Impact Enterprise’s Goal: A More-Inclusive Way To Build Credit

Back in 2013, when James Garvey and his new wife took a long trip overseas, he set up his bills on autopay. Only, he forgot about one of his credit cards. As a result, his payment was two months late—and it tanked his credit score. So, he went about trying to rebuild his score, only to find the options dissatisfying.

That got him thinking: Maybe Garvey, who had previously started and sold an email services provider, could create a platform with which people could quickly get started on establishing a credit history and score or rebuild an existing one. Two years later, launched Self Financial, an Austin-based fintech enterprise with an app that lets users build both credit and savings at the time, without putting down a lot of money or having to go through a credit check. The company has about 1 million members, meaning users who are actively using the product and making payments.

This month, the company also expanded its membership to include H-1B and L-1 work and student visa holders.

“We’re trying to create an inclusive community where anybody can use the product as long as they’re 18 and older and have a social security number,” says Garvey.

More-Inclusive Alternatives

When Garvey first started looking for ways to address his bad credit score, he found a few possibilities. What he learned was eye-opening, because they seemed to be inaccessible to a lot of people. There were secured credit cards, allowing users to open a deposit account, which would then act as security in case they missed a payment. But Garvey realized many people couldn’t go that route, since it required the individual have the extra money lying around to deposit. Credit unions offered secured loans, but, according to Garvey, they were complicated and not easy to use.

That’s when he started considering more -inclusive alternatives he could build himself. What he came up with was an app with which users could apply for a Credit Builders Account. The only requirements were being age 18 or older and providing their social security number. The account, a bank-held CD, was paid off in monthly installments, in increments of $25, $35, 48 or $15 over a 12-or-24-month period.  Thus, unlike a secured credit card, people didn’t have to come up with the money upfront.

Then users’ payment information was reported to the three credit bureaus, thereby allowing them to start building a payment history, which, according to Self, comprises about 35% of an individual’s credit score.

Self works with three banks, which do the lending and pay Self on the backend; Garvey couldn’t disclose the exact terms.

Customers who miss a payment get a reminder warning them of a potential late fee. After 30 days, the information is reported to the credit bureaus. “It’s up to the customers to determine if they want to build good credit,” says Garvey. “As they make timely payment, they build a positive credit history—or the opposite is true.” Users can also opt to close their account at any time.

H1-B and L-1 Visa Holders

As for the H1-B and L-1 visa eligibility, according to Garvey, the original agreement with the company’s bank partners was that only U.S. citizens or permanent residents could apply for an account. But after many potential users, as well as Self employees, on those visas started asking how they could sign up, he worked with his bank partners to change the terms.

In 2019, Garvey introduced a credit card for Credit Builder customers with a history of three on time monthly payments, $100 or more in savings and an account in good standing.

The company has raised over $127 million, $110 million of that since the start of 2020. Most recently, Garvey announced a $50 million Series E led by Altos Ventures this month.