They’re spending money on avocado toast and lattes. Yet they hate diamonds. But forget the memes. Between the absurd cost of college — and even more ludicrous housing costs in top job markets — the financial challenges young adults face are anything but humorous.
That can make the idea of building a strong credit history a grim punchline.
This is where Deserve steps in. Rather than using traditional metrics — like FICO scores — that look backward, the Silicon Valley startup uses machine learning to look forward.
“For somebody who is new to credit, that history doesn’t exist,” said Ajay Gopal, chief data scientist at Deserve, in a conversation with AI Podcast host Noah Kravitz. “You get offers of credit that are egregious in terms of their interest rates, or they ask you for a deposit.”
Instead, Deserve uses machine learning to evaluate credit card applications to assess applicants’ future earning potential. For students, Deserve’s algorithms looked at variables such as degree programs, GPA, school choices, jobs held during college, and more.
Credit Where Credit’s Due
The financial startup uses machine learning to extend credit cards to those who either have no credit score or need to rebuild their credit. The fintech company launched its flagship product in 2016 — a credit card catered entirely to college students.
“A natural extension of being a student is being employed, and we’re able to use a lot of employment data as well in order to make models for subjective cases,” Gopal said.
Besides building up good credit, Deserve helps its customers learn financial responsibility.
“We take financial education as our first prerogative,” said Gopal. “We want to bring on people, train them, give them the right behavioral nudges, so that they become good citizens of our financial system.”
Deserve has now expanded its product line to three credit cards, with the hope of helping not only students but also new grads and migrant workers build up their credit scores.
“Our learnings from being able to tune educational parameters defined people who can responsibly be citizens of the credit economy,” Gopal said. “Those learnings have been translated, [and] we now have products for all students and we actually have products for all people.”
Looks like the college students Deserve originally catered to weren’t the only ones getting smarter.
Feature image credit: 401kcalculator.org