I remember the golden years of mail when credit card offers flooded my apartment mailbox.
So maybe because of all that ready credit, there’s a mail truck-load of people with debt problems and some piss-poor credit solutions for folks who could use better. FICO says that nearly 80 million Americans have subprime credit. Add to that the 53 million who are “scoreless” because they missed some bills or don’t have an adequate credit track record.
And the payday crowd is still doing nicely, thank you—with unregulated interest rates in 33 states. It’s basically legal robbery, with interest rates that range from about 155% to 675%.
Credit solutions, anyone? Hell, yes, say the VCs, who’ve never been averse to investing in social impact businesses—if there’s money in it. Here are a few of the players.
Credit engine. → Deserve
Deserve is the story of the little engine that could. It started out as a credit card for foreign students who wanted to establish credit, then went on to serve young professional Millennials and Gen Z. It uses info beyond FICO scores, like income and employment records, to increase approval rates.
Now Deserve has basically found that their little engine—its tech platform—can be used by a lot of financial institutions who want to set up their own credit cards. And clients are lining up since Deserve launches a lot faster and cheaper than those institutions could themselves.
This is what I love about VC. Agile, smart people playing like a smooth hoops team seizing the openings.
Venture status: Sitting pretty, with nearly $290M raised, including $50M from their Series D. That one was led by Mission Holdings, Mastercard, and Ally Ventures—along with Goldman, Sallie Mae, and others.
Making a dent. → Perch Credit
Fist pump! Perch’s app helps young adults build credit through nontraditional ways like rent payments, subscriptions, and credit cards. They also offer savings and microlearning accounts to school users on personal finance.
Results: Users often bump their credit score in just two weeks. And it’s a big-time bump, boosting subprime scores on average 60-120+ and the scoreless to 670+. The best part: It’s FREE.
So how does Perch make money? From taking a share of revenue from those subscription services like Netflix, Hulu, Spotify. Those companies play along because they see the upside in fielding a bigger pool of customers.
And Perch knows how to play nice with the “credit authorities.” It’s operationally backed by FICO and all three major U.S. Credit Bureaus.
Venture status: Perch’s total funding to date is modest—$2.5M in a seed round (in addition to a pre-seed)—but its syndicate is impressive. A Y Combinator grad, Perch has been backed by scouts from Sequoia, Kleiner, and Lightspeed. SoftBank and Y Combinator are in the mix too. Extra love because the founder was inspired by his own struggles to build his credit score to get a college loan.
Ready to make its mark. → Zoro Card
See, this is how an elevator pitch is done: “Build credit with a debit card. Just $3/month.”
Each month, Zoro submits all your purchases via their card to major U.S. credit bureaus. The co-founders are in their twenties and are trying to address the problems of fellow former students, as well as ex-GIs and a lot of the subprime folks.
Still in early access, Zoro is just getting its skates on.
Venture status: Zoro Card has conducted two pre-seed rounds, with backing from Starting Line and Motivate Venture Capital. Starting Line is fairly new itself, with a colorful founder who was a former professional poker player, turned VC, just having raised its first $17M Fund. Starting Line has its own righteous cause, seeking to fund companies who serve the underserved.
Doing good and doing well don’t have to be polar opposites. Let’s give credit where credit is due…past due.
Calling 911. Who’s got your back in an emergency?