Carlton White, one of the first participants in an innovative loan program, on December, 15, 2015 in Washington, DC. (Photo by Bill O’Leary/The Washington Post)

When Carlton White took out a bank loan earlier this year, he didn’t get any money. All he got was a debt to pay off.

It might sound like a raw deal. But it was just what White was looking for.

What White wanted wasn’t extra cash. He wanted the opportunity to make monthly payments — just to prove he could do it.

He got that chance thanks to an innovative program which recently launched in the District. The program, run jointly by four nonprofits, gives loans to low-income residents with one big goal: improving the recipients’ credit scores.

“It’s becoming one of these dividers,” Jim Knight, one of the program’s leaders, said about credit scores. “Increasingly in modern society, your credit score either gets you into opportunities or keeps you out of them.”

Intended as a measure of a person’s history of trustworthiness when it comes to borrowing money, credit scores are now used for much more than just bank loans and credit cards. Many apartment buildings require a credit check when deciding whether to rent a home to an applicant. Even employers run credit checks on job applicants.

So a low credit score, or no credit score at all, can stand in the way of a low-income person achieving greater stability. These loans are meant to help.

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With money from Citibank’s charitable Partners in Progress initiative, Jubilee Housing, which Knight serves as president of, teamed up with three other D.C. nonprofits — Jubilee Jobs, Capital Area Asset Builders and Life Asset — to create the credit-building loan program.

The nonprofits’ program, which they plan to repeat with a second group of recipients soon since the first group successfully made it through the six-month process, resembles credit-building loans that some credit unions nationwide offer to their account holders.

Devin Thompson of Jubilee Housing summed up the idea: “How can you get someone back in the mainstream? Why don’t we give the right tools and opportunities to people to stabilize themselves?”

White, 45, had no credit score at all when the program began, a huge stumbling block to his plan of eventually buying his own house. He said that he fell out of that mainstream that Thompson talks about when he became sick from a lung disease, which he believes was caused by chemicals he inhaled while serving in the military during the Persian Gulf War.

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He had to have his right lung removed and spent four months in a hospital. Then he moved to the nonprofit Christ House, where he was entirely focused on his medical situation. “They told me I’d be in a wheelchair, on an oxygen tank the rest of my life. Everything they said I wasn’t going to be able to do, I ended up doing.”

Once he regained the ability to walk and breathe unassisted,  he turned his attention to his finances. His car had been repossessed and he owed almost $1,000 in medical bills. And it had been so long since he made any payments that he had no credit score. That’s how he ended up in the first round of participants in the loan program.

Each of the 15 participants got a small loan — for White, who now works for Christ House and lives in a subsidized apartment owned by Jubilee Housing, the loan was $125.

Unlike a conventional loan, the participants weren’t allowed to touch the money until they had already paid it off, in six monthly installments. During those six months, they received personalized financial coaching, which White said was the most helpful part of the program.

“I was taught to do a budget. That helped me to do a little savings,” he said. Writing out what he spent, he realized that spending a few dollars at a time at fast food restaurants could really add up. He cut back in favor of cooking at home, and was able to save enough to pay off his remaining hospital bills.

When the program began, five of the 15 participants had no credit score at all, Thompson said. The other 10 had scores between 511 and 647. Companies generally consider a score in the high 600s to be good, and a score above 720 to be excellent.

The good credit behavior that the program required — making payments on a loan — paid off. The participants’ credit scores went up by an average of 27 points, a very large jump in six months, Thompson said.

White got his up to an average of 618 during the program and is intent on making it higher, he said. With help from his financial educator from the program, he took out several credit cards that he uses now instead of cash to pay some of his bills. He makes sure to pay the balance on time, so he can see his credit score keep rising.

“I was just shocked at if you are doing the right things, how fast your score can move,” White said.

His goals include buying a home someday and taking classes at the University of the District of Columbia so he can find higher-paying employment.

And he wants his good fortune to benefit his 16-year-old daughter.

“There’s not no class or nothing to teach some of this stuff,” he said. “I’m glad to pass some of this on to my daughter too. I want to explain to her about messing up her credit, so she won’t need to fix it.”

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