Constructing credit score historical past will be tough in case you are a shopper that’s having hassle gaining access to credit score within the first place.
Enter TomoCredit, which has developed a bank card targeted on constructing credit score historical past for first-time debtors. The San Francisco-based startup is asserting as we speak that it has raised $10 million in a Sequence A funding spherical co-led by Kapor Capital and KB Funding Inc. (KBIC), a subsidiary of South Korea’s main shopper financial institution. Lewis & Clark Ventures, AME Cloud Ventures, Knollwood Funding Advisory, WTI, Bronze and Sq. co-founder Sam Wen additionally participated within the Sequence A financing.
The brand new capital comes simply over seven months after TomoCredit raised $7 million in seed funding, and brings its complete raised this yr to $17 million. The corporate additionally introduced as we speak it has appointed Ash Gupta, former CRO at American Specific, to its board.
TomoCredit co-founder and CEO Kristy Kim got here up with the idea for the corporate after being rejected a number of occasions for an auto mortgage whereas in her early 20s.
Kim, who immigrated to the U.S. from South Korea along with her household as a baby, was dissatisfied that her lack of credit score historical past proved to be such an impediment regardless of the very fact she had a job “and constructive money movement.”
So she teamed up with Dmitry Kashlev, a Russian immigrant, in January of 2019 to create an answer for different foreign-born people and younger adults going through related credit score challenges. That fall, the startup (quick for Tomorrow’s Credit score) was accepted into the Barclays Accelerator, powered by Techstars.
The fintech provides a bank card aimed toward serving to first-time debtors construct credit score historical past, primarily based on their money movement, quite than on their FICO or credit score report rankings. Its largest differentiator, believes Kim, is that it has no charges, no APR and no credit score pull. Conventional credit score merchandise rely closely on charges and APR, she mentioned, whereas TomoCredit makes cash by service provider charges.
TomoCredit is powered by Finicity (which was acquired by Mastercard final yr), and leverages that firm’s knowledge community and open banking know-how in order that it could possibly “securely” entry candidates’ financial institution accounts to acquire monetary knowledge for underwriting functions.
As soon as accepted, candidates obtain the TomoCredit Mastercard. The aim is to deliver “tens of millions of people that lack a credit score rating into the monetary system, permitting a various group of customers the chance to higher place themselves as certified candidates for mortgages, auto loans, or different main life purchases,” the corporate mentioned.
TomoCredit has already pre-approved greater than 300,000 prospects and expects to concern a complete of 500,000 playing cards by yr’s finish, in keeping with Kim.
“We’ve grown 10x this yr from the start of 2021,” Kim mentioned. “Nonetheless, this spherical got here collectively sooner than anticipated.”
One thing that has been shocking to Kim is the curiosity from a wide range of kinds of customers.
“To start with, we thought worldwide college students and immigrants can be most inquisitive about our product,” she informed TechCrunch. “However after launching, we’ve realized that so many individuals can profit — from gig financial system staff to YouTubers to any younger one who hasn’t had an opportunity to construct credit score but. The market is method greater than we even realized.”
In early 2022, the corporate plans to roll out the Tomo Black card, a product for a few of its current prospects that “are displaying good efficiency.” It’s presently testing it with a few of its current person base.
“It is a premium product that may develop with our prospects, who we need to retain over the subsequent 10 to twenty years,” Kim mentioned. “We don’t need our product to be a stop-gap resolution.”
The startup plans to make use of its new capital to do extra hiring and improve options reminiscent of weekly autopay and excessive credit score limits in an effort to “enhance credit score scores quicker,” she added. At the moment, TomoCredit has about 30 workers, up from 10 on the time of its final increase in February.
“My most important focus is recruiting high expertise,” Kim mentioned, noting that the corporate had already employed “some senior individuals from Wells Fargo.”
“Once we recruit and rent, we care about variety,” she added. “We’re constructing merchandise for individuals who have been historically underserved by main banks. I believe to align with our mission, we should always embody that in constructing our group. Greater than 50% of our execs are feminine. The whole danger group is feminine. We’re various when it comes to gender, age and ethnicity as a result of we need to actually perceive our prospects and construct a product that’s inclusive.”
Brian Dixon, accomplice at Kapor Capital, factors out that there are about 45 million individuals within the U.S. who ought to have credit score scores, however can’t take out a mortgage, get a bank card, or apply for a mortgage. And that quantity is barely growing.
“Once we realized that Kristy skilled these points firsthand when she moved to the USA and thoughtfully found out a option to circumvent the predatory and damaged bank card system, it deepened our conviction in her and the product itself,” he wrote through e-mail.
Dixon believes that TomoCredit’s mannequin of not charging the person makes it a “secure and reasonably priced various” to what’s out there.
“Their mission aligns with our thesis of closing gaps of entry and alternative within the credit score area at giant as properly,” he added.