When Kristy Kim graduated from college in 2011, she had a problem. Despite locking in an investment banking position at San Francisco-based J. Moore Partners, Kim couldn’t purchase her first car or rent her first apartment.
Money wasn’t the issue. “I always had money, there was never a problem with tuition,” Kim says. The problem was her credit. She didn’t have any. And she didn’t realize it was a problem until she kept getting rejected during the application process for multiple apartments in the San Francisco Bay Area’s hyper-competitive rental market.
“It turns out, they were running my credit score,” Kim says. “And they found out I didn’t have a credit score, and they didn’t want to take the risk.”
Eventually Kim found a building owner who was renting out a unit. He asked for Kim’s resume and offer letter, and even talked to her boss. When it came to credit-check time, Kim explained she was an international student and never had a credit card, and thus had no credit score. “So he made an exception for me,” she says. But that “exception” required her to pay six months’ rent up front.
TOMOCREDIT WAS CREATED WITH COLLEGE STUDENTS IN MIND
Kim remembers trouble getting a car, too. There was simply “no way” she was getting an auto loan, she says. “Auto loans and dealerships cannot make an exception for me,” she says, adding that she tried to offer pay stubs and bank account information but was rejected because she didn’t have a minimum credit score. Once again, Kim bought her car with cash. “I remember feeling like a gangster in a way,” Kim laughs. “Like, oh my gosh, I can’t believe I’m buying a car with cash.”
But paying in cash created another issue. Kim wasn’t able to build credit by making big purchases or paying off loans. “So it’s a bit of a chicken-and-egg problem,” Kim says. “No one gives me credit, but I can’t build a credit score.”
Of course, she is not alone. International and domestic students alike have problems building credit. “As an international student and immigrant, this is a well-known problem that we have. But I think what’s interesting is, in 2020, it’s not just affecting international students and immigrants, it’s affecting everyone.”
When Kim went to earn her MBA at the Haas School of Business, she did something about the problem. She launched TomoCredit — short for Tomorrow’s Credit — to help people get credit cards without credit scores and without the approval of big banks. “My team and I built the product with students in mind,” Kim says.
DITCHING CREDIT BUREAU DATA FOR BANKING HISTORY AND INCOME
TomoCredit provides no-interest credit loans ranging from as low as $100 up to $10,000. Instead of checking credit scores through credit bureau data, TomoCredit assesses an applicant’s credit reliability by checking two years of banking history and confirming sources of income. “We don’t look up your credit score when you apply,” Kim says. “Instead, we look at your cash flow. And as long as you have a responsible history of managing your cash, in your savings account or checking account, Tomo approves you. There is so much data out there, why should we have to rely on credit bureau data? So at TomoCredit, we don’t do that.”
Once TomoCredit has access to bank accounts, Kim says, they run the data against their algorithms; based on the situation and history of the applicant, they then give a customized limit. “If you make a lot of money, we can give you a high limit,” she explains. “If you’re a student or don’t make a lot of money, that’s fine, we’d rather approve you than reject you. And then based on your performance, we’ll increase your rate.”
CREATED BY INSIGHTS FROM A BERKELEY HAAS CLASSROOM
TomoCredit’s roots go back to a Berkeley Haas classroom during the summer of 2018. Kim was a guest lecturer in Haas professor Gregory La Blanc’s blockchain and cryptoeconomics course. While in the class, she surveyed students to get data on their experience accessing credit. She learned it wasn’t just her who struggled to earn credit.
After putting down a ridiculous amount of cash to secure her apartment and buying her car, Kim eventually got a small credit loan from Citibank. “Citi gave me a small loan just for the purpose of building a credit score and I built my credit score that way,” she says. “I literally just moved money from my savings account to that loan account just so I could have transaction history.”
It took Kim three years to get a credit score and a decade to earn a score of at least 700 she says. If it was that hard for Kim to build a credit score, who had a solid job, plenty of money, and a lot of determination, she wondered how tough it must be for other international students to earn credit. “And now, in 2020, I still talk to college students about credit scores and they ask me why they need one, that they just use debit cards,” Kim says. “The data shows 52% of college students don’t have a credit score.”
Kim, who first came to the U.S. as a “parachute kid,” says her parents stayed in South Korea where they still live. “As an international student, I didn’t know about the U.S. credit system. And my parents had no idea,” she says.
THE WAITLIST ALREADY INCLUDES 20,000 PEOPLE
TomoCredit officially did a soft-launch last October. Since then, it’s raised more than $3 million in investments and has more than 20,000 people on its waitlist. “That’s how I knew we were on to something,” Kim says of the massive waitlist. “I didn’t spend any marketing dollars. I was like, where are they coming from?” Kim says sites like Americanbankers.com and creditcards.com mentioned TomoCredit saying they were innovating in the industry by looking at cash flow data instead of credit score.
Kim has five other full-time employees and will add two more this summer and, she says, is currently hiring to add more. “Almost all of us are immigrants and we all had the same issue,” she says.
The full-on public launch is set for July 15. They’ve already pre-approved about 2,000 cards and want to issue about 10,000 by the end of 2020. Kim says the user side of the card is totally free and that there is no user or annual fee. When a user swipes the card, the merchant pays TomoCredit 1.5% to 2% on each purchase. “Many cards out there that accept people with no credit scores have annual fees or high APR or they set the limit really low so it’s very inconvenient to use,” Kim explains on what differentiates TomoCredit.
Kim says this generation of young adults does things differently and that it’s time for the credit system to catch-up and adapt.
“Even many American-born students have told me they didn’t know they needed a credit score until they needed an apartment as well,” she says. “And I don’t think it’s our fault or that our generation is stupid or anything. We just behave differently in a way. The credit system should change and keep up with the new user behavior.”