Dive Brief:

• Credit Rich, a savings and bill payments app, partnered last month with Experian, a major credit reporting agency, to aid people sometimes marginalized by the financial system to optimize their credit scores, and, generally, to build a more financially inclusive society, Angel Rich, CEO of Credit Rich parent WealthyLife, told Payments Dive. The service is aimed at women; millennials with high student debts; and people of color that lack financial services and literacy.

• The app reports a consumer’s bank account activities, such as balances, recurring payments, overdraft history and bill payment history, to Experian for their FICO credit score, to help customers build a credit history quickly. “Paying your bills on time is 35% of your credit score, and being able to help people understand how to do that and helping them to do that goes a long way in being able to optimize that score,”  Rich told Payments Dive.

• Major financial institutions like JPMorgan Chase and Wells Fargo also have initiatives to extend credit facilities to consumers with limited banking options after the Office of the Comptroller of the Currency launched Project REACh last year.

Dive Insight:

When Rich graduated from Hampton University of Virginia in 2009, she not only earned an undergraduate degree in marketing, she also walked out of the school with $180,000 in student loans and a 444 credit score in a range that runs to 850.

Now, Rich has formed a partnership with the credit agency Experian, making her one of the first Black American women to secure an institutional partnership with a major credit bureau, she said in an interview with Payments Dive. Experian didn't respond to several requests for comment. 

Rich experienced the pain points of building credit from scratch along with repaying high amounts of debt and wanted to help people to break out of the debt cycle. The serial entrepreneur built an application called CreditStacker in 2017 where consumers can learn about the nuances of credit systems and reporting agencies by playing games similar to Candy Crush. That gamification of financial literacy proved popular among users, with over 200,000 downloads in the first two weeks of CreditStacker's launch.

Rich decided more had to be done to help customers optimize their credit score and decided to launch Credit Rich to help customers with low credit scores get a grip over their financial life. 

“We created Credit Rich to provide people with the opportunity to take the burden [of debt] off them by helping them understand how the credit system works,” Rich said. “By rounding up their spare change from everyday purchases, they don't really have to think about saving as much as they would if they had to just completely do it on their own. We also connect with their mobile banking, so that we understand what their recurring payments are and help them in understanding which bill they should prioritize.”

More than six in ten (62%) college seniors who graduated from public and private nonprofit colleges in 2019 had student loan debt, and they owed an average of $28,950, according to The Institute for College Access & Success (TICAS). It can take years to come out of such high amounts of debt if the consumer lacks financial literacy, Rich said. 

The application provides the ability for friends and family to contribute their spare change to a college student or someone in need to optimize their credit score through message payments.

By rounding up spare change and helping customers make timely bill payments, Credit Rich aims to help millennials pay off their student debt as soon as possible while optimizing their credit score for a better financial future. In its partnership with Experian, Credit Rich updates a consumer's credit report “every five seconds in real-time,” which is unheard of in the market, Rich said.

The Credit Rich app had been in beta testing mode since last year with 1,000 users testing the application. In April, the app went live and gained traction among users. Rich did not disclose the number of users or total spare change transactions processed. “It's too early to share,” she said. There is a monthly fee for the service, but she declined to specify the cost.

Last year in July, the Office of the Comptroller of Currency launched Project REACh to promote “financial inclusion through greater access to credit and capital.” The program aims to help customers by urging financial institutions to extend credit products and services to customers with no credit or low credit history and reduce barriers that prevent full and fair participation in the nation’s economy.

“A good example of the structural barriers we can tackle involves the fact that almost 50 million Americans have no credit score,” Acting Comptroller at the time, Brian Brooks said in the press release. “That does not mean those individuals are uncreditworthy, but it likely means they cannot get a traditional loan. We can fix that and similar problems that will make access to credit easier and more affordable for millions of people.”

Major financial institutions like JPMorgan Chase, Citibank, Wells Fargo and Credit Karma joined the initiative to help expand the reach of credit products to customers. 

Last week, the Wall Street Journal reported that JPMorgan Chase, Wells Fargo and US Bank are planning on issuing credit cards to consumers with no credit history. It is aimed at individuals who don’t have credit scores but who are financially responsible. The banks would consider applicants’ account balances over time and their overdraft histories, news outlet reported. 

JPMorgan Chase leverages their own internal deposits data to better understand a customer’s ability, stability, and willingness to pay and identify opportunities to provide credit to those with little or no credit history, a JPMorgan Chase spokesperson told Payments Dive. 

“Chase Card Services has used cash flow-based underwriting to approve credit for ~700K 'credit invisible' customers over the last five years,” the spokesperson said in an email. “Through the OCC’s 'Project REACh,' the large banks worked with Early Warning Services (creator of Zelle) to create a tool to bring non-traditional data sources, such as deposit account activity, into the three credit bureaus to allow all lenders improve their ability to assess creditworthiness.”

Last October, Equifax, another major credit reporting agency, launched a new service that lets customers directly share their online bank account information, including balances, deposits and withdrawals, from more than 7,700 participating U.S. financial institutions, to help create a more robust personal financial profile when applying for loans and other services.

“While credit reports remain a strong indicator of credit history and past financial reliability, alternative data has the potential to help responsibly expand consumer access to credit opportunity and support a more inclusive economy,” an Equifax spokesperson told Payments Dive.

 Rich said she believes that alternative data points are essential to consider when building a credit report of an individual with no, or with low, credit history. 

“We have been in the forefront of financial inclusion since the inception of the company,” Rich said. “It is very beautiful to see a movement now where we are able to be recognized for our work, and have many of these financial institutions, reaching out to us to ask us to sort of help shepherd them through this financial inclusion movement.”

Credit Rich currently partners with 20 major financial and banking institutions and plans on adding more features like financial literacy lessons on its app. Rich declined to identify the banking institution partners.