In 2013, when James Garvey and his new wife took a long trip overseas, he paid his bills on automatic payment. Only he forgot one of his credit cards. As a result, her payment was two months late and this caused her credit rating to drop. So he tried to rebuild his score, only to find the unsatisfactory options.
It got him thinking: maybe Garvey, who had already launched and sold a courier service provider, could create a platform with which people could quickly start building a credit history and scoring or reconstruct a history. Two years later, he launched Self-financing, an Austin-based fintech company with an app that allows users to create both credit and savings, without putting in a lot of money or having to go through a credit check. The company has around 1 million members, which means users who actively use the product and make payments.
This month, the company also expanded its membership to include H-1B and L-1 work and student visa holders.
“We are trying to create an inclusive community where anyone can use the product as long as they are 18 and over and have a social security number,” Garvey explains.
More inclusive alternatives
When Garvey started looking for ways to fix his bad credit, he found a few possibilities. What he learned opened my eyes, for they seemed inaccessible to many people. There were secure credit cards, allowing users to open a deposit account, which would then act as a guarantee in case they missed a payment. But Garvey realized that a lot of people couldn’t go this route, as it required the individual to have the extra cash lying around to deposit. Credit unions offered secured loans, but, according to Garvey, they were complicated and difficult to use.
It was at this point that he began to consider more inclusive alternatives that he could build on his own. What he came up with was an app with which users could apply for a Credit Builders account. The only requirements were to be 18 or over and provide their social security number. The account, a CD held in the bank, was repaid in monthly installments, in increments of $ 25, $ 35, $ 48 or $ 150 over a 12 or 24 month period. So unlike a secured credit card, people don’t have to pay the money up front.
Then, the users’ payment information was passed to the three credit bureaus, allowing them to start creating a payment history, which Self says makes up about 35% of an individual’s credit score.
Self works with three banks, which lend and pay Self on the backend; Garvey could not disclose the exact terms.
Customers who miss a payment receive a reminder alerting them to possible late fees. After 30 days, the information is reported to the credit bureaus. “It’s up to customers to decide if they want good credit,” Garvey explains. “By making payments on time, they build up a positive credit history, or the opposite is true. Users can also choose to close their account at any time.
H1-B and L-1 visa holders
Regarding eligibility for H1-B and L-1 visas, according to Garvey, the initial agreement with the company’s banking partners was that only U.S. citizens or permanent residents could apply for an account. But after many visa holders, including Self employees, started asking how they could register, he worked with his banking partners to change the conditions.
In 2019, Garvey introduced a credit card for Credit Builder customers with a history of three monthly on-time payments, $ 100 or more in savings, and an account in good standing.
The company has raised more than $ 127 million, including $ 110 million since the start of 2020. Most recently, Garvey this month announced a $ 50 million Series E led by Altos Ventures.