With the COVID 19 pandemic still at bay, all the major credit card issuers toughened their standards. Some financial startups have, on the other hand, decided to follow a different track.

Using innovative methods to determine credit

In 2020, these young companies like TomoCredit, Chime, and Grow Credit expanded their credit card catalogs to accommodate those who have undesirable credit. This was helped by the fact that these companies don’t run a credit check. They instead use factors like money management and bank accounts to determine eligibility. The cards also lack APRs and even annual fees making it impossible to carry a balance on them.

Mainstream credit card issuers usually run a hard inquiry on your credit report to determine your eligibility. As a result, people with poor (FICO scores less than 630) or no credit had very limited options for credit cards before the pandemic. These new products, on the other hand, are not concerned with your credit score. 

For example, Grow Credit offers the Grow Credit MasterCard by Sutton Bank. All applicants need to do to get this card gives access to their bank account information. The card also allows users to build credit from paying qualifying monthly subscription services like Hulu and Netflix. The card gives you some credit to charge the qualifying subscription services and gradually grow your credit by paying off the bills in full every month.

The Chime Credit Builder Visa Secured credit card takes a slightly different approach. To get the card, you open a Chime Spending Account with a participating direct deposit. You can then transfer money from your spending account to the Credit Builder Account which determines your credit on the card. 

Using income to determine credit.

Another startup, TomoCredit, has the Tomo Card. The company’s technology allows the card issuer, Community Federal Savings Bank, to use factors like the recipient’s account balances and income to determine their eligibility and credit limit. You can also earn reward points with the card by liking a qualifying third-party service.