StellarFi announced Wednesday that it’s partnering with the National Foundation for Credit Counseling (NFCC). The NFCC is a nonprofit organization that specializes in counseling consumers about all aspects of credit. The new partnership gives StellarFi users access to the NFCC’s certified credit counselors to help them learn more about credit and improve their financial literacy.
“We are passionate about helping people overcome financial impediments through financially responsible behavior education,” Bruce McClary, NFCC senior vice president of communications, said in the press release. “We are excited to partner with StellarFi to reach more Americans who might be in financial distress, assist them to solve those problems, and ensure they can live their best lives.”
The new partnership is the next step in StellarFi’s goal to make credit and financial literacy more easily accessible to the wider public. At launch, users will be able to follow a link within the StellarFi app to schedule an appointment with an NFCC counselor. However, according to Stellar, everything will be handled within the app sometime in 2023.
“We do feel that human touch is still critically important in getting folks up to speed in terms of paying bills on time, understanding how to budget and so forth,” Lamine Zarrad, Stellar CEO and founder, told ZDNet. “You can’t solve it with an app, you have to have a human who provides context-based, nuanced advice. And this is why we decided to partner with the NFCC and we will continue to expand our partnerships with organizations that have a mission that’s aligned with ours: to further access to credit, to improve people’s financial lives.”
What is StellarFi?
StellarFi, the company’s application, which is currently in Beta, is a tool that will pay consumer’s bills for them and report the positive payment activity to all three major credit bureaus (Equifax, TransUnion, and Experian). By doing so, the company will help consumers build their credit simply by making on-time payments and eliminating the chance to miss one.
StellarFi requires no credit check to sign up. Instead, users need to sign up using their Social Security number and a valid bank account.
StellarFi will analyze a user’s bill payments, create an account, and then remit a payment on the behalf of the consumer. Once the payment is made, Stellar will deduct the amount from the consumer’s linked bank account. Stellar verifies the balance beforehand, so as long as the funds are in there, consumers won’t miss any of their bill payments.
StellarFi requires a monthly subscription, and has three membership tiers that offer varying degrees of functionality. There’s the basic level, which costs $4.99, the mid tier, which costs $9.99, and the highest tier, priced at $19.99 monthly. The $9.99 tier offers consumers the ability to add an unlimited number of bill payments to be covered.
According to the company, there are no additional fees outside of the monthly subscription payment. The company’s website currently offers consumers a free trial of the service, and an opportunity to sign up for the waitlist. StellarFi is currently set to release later this June.
Because the company is paying the bills in the consumer’s name and then pulling the funds after the fact from the consumer’s banking account, the company is assuming risk. StellarFi is then able to report the payment to the credit bureaus as a positive payment, which builds the consumer’s credit.
According to Zarrad, the difficulty of accessing credit products and capital for consumers is one of the flaws in the financial system that the company is trying to solve. “You have to have an excellent credit history. You have to have a certain profile that makes you attractive to a lender that de-risks you, and as a result it’s really inefficient,” he said.
By offering consumers a way to build credit for making payments they’re already making, Stellar looks to disrupt the poverty cycle that some consumers living paycheck to paycheck find themselves in. And not only can consumers have stellar pay their utility bills, but also their rent payments, whether it’s to a private individual or a property management company. Stellar will even pay the subscription cost of any service a user is subscribed to, such as Netflix, and then report that payment to the credit bureaus to help build the consumer’s credit.
Ending the cycle
Stellar plans to help build up their clients profile so that they can get more favorable terms for financial products as well as faster access to capital when they need it.
“It’s not that we’re rethinking how to underwrite someone, rethinking how credit scores work, we’re not naïve enough to think we’re smarter than the industry or that we have access to some magical set of attributes that no one else does ,” Zarrad said.
“It’s just that, no one is providing a conditioning experience for users. We have personal trainers for fitness, nutritionists, and dietitians. There are industries around helping people get better at things when it comes to financial health, but when it comes to health , the best thing out there is a budgeting app,” he said.
By automating necessary payments for clients, thereby eliminating the risk of missing a payment, which leads to a negative impact on their credit score, Stellar hopes to lift people from the cycle of living paycheck to paycheck that many consumers are facing.
“That’s essentially what we wanted to do. Have an automated way to get you onboard, to plug into your financial life and understand what’s happening in your bank account and [see] what kind of bills you’re paying, and then actually do something meaningful for you. Not tell you what you should do, but rather pay your bills. Give you access to capital. And if we could pay your bills, we could potentially break your cycle of living paycheck to paycheck and the cycle of poverty for some folks,” Zarrad said.
At launch, StellarFi will include the bill-pay tool, but the company plans to expand on the app’s functionality later on. A credit marketplace where consumers can access offers below market rates is also in the works.
Additionally, sometime after StellarFi launches, the company plans to assume even more risk on behalf of its clients. Stellar has plans to allow certain clients to delay the withdrawal of their funds from their bank account for 45 to 60 days if they aren’t able to immediately cover the bill payment.
The company is also looking to further support financial literacy. Stellar plans to gamify financial literacy resources to entice users. That means users can play financial literacy-themed games and earn badges or rewards that can then be applied to their bill payments to lower the cost. Stellar is also looking into working with schools K-12 and colleges to support the financial literacy of students and younger generations.
StellarFi is expected to launch later this month, but interested consumers can sign up for the waitlist now on StellarFi’s website.