Credit Sesame combines a prepaid debit card with a virtual credit card to secure credit results

Credit Sesame’s new Credit Builder allows users to create a credit score through purchases on a prepaid Credit Sesame debit card, combining it with a virtual credit card. Users can specify the amount they want to spend on building credit and Credit Sesame computers calculate the debit costs to match this amount and report it to the credit bureaus via the virtual credit card.

“As you make these purchases, an amount equal to the balance of your virtual secure credit card is also deposited into your Sesame Cash account to ensure that you can make timely payments to repay the balance on your virtual secure credit card at the end of each month “, explains the company’s website.

“We have innovated and combined two products – a digital bank account and a secure card,” explained Miro Pavletic, general manager and head of global banking. If you do not have a credit profile, you can log in to our platform, take a photo of your ID such as a driver’s license or passport with your phone and we can create

digital account for you. ”

Credit Sesame is aimed at people who do not have good credit scores or perhaps any credit score – invisible credit. That amounts to about 44 million Americans, Pavletic said, and it’s a real disadvantage.

“Without a good credit score, people will pay more for car loans and even car insurance, and they may find that a lack of credit score will work against them when they apply for a job. “We have helped more than 16 million Americans improve their credit scores.”

The results were impressive. “Ninety percent of consumers who did not have a credit profile in their first month went from 0 to a credit score of 600. No one in the industry is doing that right now. “We see a huge opportunity to introduce non-banking and sub-banking to the ecosystem.”

New Credit Sesame customers can now register via mobile devices, Pavletic said, as a result of the continuous introduction of new smartphone models every year. They can use the phone to photograph a driver’s license or passport to verify their identity.

“The last two years have seen a big change – people who did not have access to mobile devices now have it, as the devices they trade are resold on the secondary markets at much lower costs, giving access to people I did not have cell phones with before.”

Prices for used smartphones can range from $ 200 to $ 700, he said.

Credit bureaus are really open to finding ways to attract customers who were not previously visible in their credit rating systems, he added. Equifax recently announced that it started in 2022 and will start reporting Buy First, Pay Later (BFPL) trades.

Pavletic is pleased that regulators, such as the Office of Consumer Protection, are considering the BNPL. The big players just want to know the rules and adjust their models if necessary. He said the BNPL imposes discipline that credit cards do not impose.

“With a traditional card you get approval for $ 5,000 or even $ 10,000 and nothing prevents you from using them all. With BNPL, if you lose a payment, you can not trade further, which prevents the accumulation of debt. “

Statistics in the United States show that 25% to 33% of BNPL customers have lost a payment, but that’s not a bad thing, he said. A YouGov survey found that 70% of BNPL customers never lost a payment and 90% of those who lost quickly made it, he added.

Many people who do not use banks have money, Pavletic said, and combine solutions while staying away from banks. Some former bank users have come to the conclusion that they can not afford a bank account with monthly account fees, unpredictable rules on when deposits are credited and high bounce check charges.

“We are really surprised by a lot of misunderstandings among people who do not have a bank or a sub-service. Many people who do not use banking products are in the cash economy or use prepaid cards, applications that can hold balances. “The opportunity we have seen is among people who are not poor, they just do not have a credit profile.”

He sees an aversion to traditional banking in the younger generation – two-thirds of millennials do not have a credit card because they avoid credit card debt, he said.

“But when you do not have a credit card, you still want to create a credit profile. We are the only credit score provider that rewards our user – if your score increases by 10 points over a 30-day period, we reward you with $ 10; if it increases by 100 points over a 30-day period, we give you $ 100. We provide these incentives to attract people to ecosystems. We have integrated your credit profile with your daily expenses, to show how your purchases can affect your credit score. ”

How does a non-commissioned banking provider pay rewards? Where does he make his money? Unlike Simple and Moven, which relied on debit card interchange fees, Credit Sesame combined a bank account with a referral service that pays commissions.

Like well-known consumer advice and rating sites like Credit Karma, Nerdwallet and MagnifyMoney, Credit Sesame has a credit market where it lists and ranks financial products such as credit cards, home and car insurance, life insurance, loans and mortgages from citations. The company has been profitable for more than two years, he said.

“We believe in creating a lifetime value, a product that as it grows over time will increase the products and services you need,” Pavletic said. This could be a low credit card or personal loan to get you started. The big ambition is to get users to round up their purchases to the nearest dollar or add $ 1 or $ 5 or $ 10 – the extra amount goes to a savings account. Credit Sesame allows users to create virtual wallets to save money on specific goals, such as a car, vacation, home, or retirement investment.

“We want to build a really close relationship with our consumers and grow with them along the way.”

Credit Sesame also offers value to its partners, such as credit card companies or mortgage lenders, by predetermining customers for them.

“We know their credit score and we know their goals.”

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