Many of us take having a credit card for granted, but for millions of Americans, these financial tools are out of reach. Fortunately, there’s a new credit card for people with no credit coming to the market.
“There’s a huge number of consumers in the United States who lack a representative credit score,” says Jason Gross, CEO and co-founder of Petal, a new credit card product. This can make it impossible to get approved for credit cards, mortgages or auto loans.
Rather than determining approval the usual way — by running your credit report — Petal underwrites based on your cash flow, looking at factors like how much money you make and how much you have saved.
Here’s what you need to know about Petal’s new credit card for people with no credit:
The current standard credit scoring technology was created 60 years ago, Gross says. He believes the current scoring system is broken. If we were to create a system from the ground-up today, it would be very different, incorporating a wealth of financial information that’s now available, he notes.
“What we’re talking about is the same information that you use to determine if you can afford anything,” Gross says. “It’s about the money you make, the monthly bills you pay and the money you have saved up.”
He says this is the kind of information that’s been used manually in making lending decisions on products like mortgages for hundreds of years, but now Petal is using it via machine learning with an algorithm to instantly deem consumers as creditworthy.
“By using cash-flow underwriting, and by scoring people accurately, we can give customers more access to credit, which means higher credit limits. And it means people qualify who would (otherwise) be denied by big banks,” Gross says.
It also means that they can charge less — lower interest rates and no fees.
Petal’s credit cards specs:
Here’s a breakdown of Petal’s credit card offer:
|Credit Range Limit||APR Range||Fees||Rewards|
|$500 to $10,000||14.24% to 25.24%||None||None|
Petal has a mobile app and website to help customers manage their credit account, track their spending and gain more control over their financial lives.
Additionally, they encourage all users to pay off their balance in full each month, making that the default option.
If you want to carry a balance, before you make that decision, Petal calculates what it will cost over the next month, so you know what it truly costs to use the card.
When will it be available?
Petal is still in beta and currently has 65,000 people on the waitlist. In the coming months, they will allow more people in from the waitlist and will start rolling it out to the general public, Gross says.
Raising money to meet demand for Petal
Petal has been building its product in stealth mode for a number of years, Gross says, working with banks, regulators, and their partner, Visa, to get the product ready for launch.
In September 2017, Petal unveiled the product. And within a week, tens of thousands of people had signed up for their beta program.
In order to bring the product to market at scale, Petal just closed a $13 million round of series A financing led by Valar Ventures.
Petal’s new technology has the potential to help millions of Americans who can’t qualify for a traditional credit card, says Gross.
Indeed, 45 million Americans have no credit score at all, according to the Consumer Financial Protection Bureau.
“We’re talking about tens of millions of American consumers that are being mis-scored from a traditional perspective,” Gross explains.
Within that group, he notes, you have a log of young people that fall into a catch-22: They can’t get credit without a credit history, and you can’t build credit history without access to credit.
Young adults who came of age during the financial crisis are hit particularly hard, Gross says, when it was harder to get a credit card and harder to establish and start building credit.
But it’s not just young adults who are left behind. Gross hears stories from a wide range of people who have difficulty accessing credit.
Not only will Petal make it easier for those with no credit to obtain a credit card, but it also gives them a method to build their credit, making it easier for them to qualify for other financial products in the future.
“We really feel that a product like Petal is missing in the market, and we’re really excited to be able to meet the needs of all these folks that are being left out of the traditional system,” Gross says.