Affirm Will Soon Help Customers Build Credit Histories

Affirm, the lending startup piloted by PayPal co-founder Max Levchin, recently announced plans to report its loan data to the credit bureaus. This will help customers with thin files, particularly millennials, to bolster their credit histories.

Affirm provides point-of-sale loans that allow customers, particularly millennials, to finance purchases with participating merchants. The company raised $275 million in debt and equity last year.

Affirm currently reports missed payments, which can harm a borrower’s score, but does not do the reverse. It appears that will change in the second quarter.

Financing for millennials is a niche market because they generally do not have the greatest credit scores, or credit histories generally, and so are unable to qualify for the loans many older consumers with equity often rely on. This is a source of frustration for those wanting to see the successful innovation of Silicon Valley work its way into the mainstream, as Lauren Gensler investigates in a recent Forbes article. Max Levchin read the piece (or at least tweets referring to it) and chimed in that Affirm was working on this very thing.

Soon after he tweeted twice more, citing the need to be thorough in testing Affirm’s reporting process, as the risk to customers is far too great for this to be taken lightly. Extraneous information, for example, might be sent, to the detriment of borrowers. Credit reporting is also a matter of some concern to regulators.

When completed, this capability could generate a small revolution in the financing market as a quick and easy way for anyone to improve his or her credit score without the hassle of applying for and managing a credit card. However, the problem now for Affirm is to work with the major credit agencies like Experian, TransUnion and Equifax, to see how open they are to the idea of accepting users’ spending and credit habits offered by an online startup. 

Bank Innovation reached out to Affirm for comment, but received no response.