New type of credit card offers access to loans for poor credit customers:
If you’ve got a credit score below 600, chances are you’ve messed up. Late payments. Foreclosure. Maybe you’ve been through a bankruptcy.
Getting a credit card in these situations can be pretty difficult, for obvious reasons: It’s not worth the risk to many lending institutions.
But Americans with bad credit are often the ones that need loans the most. In the absence of reasonably priced lending, many resort to alternatives with exorbitant interest rates to stay afloat, like payday loans — an industry that has grown massively over the past decade or so.
Sometimes this works as an expensive stop gap, but often people get sucked into a cycle of debt and struggle to come back up for air.
Marla Blow thinks she can help. A card industry veteran who spent nearly a decade at Capital One and helped run the credit card and payments division at the Consumer Financial Protection Bureau, Blow recently helped launch a startup called FS Card, whose sole product at the moment is a credit card targeted toward those with tarnished credit histories.
The card, which is called “Build” and has MasterCard branding, enables customers to avoid the local payday lender’s sky-high rates and gradually mend their standing in the eyes of the almighty FICO.
FS Card’s strategy is to target “deep subprime customers” in the 550 to 600 credit score range, a group that’s largely been overlooked and forgotten by the big banks, according to Blow, the company’s CEO. By offering transparent rates and fees and low spending limits to start, Blow thinks she can carve out a profitable business that also helps people repair their financial bedrock.
It’s off to a good start: Some 50,000 people have signed on in about a year and a half.
“We’ve found really good traction,” Blow told Business Insider. “Access to mainstream, reasonably priced credit is still something the underserved market is very much seeking.”
More at: http://www.businessinsider.com/build-credit-card-helps-people-with-bad-credit-scores-2017-5