was made possible by a MetLife Foundation grant.

Of particular note, 32% of borrowers increased their credit scores by enough to qualify for a lower rate auto loan at Self-Help Federal. Over the life of a typical auto loan, these borrowers would save, on average, $3,211 in interest.

Self-Help Federal’s Fresh Start is a credit builder loan, functioning more as a savings product. It is intended to help borrowers build or rebuild their credit scores and establish saving habits. Loans range from $500 to $3,000 with six to 24 month terms. The funds go directly into a savings account, instead of to the borrower. The borrower makes monthly payments on the principle and 3% interest. Self-Help reports the payments to credit bureaus, helping borrowers establish a payment history. When the loan is paid off, the borrower receives the loan amount plus the interest earned.

Self-Help is hosting an hour-long webinar on Thursday March 3 at 2 p.m. EST (11 a.m. PST) to discuss the study findings. To sign up for the webinar please click here. A full copy of the report is available there.

The study’s key findings note that:

  • 70% of Fresh Start borrowers increased their credit score. Borrowers with starting scores below 640, those who started out unscored and younger borrowers saw the greatest credit score increase.
  • Borrowers who were unscored at loan origination were able to build an average score of 643, falling at the bottom of the “average” credit category. For borrowers who improved their existing score, the average gain was 47 points. However, most borrowers (71%) with high initial credit scores (750 and above) experienced a decline in credit score.
  • The number of on time payments is a key driver of credit score improvements. However, over half of Fresh Start borrowers paid off or closed their loan early, likely truncating the loan’s positive credit score benefit.

“Overall, the study finds that the Fresh Start loan is quite effective in raising credit scores which provides a lot of promise in terms of replication,” said lead researcher Sarah Wolff. “We also found some areas for improvement that can make the product even more impactful.” 

Self-Help Federal inherited the Fresh Start Loan program in 2008 after merging with People’s Federal Credit Union in Oakland, California. Self-Help Federal later merged with Mission SF Federal Credit Union, whose credit builder loan was the original inspiration for People’s Fresh Start program. From 2008 – 2014, Self-Help Federal reconciled the legacy loan programs and consolidated them into one loan product offered at all branches in California and Chicago. Self-Help Credit Union in North Carolina now offers a similar credit builder loan.

A strong credit score is a passport into the financial mainstream as it is used to determine the terms and eligibility for basic and affordable financial services. Credit is also a factor that landlords, insurance companies and even employers take into consideration when making decisions and setting prices.

As a result, many nonprofits and credit unions view credit building as a crucial first step for underbanked populations entering the financial mainstream. While credit builder products are relatively common, there has been little public evaluation of their effectiveness at improving borrower credit scores.

“We hope this evaluation will help other organizations learn from our experience,” said Wolff. “To that end, we have detailed our research process, our findings, and our challenges in order to help improve credit building loan programs at Self-Help and elsewhere.”


About Self-Help
Self-Help is a community development lender founded in 1980.  It has provided over $6.9 billion in financing to 112,000 families, individuals and businesses underserved by traditional financial institutions. Combined, Federally chartered Self-Help Federal Credit Union and North Carolina chartered Self-Help Credit Union serve over 120,000 people in California, Chicago, Florida and North Carolina and offer a full range of financial products and services. Self-Help’s Center for Responsible Lending is a nonprofit, non-partisan organization that works to protect homeownership and family wealth by fighting predatory lending practices. CRL's work grows directly from its affiliation with Self-Help. Learn more at, and


About Self-Help

Self-Help is a leading national community development financial institution headquartered in Durham, NC. Since 1980, Self-Help has provided over $8.5 billion in financing to 150,000 families, individuals and businesses. It helps drive economic development and strengthen communities by providing responsible financial services; lending to individuals, small businesses and nonprofits; developing real estate; and promoting fair financial practices across the nation. Through its credit union network, Self-Help serves over 150,000 people in California, Florida, Illinois, North Carolina, South Carolina, Virginia, and Wisconsin.

The nonprofit Center for Community Self-Help is the umbrella organization for the Self-Help family of nonprofit organizations, which includes Self-Help Credit Union, Self-Help Federal Credit Union, Self-Help Ventures Fund and the Center for Responsible Lending.