Finance expert, CEO of Credit Builders Alliance (CBA), and Mindful Management podcast guest Dara Duguay talks with Shenandoah Chefalo about financial trauma. What is it? How does it affect individuals and communities? How is the CBA advocating for financial equity? They cover all this and share where you can go to find help, with a special resource for youth in the foster care system.
What is the Credit Builders Alliance?
Dara Duguay is the CEO of Credit Builders Alliance (CBA), a national network of 650+ nonprofits advancing financial literacy across the country. CBA was created by and for nonprofit members as a bridge to the modern credit reporting system to help millions of individuals with poor or no credit.
Before joining CBA, Dara ran her own consulting practice and advised clients such as TD Bank, the World Bank Group, Experian, Visa, and SunTrust Bank on their financial education efforts.
What is Financial Trauma?
Financial trauma refers to the emotional, psychological, and physical toll that financial instability can impose on individuals and families. Financial trauma causes grief, anxiety, health problems, and challenges even the strongest relationships.
The effects of financial trauma aren’t just limited to individuals. Entire communities feel the weight of economic inequality. People living in poverty are often left to navigate complex financial systems designed for those with more resources. Financial practices like payday loans, check cashing services, and rent-to-own options are expensive and risky, yet sometimes the only options for those with no savings or credit history.
Financial trauma is an often overlooked yet significant source of stress which affects countless individuals, particularly within marginalized communities. It is not merely the result having low income; rather, it is a complex interplay of historical injustices, systemic inequities, and personal experiences with financial loss, instability, or exploitation.
Addressing financial trauma, therefore, isn’t just about improving individual lives; it’s about creating stronger, healthier communities.
Visit the Credit Builders Alliance website to learn more about programs that can help you build credit, improve financial literacy, and create a more secure future for yourself and your community.
It’s Expensive to be Poor
There is a persistent misconception that people living in poverty are poor because they aren’t trying hard enough or lack financial discipline. In reality, many low-income individuals are experts at managing their resources because they have no choice but to track (and stretch) every penny.
Despite these efforts, systemic barriers make it difficult to build long-term financial security. As Duguay points out, many of the people her organization serves make plenty of financial transactions, but often in ways that never show up on their credit reports such as making consistent rent or utility payments. This leaves them “credit invisible” and shut out of opportunities to build credit the traditional way.
Alternative Data: How CBA is Advancing Financial Equity
The Credit Builders Alliance is tackling these inequities head-on by advocating for programs like rent reporting, where individuals can build credit histories based on consistent rent payments. Rent is often the largest bill a person pays, but it historically hasn’t helped renters improve their credit scores.
Dara explains that a credit report is no longer just a tool for securing a loan—it’s used in tenant screening, job applications, and even security clearance processes for government jobs. Without a credit history, individuals are at a severe disadvantage, often facing higher interest rates, housing discrimination, or missed employment opportunities.
Looking ahead, Dara sees great promise in the use of alternative data to assess creditworthiness, expanding the scope beyond traditional credit reports.
Alternative data includes bill payment history, such as utilities, rent, and cell phone payments. These are expenses that people pay regularly and on time, yet they don’t receive the credit-building benefits of these financial behaviors.
Alternative data could revolutionize the credit industry by including these payment histories in credit reports, providing a more accurate and equitable reflection of someone’s financial habits. Additionally, Dara points to the potential of leveraging bank data, such as consistent deposits and lack of overdrafts, to further assess financial health.
Foster Credit Check Site Designed for Youth in Foster Care
Dara highlights an alarming issue faced by many youth aging out of the foster care system—financial illiteracy and credit fraud. For many (including our very own Shenandoah Chefalo), aging out of the system meant facing the real world without any formal education in handling finances, a predicament that sets them up for significant challenges. Many foster youth have had their credit used fraudulently while they were still in care, unknowingly accumulating debt in their name, often without any avenue for recourse.
Foster care workers are mandated to pull the credit reports of the youth they oversee annually, helping identify instances of fraud and providing a roadmap to dispute these errors. However, credit checks occur inconsistently across states.
In response, CBA built a program in collaboration with Child Focus, called Foster Credit Check. Foster Credit Check was designed as a one-stop-shop to simplify the dispute process, equipping child welfare workers with the tools to help address the gap in financial literacy.
Building Financial Literacy and Empowerment
One of the most empowering tools for overcoming financial trauma is education. Many individuals, especially youth in foster care, grow up without any formal financial education or someone to help them build or track their credit history leaving them vulnerable to identify theft or credit mistakes with difficult-to-remedy consequences.
Financial literacy programs, like those supported by the Credit Builders Alliance, are critical in helping individuals and families break the cycle of financial instability. Programs teach about credit – how to check it, what to look for, and how to build it from zero or repair it from mistakes.
For marginalized communities, this education is especially important. By focusing on financial empowerment through tailored programs, Credit Builders Alliance ensures that those who are often left out of traditional financial systems are given a chance to thrive.
Duguay mentions that people without any credit history can achieve a solid credit score by making consistent payments on things like rent and utilities. Repairing poor credit is more difficult, but not impossible. You can always learn more, find help, and change your situation.
Final Thoughts: Financial Trauma and the Path Forward
Financial trauma is real and can have disastrous effects on individuals and communities.
The Credit Builders Alliance and their members are actively working to reduce financial trauma, advance financial literacy, and promote financial equity by helping individuals build credit in non-traditional ways.
Through financial education, they are bringing people out of the shadows of financial invisibility and into a system where they can build a more stable financial future.
How You Can Promote Financial Literacy Today
If you are or know a youth in foster care, visit fostercreditcheck.org today to get your credit score. If there is a problem with your credit score, find guidance on how to fix it.
Anyone can visit annualcreditreport.com to find your credit score.
If you or someone you know is facing financial challenges, visit creditbuildersalliance.org. Click on “Find a Member” at the top of the page and search for help near you. Many places provide financial coaching and counseling for free or for a very low cost.
Listen to the entire podcast with Shenandoah Chefalo and Dara Duguay here.
Subscribe to the Mindful Management: Creating a Trauma-Informed Work Environment podcast, and don’t miss a single episode.
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