Does public or charity assistance affect your credit rating?
The Monroe Evening News is getting reports that more families in the Monroe, Mich., area have been going on public assistance, or asking for help from the food pantries and other agencies, during the past few months.
That’s why I’ve been focusing more on Monroe on a Budget lately on Michigan Bridge Card topics. Michigan Bridge Card is the EBT card through which the state of Michigan provides food stamps and cash assistance.
One of the Google search phrases that landed on my blog last week was along the lines of whether applying for Michigan Bridge card affects one’s credit rating. That’s a question I had not thought of, but when I went searching for that phrase or similar question with food stamps in the search box, I found that question does come up on other sites.
Does receiving public or charity assistance affect your credit rating?
For the most part, no. Financial assistance might actually help your credit rating by helping you keep the bills paid. Reason: you can direct the cash that used to go toward, say, groceries, toward other family expenses.
But the details of how this works will vary from one financial aid program to the next. You’ll have a better understanding by finding out first what actually goes on a credit report. You can get your free credit report at AnnualCreditReport.com.
Equifax is one of the three major credit bureaus and I found their list of what goes on a credit report to be the most detailed and helpful of the three:
Personal information. Compiled from credit applications you’ve filled out, this information normally includes your name, current and recent addresses, Social Security Number, date of birth, and current and previous employers.
Credit history. The bulk of your credit report consists of details about credit accounts that were opened in your name or that list you as an authorized user (such as a spouse’s credit card). Account details, which are supplied by creditors with which you have an account, include the date the account was opened, the credit limit or amount of the loan, the payment terms, the balance, and a history that shows whether or not you’ve paid the account on time. Closed or inactive accounts, depending on the manner in which they were paid, stay on your report for 7 to 11 years from the date of their last activity.
Credit Report Inquiries. Credit reporting agencies record an inquiry whenever your credit report is shown to another party, such as a lender, service provider, landlord, or insurer. Inquiries remain on your credit report for up to two years.
Public records. Matters of public record obtained from government sources such as courts of law — including liens, bankruptcies, and overdue child support — may appear on your credit report. Most public record information stays on your credit report for 7 years.
When you apply for public assistance through the Michigan Department of Human Services, that application information is considered confidential. It is not a public record such as the civil suits one can look up at the public access computers at the Monroe County Courthouse.
The assistance information only goes to the agencies that need to have that data in order to approve your benefits. This is what DHS says on its web site:
No one from the general public may see your case record without your permission.
When you use the Michigan Bridge Card to make a purchase at the grocery store, the clerk does know how you paid for the groceries.
In theory, the customer standing behind you is paying no attention to your transaction and won’t notice that the card used at the machine is a Bridge Card instead of say, a bank card. But in theory, you can conceal the view of your Bridge card from nosy bystanders.
The credit bureau, however, has no reason to know anything about this transaction.
Look back at what Equifax lists as information it is interested in. The credit bureaus focus their attention on who you owe money to, and whether those debts are paid as agreed. DHS benefits are not even on the radar screen. Neither is how you pay for groceries at the supermarket, that is, unless you used a credit card for that transaction.
Here’s what the DHS media office sent back to me on a query on this topic:
Applying for and receiving DHS assistance does not hurt one’s credit score. The Bridge Card carries benefits, not actual money. While the Bridge Card works like a debit card, it is not a form of credit card that can use cash that isn’t in the client’s account. Once the client’s benefits are exhausted, transactions cannot be completed.
Whom else might know you are receiving public assistance? Until recently, Michigan Bridge Card clients have been eligible for reduced rates on Michigan State Park annual passes. Although the park pass fee structure completely updates on Oct. 1, the way this worked is that the card holder had to physically show the card to the park ranger station when buying the pass.
Michigan Bridge Card families are also automatically eligible for the school lunch program. And school lunch program participation, depending on the district policies, might therefore mean students are eligible for waivers or reductions in their school sports fees.
So then there could be a few more people who know you are receiving public assistance. But none of them are affiliated with the credit bureau.
Now, let’s look at the bigger picture. Michigan Bridge Card is just one piece of the financial safety net.
If you are receiving Michigan Bridge Card benefits, you are likely seeking out any and all other financial aid programs you qualify for. Families who got forced into a pay cut or layoff, but still make too much money for public assistance, are looking for help with their household expenses, too. The Monroe on a Budget archives and blogroll features a huge library of resources where families in southeast Michigan can find that information.
So, now, consider these details:
- Some assistance programs require that you have to be in dire circumstances in order to qualify, at which point your credit is probably taking a hit. An example is the Heat and Warmth Fund, which DTE Energy participates in. It requires those getting assistance to already have a past due balance or shut-off notice (except for those who are senior citizen age 62 and older). Consider this: How many other bills would you be leaving unpaid if you hadn’t paid the electric bill? Ummm, yeah.
- Some assistance programs don’t directly affect the credit report, but it might be known through other directions that your family received financial assistance. A college scholarship where the application criteria includes financial need is a good example. Many scholarship sponsors send the names of their honorees to the local newspaper and / or post the winners’ names on their own web sites. Therefore, the neighbors may not know exactly how much money your family makes, but they would know your student got a scholarship that is intended for financially needy families. Is that a concern for you?
- Some assistance programs require you to have a good credit rating first. One example is the home purchase grant program that was recently announced for residents of Monroe County, Mich. It requires eligible low-income households to have “good credit and the ability to get a mortgage.” Can that be done? If not, there would be no potential audience for that grant program.
- Other financial survival techniques have no impact – good or bad – on a credit report. And this applies to most of the tips and tricks that you’ll find on my blog. Reason: the credit bureaus have no reason to know what you are doing since they don’t track those transactions. Examples can include shopping at the thrift shops or the Mom to Mom sales rather than a department store to get the kid a pair of jeans.
Maybe you have other reasons you’d rather not sign up for public assistance. I understand. The smack-talking I’ve seen on some other sites and forums against welfare and food stamp recipients is pretty atrocious.
But you won’t find that on my blog.
Here’s my thinking: If you honestly meet the eligibility requirements for this or that program, service, benefit or discount, then you were the person it was intended for.
P.S. on Dec. 23, 2011: I’m reading through the “Debt Free in Due Time” booklet provided by GreenPath Debt Solutions and it includes this statement:
Credit reports do not include information about your race, color, religion, national origin, gender, income, assets, occupation or receipt of public assistance.