In the United States, having good credit is a significant step in accessing opportunities that otherwise wouldn’t be available. Consumers need a credit score to get a loan, to rent an apartment and even to get certain jobs. However, for students and immigrants, establishing credit can be incredibly challenging for a variety of reasons, even if they have sufficient income to send money home using Ria money transfer.
According to a 2016 study by Sallie Mae, a little more than half, just 56 percent, of undergraduate students had a credit card. Immigrants face an even tougher challenge, as getting a social security number, the first step in establishing credit, can be extremely difficult and daunting for people who don’t understand the process, which is complicated even for native citizens.
Fortunately, a new startup in California is working to make the process easier for these two groups, whose members often overlap. Deserve, working with venture capitalists, has raised $12 million to address the significant portion of the population that can be invisible to credit bureaus. Up to 10 million people who lack credit could get the help they need with this process, which focuses on the future rather than applicants’ pasts.
For Immigrants and International Students
Creating a credit file involves a lot of hoops to jump through, and this can be a barrier for a lot of international students and immigrants. They must be authorized to work in the United States, and then they have to apply for a number, a process that can take months or even longer depending on documentation.
The CEO at Deserve, Kalpesh Kapadia, wants to get away from this system, which is daunting and can dissuade immigrants from getting started. He explains that his company’s new app looks at different criteria to determine the credit-worthiness of applicants instead of the traditional credit file. For example, if the student routinely chooses to send money to the Philippines, he or she obviously has enough earning potential that awarding credit would be appropriate.
Indeed, looking to the future, instead of students’ pasts, is a key point for Kapadia. Deserve also looks at factors such as good grades and an established work ethic—attention Ria money transfer users—to determine whether an immigrant or international student has a good earning potential. The fields they are studying in school is another good indicator of a sound credit risk.
For Domestic Students
Kapadia, himself an immigrant, said the future-focused algorithms used by Deserve Edu get a credit card into the hands of students, giving them something to report to the three major credit bureaus in the United States: TransUnion, Experion and Equifax. Of course, all types of students still need to get a social security number so that they can get better and more traditional credit cards down the road. The Deserve option just gets them started on the right path.
Whether international students send money to India or are working to pay for their own higher education, they now have an option to establish credit while avoiding some of the usual red tape. Additionally, it seems Kapadia and Deserve are not alone in their vision for the future. FICO, the agency that actually scores credit, is considering changing its criteria from solely credit payments to other types of indicators such as on-time utilities payments and factors that indicate reliability. The program is called FICO XD, and it is one of several similar options for new ways to establish credit.
The credit industry moves slowly. Fortunately, there are at least companies that are trying to help the millions of immigrants, international students and domestic students who need to get started on the road to good credit.