This month we sit down with eCredable‘s CEO’s Steve Ely, and find out about the company’s efforts to improve credit scores and, ultimately, provide opportunities for consumers to access credit.
What efforts is eCredable making to reach the “credit invisibles?”
eCredable works with various organizations across the United States to help “credit invisibles” initially create their credit report or enhance an existing “thin file” consumer. We focus on partnerships that are already invested in reaching these same consumers where there is significant mission alignment. We know that Black and Latinx consumers have poorer credit scores in general, so we seek out partnerships with companies like VamosPay who serves the Latinx market with a Prepaid Debit Card. This type of financial product is very popular with these consumers, but the card itself does not help build credit. When the cardholder enrolls in eCredable to report their phone and utility accounts to TransUnion, they can use their VamosPay card to pay the utility bill. Not only do they build better credit, but VamosPay provides a differentiated product by helping their cardholders with a credit building service that is desired by more than 60% of their customer base.
What type of “lift” (i.e., benefits) do you see when adding utilities to a credit report, using eCredable Lift?
eCredable Lift helps consumers based on their own credit report circumstances. For example, if a young person or immigrant has yet to build an initial credit report, using eCredable Lift is a “no brainer”. Adding just one utility account (like a cell phone) with a limited amount of payment history can create an initial VantageScore 3.0. If they have 12 months of on-time payment history, they can see a score in the mid 600’s which is great starting point. The more accounts they link with eCredable Lift the higher their score. For the “thin file” consumer, eCredable Lift is also a “no brainer”. Linking just one account can help them go from not being scoreable to having a credit score they can use. For consumers with thicker credit files (multiple credit cards, a car loan and a mortgage), the impact is less significant. Phone and utility accounts to not have the same value as secured loan products like mortgages and car loans.
Why was it important for eCredable to recently partner with Finlocker?
We’ve known about FinLocker for quite some time. One of the co-founders (Bryan Garcia) is a long-time friend of mine that I worked with at Equifax, so we naturally stay connected to see if a partnership could potentially be realized. Credit reporting is built on a spectrum of accounts that can be included in the consumer’s credit report. eCredable is focused on the beginning of this “credit journey”, while FinLocker is focused on the “mature end” of the credit building journey. Our partnership spans the entire spectrum of the credit journey that every consumer will embark upon which starts with building an initial credit score to applying for credit cards, student loans, auto loans and eventually home loans. The combination of the products have been combined to create eCredable LiftLocker™. This product helps the consumer no matter where they are on their credit journey since eCredable LiftLocker includes eCredable Lift (adding phone and utility accounts) as well as all the benefits that FinLocker provides. This includes financial account aggregation, financial education, credit building, credit monitoring, secure digital storage for any type of personal documents (including financial documents you would want to share with a financial planner or mortgage underwriter), and a mortgage readiness tool to help you know when you’re ready to qualify and apply for a home mortgage.
How do you define “alternative credit data”, and do you think there will be more types of data that may expand this definition in the near future?
I think most people define “alternative data” as a set of data that is not typically stored in a “traditional credit report” which can be used to create a traditional credit score (e.g. VantageScore 3.0). Most “alternative credit scores” use core credit files and complement the scoring model with alternative data to create an alternative score. This allows the lender to know when they’re using traditional credit data and/or alternative credit data when setting up credit policies. Ideally, you would want as much alternative data as possible to simply be a part of the core credit report. VantageScore 3.0 and newer versions already consider accounts like telecom and utility accounts as part of the scoring algorithm. The challenge has been in getting the data into the core credit file used to create the score. This is fundamentally the problem that eCredable Lift solves for – the data we furnish to TransUnion goes directly into the core credit file instead of a file that houses alternative data. This approach benefits everyone: a) the consumer can opt-in to have these accounts included and sees an immediate benefit to their basic credit scores which lenders are already using, b) the lenders does not need to validate a different type of score, c) the lender does not need to pay for additional data (which is common when using alternative credit data), and d) the credit bureau gets more data in their core credit file to be able to more effectively address the “credit invisible” challenge. As long as there is enough data to be used in the modeling process to impact mainstream credit scores, more and more “alternative data” (like rent) will be added to the core credit file which is ultimately a better outcome for all parties.
What experience/knowledge did you take from working at a credit bureau (Equifax) that help provide insight on how you manage and envision the future of eCredable?
My experience at Equifax was incredibly valuable in that I was able to see the credit ecosystem from everyone’s perspective. The credit bureaus simply want more data so they can sell more credit reports and credit scores. The more differentiated the data the higher the price they can charge and the stronger their competitive advantage. Lenders want reliable credit related data so they can reach more consumers that fit into their “credit box”. Consumers want access to financial products at the best terms, so they need tools to help them understand how to build better credit scores and find the financial products that best match their credit and financial situation. I always put myself in the shoes of the person I am speaking with and try to empathize with their needs, while understanding and respecting the needs of their other parties involved in the transaction. Over the years I become more of a consumer advocate, but an advocate who understands how the whole ecosystem needs to work to create the best outcomes for everyone.
Software engineering and data science are popular career choices these days, and that has been your focus throughout your career. Any advice to students out there looking to choose this career path?
I’ve been in the software and technology industry with a focus on information for a very long time. The one constant I have seen over the years is that no matter how good you think you are or how strong you think your competitive position is, someone else is already working on something better, faster and probably cheaper. You can never stop learning and growing in this business, so make sure you work with people who appreciate this and realize that investing in learning is simply part of what you need to do to compete and grow. If you are just entering the financial services industry, take the time seek out people who understand how regulated the environment really is. No matter how good your idea is, it still needs to work within a highly regulated industry.
