Door-Opening Examples
(Illustration from PNGkey)
A reader asked for a couple of examples of people I’ve personally known who opened a door.
Credit Where Credit Is Due
Unless you are above a certain age, in the USA it probably doesn’t occur to you that going through a divorce could give your ex all of the credit rating you built up together and strip it all away from you, even if you contributed as much or more to that joint credit profile. But that’s exactly how credit records worked.
In the 1970s, before I joined the local NOW chapter in Clear Lake City, Texas, where the Johnson Space Center is located, one of the members got divorced. She’s deceased and I’m not in contact with her family. I’m uneasy about using her name here without permission. I got her story from one of the other members who was her best friend. She never made a fuss about it herself. We’ll just call her “P”.
American Express insisted “P” had to start over, applying for a new account with them. To add insult to injury, in their eyes she had no credit history. She had her own income. She had contributed alongside her ex-husband to the good standing of their card account, their mortgage… the works. AmEx gave all the credit history and associated credit rating to her ex-husband and acted as though her credit record was a blank slate. They had always reported the status of the account in his name, not mentioning hers. She didn’t even merit her own file with them.
AmEx wasn’t treating her any worse than any other credit card company or lender would at the time. This was the norm.
It wasn’t the worst of common practice in the credit industry. A 1975 article in the North Dakota Law Review covers the situation in depth. Her quandary is mentioned in Footnote 35:
While the married woman is a non-person when it comes to credit, the separated woman runs into another kind of Catch-22. A store won't extend credit because a credit check will frequently find that she has no credit history at all. The entire credit history belongs to the husband. N.Y. Times, Mar. 25, 1973, at 35, col. 1. Even if a woman is receiving "male support" in the form of alimony, child support or maintenance payments, creditors refuse to consider it as income because it is thought to be unreliable.
You read that correctly. The man gets all the creditworthiness even though he cannot be expected to honor his financial commitments to the woman. He’s unreliable where reliability would benefit her, but he’s reliable where the financial institution could extend credit to him.
The main text of the Law Review article explains why the 14th Amendment doesn’t solve this problem. Federal legislation was needed, and furthermore:
Unlike the Equal Employment Opportunity Act, the Equal Credit Opportunity Act does not provide for a central coordinating council that would exercise control over the enforcement agencies and this failure to so provide is thought to be an essential weakness of the Act.
The government agencies that are charged with enforcement of the ECOA cannot realistically expect to attain total compliance by the entire credit industry. Of necessity, private civil actions will play a major role in deterring violators.
The italics there are mine. Passing a law does not automatically change behavior. Sometimes the government creates an enforcement mechanism, but that didn’t happen for the ECOA. When the government chooses not to enforce a new law itself, the law is a tool that citizens can use to change behavior.
That’s what “P” did. She went to court and she won. AmEx had to create a credit record in her name, separate from her ex-husband. Her contributions to the good management of the joint account had to be treated as hers, not his.
AmEx is a prestigious name in the credit card industry, so this had a ripple effect through credit card providers and credit bureaus. Every woman who has gone through a divorce since then and has not needed to go to court to get a record opened in her name at credit bureaus… walked through that door. It’s normal now for married women to have a file at the big credit bureaus, and for divorcing women to no longer be non-existent in the credit systems. But even after Congress said the discriminatory old practices needed to end, somebody had to make it happen. “P” had to nudge that door open.
Credit Where There Hasn’t Been Any Before
However, not every woman getting divorced could walk through that door. Sometimes a woman was leaving a marriage that never had much of anything. If the couple didn’t have a substantial credit rating, there wasn’t anything for the woman to claim.
To build up a good credit rating, you had to borrow money and pay it off on time. To borrow money, you needed a good credit rating. It was a self-defeating circle.
To create a path out of that trap, in 1974 the Feminist Southwest Federal Credit Union formed in Dallas, Texas. By the time I met the women in charge, it had been renamed the Women’s Southwest Federal Credit Union (WSFCU).
Credit unions can offer the most basic financial services that banks provide: checking account, savings account, and loans of modest size such as to buy a car.
Unlike banks, credit unions operate on behalf of their customers, each of whom is a “member” of the credit union. To join a credit union, you must fulfill criteria that indicate you have a shared interest with the other members. Some credit unions are for employees of a particular company, or members of specific labor unions, or some other identifiable factor. For WSFCU, eligibility was open to any member of certain community groups such as those advocating women’s issues or advocating on behalf of underserved areas.
WSFCU provided checking accounts, savings accounts, and small personal loans secured by money held on deposit.
If you were a woman needing to establish a credit record, you could join one of the affiliated community groups for as little as $20 a year. Then you could open checking and savings accounts at WSFCU.
To start building a credit history, first you accumulated a modest amount in savings. When you had, say, $500 in savings that you were pretty sure you wouldn’t need to touch for a while, you would get a loan of $500 from the credit union at a low interest rate and start paying it back on a schedule. The loan was secured by your promise to keep at least $500 in savings until the loan was paid off.
It wouldn’t do you any good to borrow it and immediately pay it back. You needed to establish a pattern showing steady progress leading to on-time payoff of the loan. Most credit providers only reported to credit bureaus when someone missed a payment or defaulted on a loan. WSFCU filed a credit bureau report every month about every loan, so each timely payment you made added a positive mark to your credit record.
In essence, the interest you paid on that $500 bought you the beginnings of a decent credit bureau record.
When you had finished one loan, you did the whole cycle again, maybe for a slightly higher amount to establish a record of increasing responsibility.
In a couple of years, this gave you a credit bureau profile sufficient to apply for a normal unsecured credit card and start accessing other ordinary forms of credit.
WSFCU shut down in October 2012. At the time it had 734 members and held about $2 million on deposit. It was started by activists, not bankers. It never had ambitions to be big. It didn’t want or need a glitzy building. As a credit union, it did not need to make large profits for shareholders. It was there to open a financial door for its members that most financial institutions were unwilling to open.
Wrap-Up
Both of these doors were opened by women with no special power or status, no great fortune to fund their efforts and no big organization able to carry most of the load for them.
You don’t have to be a superhero to open doors like they did. You only need to see beyond “the way it’s always been done” and do something about the portion of a barrier that you can address. Open a door, and trust others to walk through after you.