LendUp (YC W12) Scores $150M for a Credit Card That Won’t Screw You Over | Hacker News Reader

LendUp (YC W12) Scores $150M for a Credit Card That Won’t Screw You Over

techcrunch.com

56 pointspavornyoh55 comments

I've been using LendUp regularly just in an attempt to help rebuild my credit (I've never actually needed the loan). I think their service is fantastic and I really hope they remain independent and true to their mission as they grow.

This is a horrible way to build credit. You are literally throwing money in the trash. Go get a secured credit card.

Diversity of types of loan is worth it (card, installment debt). If you're borrowing $1000 at 7% for a year it's on par with the fees for a secured credit card.

Did you see an improvement in your credit score?

Can you explain your process and your results?

I don't understand why Orloff is so excited about giving customers the ability to easily lock and unlock their credit card. As a customer, that's really not very valuable to me. I'd rarely use the feature, and it likely wouldn't save me any money, since I'm only liable for up to $50 of fraudulent charges (and haven't paid anything at all each time my number has been stolen in the past).

As a customer, that's really not very valuable to me

It is an excellent feature and something consumers crave knowing they can curb fraud. Many companies are now doing this. Capital One has the lock card feature, Discover has the Freeze it feature among others and hopefully their video convinces you as to why it is a good feature. https://www.youtube.com/watch?v=Z0ZNAHZlkMY

Many people (that I know / have known) frequently misplace their wallet and then their cards are in this limbo state where it's unclear if they are stolen and have to be replaced (expensive for the co., inconvenient for the customer) or just not found.

Seems like a useful feature to me.

This seems like a win-win to me, I can misplace my wallet/CCs a lot and would be very grateful for a way to lock down my cards temporarily. If used correctly by consumers this would massively reduce fraud done with the stolen plastic, I'd be interested to know how much of fraud is done with the actual card.

> I'm only liable for up to $50 of fraudulent charges...

While true, I locked my Simple card after a $20ish charge in the Dominican Republic, then initiated a support request asking about it. Simple's nice and refunds all fraud, but some banks I'd have saved $30 there.

Plus, your not being liable doesn't mean you don't pay for it. We just pay indirectly - it's figured into the bank's fees, the interest rates they'll pay you on savings, etc. I like Simple, and I was happy to be able to stop it myself before they went and charged $1k somewhere else.

One time on vacation my wife's purse was stolen. We had to call the bank(s) and get them to kill all of the credit cards. Then we recovered the purse. For the rest of the vacation she didn't have access to a credit card (unless I was with her) and had to use cash for everything. It would have been much less of an inconvenience if we would have had the ability to easily lock and unlock the CC.

There are plenty of people for whom $50 is quite a lot of money to lose.

And I know some people who have cards for online purchases only, which they use very rarely. Leaving the card locked except when actually in use would be quite a security improvement.

Assuming it's a Visa card and it was not a pin based transaction. Visa has a Zero Liability of fraudulent transactions for card holders regardless of the issuing bank

Does anyone know if they cater to the recent immigrant? The USA credit score system is totally broken for people who have come recently to the country.

It's not easy without credit score, but there are definitely options. For example if you're in the Bay Area you can get a credit card from Tech CU: https://www.techcu.com/Personal/Global_Members/CreditStart_C...

Also, if you've got an Amex card in your home country it might be possible to use it to get another card in the US: https://www.americanexpress.com/global-card-transfers/united...

In addition, you can also apply for a secured credit card (e.g., from Capital One) which will help you to get a credit score.

This above... To add to what he/she said, to maximize your scores, you need at least 3 credit cards reporting. For a newbie, you should be able to generate a score within six months. BOA, Capital One and CUs are are good place to start. Also if someone can add you as an authorized user on their cards also helps a lot. Stay way from predatory lenders like First Premier and Credit One. Once you get it, always pay your balance before statement cuts and let only 1%-9% of the balance report to the bureaus. Do this and in six months you will be qualified for unsecured cards...

Leaving aside the fact that as a non-USian this all sounds completely insane...

> Once you get it, always pay your balance before statement cuts and let only 1%-9% of the balance report to the bureaus.

...what does this mean?

The latter means that the credit reporting agencies "evaluate" how you're doing at specific times, so instead of paying off your card when it is due, you can notice when they evaluate and pay it off right before they check. If you do, try and pay off enough to have it below 10%, but above 1%, since that'll give you the best evaluation (i.e. the highest credit score).

For anyone else, pretty much anyone with income can more or less fix their credit in 6-9 months if you just work at it. It's a game, you can game it, and get a good credit score.

(If you scoff at the notion of credit scores being "a game", realize that it's the whole point. People who "care" enough about their credit score to learn the game and play it are—by definition—good credit risks. So doing well "at the game" is exactly what credit providers want you to do.)

> People who "care" enough about their credit score to learn the game and play it are—by definition—good credit risks

Either that or they are fraudsters.

The credit score is not intended to find fraudsters. It's intended to find people with poor credit skills, but good intentions.

For fraud they have other tools.

How do you know when they check?

When your credit is pulled, you do get an inquiry and an alert if you are subscribe to credit monitoring [think credit karma]. So depending on your region or state, you will get an inquiry on either Experian, Transunion or Equifax.

Once you get it, always pay your balance before statement cuts and let only 1%-9% of the balance report to the bureaus. ...what does this mean?

A rule of thumb is to always keep utilization under 30% for a good score. The credit score like all other things are /can be manipulated. So the 1%-9% balance reporting instead of 30% is the best to get the best percentage of the amounts which is factored into getting your overall credit score.

This is how scores are calculated - Payment history[35%], amounts owed [30%], length of credit history [15%], new credit [10%] and types of credit used [10%].

The balance owed counts for 30% in calculating the overall score. So the lower the balance, the better.

Is there a good resource for learning all this crazy stuff?

Yes, begin here- http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/b...

It has good info.

Thanks!

The USA credit score system is completely crazy. When I was in the USA on sabbatical a few years ago even opening a bank account was a nightmare. In the end I was only able to do so because I had a Citibank credit card here in Australia and Citibank USA recognised me. It still took the poor banker a few hours and about a dozen phone calls to various parts of Citibank to open the account.

A secure credit card from your bank is the quickest to bootstrap your credit score. Usually within 3-6 months you will start getting better credit card offers so switch to one of those. Within a year of consistent spending and payment, you will have a decent credit score.

Try to find out if your employer or your university has a partnership with a local bank.

I was able to open an account and get a credit card with a $10k spending limit with only my passport, less than 24h after landing in the U.S. for the first time.

Have any consumer advocacy-type people compared LendUp's APRs and terms with that of traditional payday loan companies? 203% to 755% APR for a first-time borrower sounds comparable to what many others already offer. How much of a better deal are you getting?

I would like to see payday/title loans and other debt traps legislated off the market completely, and at those APRs, I don't see how this is substantially different.

It looks like it's comparable for a first-time borrower, as you say, and then gets better as you build a history of repayment with them.

I haven't used payday loan services myself, but from what I've read, I have an easy time believing that incumbents in that market don't use their own borrower repayment information very effectively.

Often, people who fall into a debt trap start with just one reasonably small loan, a few hundred dollars for a few weeks.

So if your first-time borrowers still pay 200-700% APR, then I don't see how offering lower rates to people who have demonstrated their ability to repay addresses the problem of people who are actually unable to repay falling into this trap to begin with.

Okay, can we agree that lendup helps people who repay, and doesn't help people who don't? Relative to existing payday loan services.

Yes, I agree. The moral issue is allowing people to take out loans that they are unlikely to be able to repay, based on their personal finance history. I don't (yet) see how LendUp does a better job of that for first-time borrowers than any other payday loan company.

Perhaps this is addressed by limiting the first-time loan amount to something small (like $250), and scraping the borrower's online banking statements as part of the approval process in order to predict (based on the account history) whether they are likely to be able to repay within a month. I don't know.

I'm pretty sure I got a 24% APR on my first credit card, $1000 limit. This was as a student with 0 history.

This seems like an INSANE spread.

Great company! Wouldn't the same concept apply to those that cannot afford car repairs for example? You provide credit to those that need to fix their cars, however, the problem is that the auto-shop is incentivized now to upsell a bunch of fixes you may not actually need. Any thoughts?

A lot of car dealerships nowadays will finance repairs or maintenance.

I don't know about how available the same kind of credit facility is to independent mechanics (dealerships tend to be pretty cozy with banks/financiers for obvious reasons), but that would probably be a good place to start.

Anyone from LendUp on here? I want to talk to you.

great article. sounds like sasha and lendup are in business for all the right reasons. hopefully their story inspires more like them.

This is f#$%ing ironic:

https://tctechcrunch2011.files.wordpress.com/2016/01/lendup_...

At only 392.38% APR, we "won't screw you over" in any other way.

Am I the only person that thinks representing a loan only designed to be held for a week or two at an annual rate is about as useful as the weatherman giving the forecast in degrees kelvin?

It's a payday loan. You pay it back plus $10-50.

And this is supposed to be "predatory"? Jeez. I'd have been screwed a few times without these evil "loan sharks".

There's an argument that could be made that capitalism is based on the idea that those who understand compound interest are allowed to exploit those who don't.

So no, you're not the only person who thinks that. And there are plenty of people who want you to keep thinking that. Especially people with bright new financial services apparently aimed at making the wealth gap even worse than it is already.

Robbery by math.

You and I have tremendously different definitions of robbery. Every legitimate payday loan outfit I've looked at is pretty much above board with what they charge and how they work.

Borrow X, repay X + Y on Z date, usually no more than a month in the future.

So sure, if you feel fully informed consent is exploitative in any way.

And the entire population aced math in their well funded school system with small class numbers and well paid capable teachers, so no worries.

I suspect we don't have different definitions of robbery so much, as of when it's appropriate to take advantage of people's ignorance and when it isn't. You'll understand better when somebody has taken advantage of yours.

How does this increasingly contrived person who has a job and paychecks/DDs into a bank account (all three of which are prerequisites for most payday loans) not understand first grade math?

I'm a perfect use case for this service, so I guess I'll tell you my story. My credit score is pretty low. Low enough that I apply for high interest cards with my bank and get rejected.

I have a high income and an equally high number of expenses. Each month I have about 300-600$ in "discretionary" income. I also have a partner with a very low income and a son. My partner is trying to get on her feet right now and there is a high degree in variability with her income and needs. She has recurring medical bills and there are constant one time medical expenditures when you have a child. Not to mention birthdays, once in a lifetime kind of events where your child gets to participate, there are family and friends that are worse off financially and need help from time to time.

I don't like, respect, or particularly want to use my banking services. I don't trust them but having a checking account is a requirement. Every time I have 500$ it makes me sick to my stomach to imagine handing it over to them, given the fees and backhanded tactics they use. I don't trust them. I imagine I might get a secured credit card sometime, but handing over the 500$ and waiting two weeks to a month for my own money back, again, just makes me kind of sick.

This service would help me in an emergency, and help me build credit (if not to the same extent as a secured credit card)

I totally sympathise, the US health system is just a disaster.

YMMV but - I had a US bank account (I was a foreign student, low income) for 10 years. Didn't cost me a cent. Made money on interest, and had a perfect credit rating when I graduated. Found a small community bank that was free provided you kept a minimum balance of $1000. Savings and Loan are an equally valid alternative (not even sure what the difference is got the same service from both - except the S&L would cash foreign checks for free).

Thing is, people think banks are evil for charging 14.5% APR for an unsecured personal loan. But they think these guys are great for charging a minimum of 29% APR - but as far as I could see more like 200%+ for an unsecured personal loan???

Holy math fail batman!

Don't bank with citizens or bank of america, and do your due diligence like you would any other purchase. There are plenty of good banks out there who would be happy to do business with you. Go in, ask to speak to the bank manager, explain your circumstances, ask questions you already know the answer to to calibrate, and treat it like any other business arrangement.

You're right a secured credit card is also better than these guys, they'll only charge you 27%APR or so. Still not as good as a bank.

Please. The entire existence of Las Vegas is predicated on people who didn't understand high school math.

Yeah APRs are silly to apply here. Go rent a $300 TV for a week and then return it a day late and pay a $20 fee. If you wanted, you could call that a 2,500% APR.

The first question to ask is: how much would be owed and a payday loan shop?

The second question to ask is: what is the percentage of non-payment. What is the expected return of LendUp per customer?

I don't know these answers... But asking is better than accusing

Payday loans and predatory loan interest rates are illegal in at least several EU countries, like Belgium for example (sorry, link in Dutch):

http://economie.fgov.be/nl/consument/consumentenkrediet/Kred...

Absolute max APR is 11.5%. Charge more, and the consumer can just walk away from your shark credit without paying any interest.

I wonder if there's been any scientific research on the effects (or the absence!) of such legislation. Anyone?

https://www.lendup.com/ Dragging the sliders around, the APR varies between 203% to 755%. Granted, these are risky loans offered to people with bad/no credit record.

It seems that rates "as low as 29%" (still higher than a credit card but lower than payday-type loans) are only offered to repeat customers with a demonstrated repayment history.

Exactly. Or a mere 29%! Would be interesting to know where the difference is coming from.

Guess the poor will be staying poor.

Short term loans have artificially high APR.

Banking software is outdated and lacks features, because there is tons of red tape involved. It also took the banks decades and probably hundreds of thousands of man hours to get the software to a level of acceptable security that most likely won't be present in a startup with a handful of employees.

As we've seen with Bitcoin, the next new shiny piece of software isn't necessarily better or more secure.

I just checked out: https://www.lendup.com/

Here was a sample loan: $250, 30 days. With the base interest (which I assume is without any lender checks) it is $43.30 with a 202% APR.

It replaces a credit score with another system that essentially does the same thing, which is to evaluate your risk to the lender.

It's clever, and might save some time (which has never really been a problem for me when I needed a loan and was poor), but is absolutely not any different than a payday loan place.

In fact, here is a random payday loan site I googled: https://www.flashpayday.com

The APR is in the same range, they just use a different mechanism to determine your credit worthiness, which really makes no difference to the person borrowing the money.

"Sasha says perhaps it’ll license its technology to other banks like it planned to pre-pivot."

You just got done telling me that banks are evil, so you are going to take your fantastic new technology to continue to enable this behavior? I don't think banks are inherently evil, but this logic just doesn't make a whole lot of sense to me.

"Sasha says he’d walk by it each day whispering under his breath, “you’re going out of business.”"

Really? It seems you are doing the same thing. Payday loans actually help the poor. The APR is huge (like on your site), because of the risk involved. There is really no way around this without the lender losing a large percentage of money invested.

It's either this, or not getting a loan at all...and when I was in a bad financial time in my life, it saved me until my next paycheck.

Reply on news.ycombinator.com