Fintech startup wants to grant credit newbies easier access to credit - Inside Subprime 9

Fintech startup wants to grant credit newbies easier access to credit - Inside Subprime 9/27/17 Fintech startup wants to grant credit newbies easier access to credit Fintech startup wants to grant credit newbies easier access to creditInside Subprime: September 27, 2017By Caroline ThompsonIn todays world, you need credit for pretty much everything. From buying a car to applying for an apartment, if your credit score is less than satisfactory, you might just be out of luck. These things can be difficult enough for people with bad credit to sort out, but those with no credit at all are often at an even deeper disadvantage. While you might think that lenders, landlords and banks would be scrambling to snatch up someone with absolutely no debt to their name, the truth is that credit newbies often find it extremely difficult to gain access to credit without the help of a cosigner, or paying upfront for a secure starter credit card.This is because lenders dont like risks. Without a credit report to analyze, theres no way to determine your ability to pay back potential loans, or to figure out whether youll be able to make rent every month. This is a fru strating and often vicious cycle for young people who need credit to further their lives, but cant find anyone willing to give it to them.Petal, a new fintech startup based out of New York, wants to change that. This month, theyre launching a new kind of credit card  for  the underserved  consumer. Instead of using traditional credit scores from the three major credit bureaus to assess a potential borrowers creditworthiness, Petal is using machine learning and  has created a new algorithm that analyzes a borrowers bank account activity.“For New-to-Credit consumers, credit is sideways,”  said Petal  CEO and co-founder Jason Gross in a press release earlier this month. “Credit scores are notoriously unreliable and mischaracterize over 65  million Americans, locking them out of the mainstream credit system. These consumers are disproportionately young, immigrant, minority and lower income  â€" and predatory lenders, like payday lenders, have rushed in to fill the gap.”According to Petals data, credit card ownership among 18-29 year-olds has dropped 60 percent in the past ten years.Petals new cards will be VISA cards, which are accepted at nearly every retailer. Their credit limits range from $500 to $10,000, and card membership comes with no fees and interest rates between 17.99 and 24.99 percent. In order to apply for a Petal card,  you must provide Petal secure, read-only  access to  your bank  statements. Petal will then verify your  income, assess your monthly expenses and spending habits, and decide whether you are, as they call it, an invisible prime candidate. Petal defines invisible prime as consumers with no credit scores, but who have all the economic fundamentals of a prime consumer.“The generation that came of age during the financial crisis continues to be underserved by the banking industry, Gross said. Without new solutions, will be increasingly disadvantaged as a result. Credit access is a critical building block for financial stability and homeownership.”Want to learn more about building credit and how to avoid falling into a predatory lending trap? Check out these related pages and articles from OppLoans:The truth about bad credit loansNo credit check loans: A guide to understanding your optionsGetting a loan with bad credit? Its possible, heres howLoans for bad credit: A shopping listVisit OppLoans on  YouTube  |  Facebook  |  Twitter  |  LinkedIn