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Perch Credit app helps minorities and the underserved build their credit

Michael Broughton, Perch Credit CEO joins the Yahoo Finance Live panel to discuss how Perch Credit is working to help young adults in the minority community build credit.

Video Transcript

ZACK GUZMAN: Welcome back to Yahoo Finance Live. One of the issues we've been talking about in the wealth inequality front and, really, kind of different systems of capitalism working for different Americans is the idea of credit and the problems that a lot of Americans run into in establishing and boosting their own credit scores. According to a new report from Credit Sesame, about 54% of Black Americans report having no credit or poor credit. And that number is about 41% for Hispanic Americans as well.

But one startup's trying to help out with that. Perch Credit is working with credit unions to help automate and boost credit scores here, tied back to things that people normally play, like a Netflix subscription or even just rent. It's a very interesting idea. So I'm happy to welcome on here the CEO of Perch Credit. Michael Broughton joins us now.

And Michael, it seems to me a very important goal you guys are working towards here, because this is something where we know how disadvantaged some people are when it comes to credit. So talk to me about how you're actually doing this. How are you making it easy for people to say, hey, I'm paying my Netflix, so I actually can be trusted here.

MICHAEL BROUGHTON: Yeah, definitely, and thank you for having me. What we've built at Perch is a simple mobile app that takes your common recurring expenses, just like you said, are your rent, your Netflix, your Hulu, your Spotify, and we turn them credit worthy. We're working with the bureaus to take these common data points and turn them into credit building pipelines for people who may not have access or just need to build their credit score over time. It's super simple, super easy. And of course, it's free to use for anybody.

AKIKO FUJITA: And Michael, your back story is an interesting one. As somebody who spent so many years abroad, you know, you say that, look, when you went to USC, you realized you didn't have credit that had been built up because you were never exposed to a credit card for years living abroad. When you think about the solution that Perch is offering right now, how far does it spread? In other words, how inclusive can it be, when you consider how many Americans just don't have credit built up right now?

MICHAEL BROUGHTON: Yeah, no, great question. So when it comes to Perch, we realize that accessibility is one of our strongest features and attributes. Anyone, from an international student to a low income individual, to someone just now entering the US, can all use the platform to start building credit. We focus on cash flow underwriting, so using basic things like if you're paying your Netflix, if you're paying your rent, as determinants for whether or not you can actually use the app.

So as long as you have those rent payments, those Netflix payments, the app can actually help you start building credit no matter where you're beginning. So someone with a pre-existing score, someone without a score both can use the product for free.

ZACK GUZMAN: Yeah, and credit scores are kind of-- I don't know. I don't know how much people out there know. I mean, I was kind of just recently woken up to the fact that, you know, establishing credit often begins with teens kind of joining their parents' credit card, maybe getting onto that. For people who have good credit scores, if your parents have good credit scores, that's great because it kind of carries over. But if they don't, it's not great. And you can actually get dinged, so it's kind of this passing on inequality that continues in the country.

So I mean, when you look at it, how important is it to kind of get the message out there? I know it's free. But where does this go in trying to attract what are the partnerships out there to bring people on board, and what are you seeing in the early days?

MICHAEL BROUGHTON: Yeah, no, you have a great point there. It's like if you never had access at step one, how do you even get there? It's a big chicken and egg, and it's actually why our logo is a bird. It's like, there's no real solution to starting to building your credit. So what we really focus on when you're focusing down on, like, how do we get the awareness out, it really comes down to just pushing out the platform.

It's free. It's on the App Store. And we've been working with a lot of awesome partners to create financial literacy content, working with nonprofits to reach those communities in need. We're working with universities as well to start talking with college students. I work with a local credit union that I'm on the board of. And we're just pushing out the agenda on this is the new way to start building credit.

YC's been great in helping us actually get our initiative out there. I know you guys just talked with Michael. He's a great guy. He's also helped us not only land investment, but also push our product forward. There's been a bunch of people in our corner. And our goal actually is to help 100,000 people this year. So we're definitely on our way and pushing forward.

AKIKO FUJITA: I'd love to get your reaction to that conversation we had with Michael, though, because he was talking about sort of the importance of having the investors also be much more inclusive, but also the importance of investing in Black founders, who have a different story to tell. And you've got some backing not just from YC, but also from Jay-Z's Marcy Venture Partners. I mean, clearly, you have been able to sort of build out that investment base. How challenging was it for you to get to that point?

MICHAEL BROUGHTON: Yeah, definitely not easy. I came from a background where I was never even exposed to venture capital or working with investors. And it wasn't until YC and meeting Michael that I really started learning how to get engaged, how to start talking to VCs and start raising capital. I got told no over 100 times before we got our first check.

And once I got that first check, it led to the second, which led to the third, which led to us, you know, just really capitalizing on all the opportunity and raising an awesome round so that we can help push this app out for millions of people down the line. So I completely agree with Michael's statement. investors being just in line and just knowing the importance of investing in Black founders really makes a big difference for accessibility across the board for everybody, so.

ZACK GUZMAN: Yeah, and a lot of people out there who may have been born into good credit families may never even know that this is an issue. And that's another one where we're talking about kind of solutions to problems out there that aren't talked about enough, which is why I love this story and which is why it's incredible. You're 21 years old. Do I have that right? This is something that's come from that?

MICHAEL BROUGHTON: Yeah, I just turned--


MICHAEL BROUGHTON: --22 last year.

ZACK GUZMAN: OK, he's 22 now, so I don't want to cheat you out of your year. But the last thing, just because it is important, what have you seen in maybe the boost in credit scores from, as people use the platform. Just lastly, before we let you go, what kind of benefits have come from it?

MICHAEL BROUGHTON: Yeah, the impact has honestly been amazing. People without a credit score normally see their score land around a 670 to a 690, which can help you get that first credit card, first loan, and start stabilizing your score. People with the pre-existing scores see an impact of about 60 to 160 points. It really depends on your credit report. We have so many testimonials of people just having life changing events just by reporting their rent payments, reporting their Netflix payments, you know, just using the app for their own benefit. So yeah, it's been great.

AKIKO FUJITA: Michael Broughton, Perch Credit CEO, it's good to talk to you. Really great to hear your story. Appreciate your time today.