In the United States, generally, if you don’t have a healthy credit history, you can forget to have access to financial services or get a credit card and the opportunity to spread out payments on purchases.
However, fintechs are trying to build a fairer system that is more inclusive of all groups. Here’s how TomoCredit with its Tomo Credit Card is making inclusion a priority in the credit system.
The “Tomo Credit Card”
Issued by Mastercard, The Tomo Credit Card is a card for those with no credit or poor credit who want to establish a credit history without carrying a monthly balance. Unlike other credit card issuers that target a similar audience, there's no security deposit or APR (Annual Percentage Rate).
Moreover, TomoCredit never runs a credit check. Instead, the company's proprietary technology can weigh many data points, a key few being your income (or income potential) and your account balances.
A credit card for everyone
Instead of relying on credit scores, the fintech uses an algorithmic approach to determine whether someone should be approved. More specifically, card users applications are reviewed by the firm on a case by case basis. If an application is rejected, the consumer’s credit score is not negatively impacted but they cannot apply again.
The company calculates its own score, called the “Tomo Score” and based on banking and other financial metrics, to assign a credit limit. After that, New York-based Community Federal Savings Bank, the bank that issues the card, uses this data to determine whether you’re a good candidate for the card.
A solid option for newcomers
People without an Individual Taxpayer Identification Number or Social Security Number can even apply for the credit card, opening up lines of credit to those who have just stepped onto American soil. Among credit cards, especially in the US, that feature is still a rarity. That's why newcomers to the United States who want to build credit found Tomo Credit a perfect tool.
Plus, because users are not allowed to carry a balance on the card from one month to the next, no interest is charged. This makes it a useful solution for beginners getting used to having a credit card and managing and building credit.
A "participation fee" and additional hidden perks
The Tomo Credit Card doesn't charge an “annual fee”, but it does charge a monthly one. Users pay $2.99 per month ($35.88 annually) to hold the card. Those fees were added in 2023. When the card was launched, it was for free. However, among cards for poor credit, that's not an outrageous cost, especially given TomoCredit's unique underwriting formula and the card's potentially generous credit limit.
Being part of the Mastercard network means the Tomo Credit Card has some extra perks. Benefits offered by Mastercard include: DoorDash discounts; Lyft credits; ShopRunner membership; mobile phone insurance and more. Anywhere in the world.
What could be improved
This year Tomo Credit removed the 1% cash back. And with many credit cards paying cash back these days, it would be nice a step back from fintech. The other major area of improvement is the membership fee. Despite the amount of money for cardmembers is low, it could be a tough pill to swallow, especially since the Tomo Credit Card is marketed to those with no credit or who want to build their credit and with some alternatives don’t charge monthly or annual fees. Overall, Tomo Credit Card is still a solid option for those who have struggled to gain approval for credit cards in the past.
How does TomoCredit work?
TomoCredit could help these consumers to better position themselves as qualified candidates for mortgages, auto loans etc. Applicants allow TomoCredit to securely access their bank accounts to read financial data for underwriting purposes. Once approved, applicants receive a TomoCredit Mastercard: a no-fee credit card with 0% APR.
So far, TomoCredit has pre-approved more than 300k customers and expects to issue a total of 500k cards by the end of 2021. The no credit-pull method with no fees allows TomoCredit to provide credit to everyone, even the ones who do not have FICO scores.
What technology does TomoCredit use?
Finicity, a Mastercard company, provides TomoCredit with a secure data network and open banking technology: the wide range of data takes richer insights and better decisioning on the underbanked.
After the Serie A funding round, TomoCredit will enhance features like weekly AutoPay and High Credit Limits to boost credit scores faster.
