CW-3 is a credit-building product that makes it possible for U.S. workers to enter and master the credit system and save money at the same time. The product combines three mainstream financial products (a savings account, a secured loan, and a credit card), to build and sustain a strong credit score—with no risk of harming the employee's credit.
CW-3 is a critical tool for employees who either have no lines of credit (no loans or credit cards that report payments to the credit bureaus) or too few lines of credit to build and optimize their credit scores. The CW-3 product is also useful to employees who don’t have a mix of both installment lines of credit (loans) and credit cards for an optimal credit profile.
How does CW-3 work?
Access to a Loan that Reports to the Credit Bureaus
CW-3 starts with a $300, 12-month installment loan from a mainstream lender (one of our financial partners). That money goes into a locked savings account, where it remains until the loan is paid off. Each month, the employee makes a $25 payment to the lender, and each month the lender reports that payment to the credit bureaus. Over the course of the year, the employee saves $300 (in the form of loan payments), and simultaneously builds a strong credit score.
Open and Use a Secured Credit Card
The key to credit building is to always have at least one loan or credit card that reports to the credit bureaus. For that reason, at the end of the 12-month CW-3 loan, the employee takes the $300 from the locked savings account, and opens a secured credit card—a card with a credit limit that is at least partially secured by funds in a savings account. Credit cards are perhaps the best vehicle for credit building, as they can be used indefinitely and they can boost the credit score more than an installment loan, if managed well.
No Risk of Delinquency or Default
If an employee fails to make a loan payment, Working Credit takes money from the locked savings account to pay off the loan, and then shuts the product down. This avoids any negative information going to the credit bureaus (and therefore any negative credit consequences).
Employers Can Opt to Match Employee Contributions
CW-3 includes an optional employee match-and-vesting feature. During the 12-month CW-3 loan, employers provide a dollar-for-dollar match for each $25 loan payment that gets to the lender on time. Employers release match funds at the end of the loan term—creating an incentive for employees to stay on the job. Matching can continue for an additional year if the employee opens the CW-3 secured credit card. In this case, employers provide a $25 reward for each month the employee 1) uses the card at least one time, and 2) keeps the balance below 30% of the credit limit. Both are optimal credit building practices.