Chime Built This: Credit Builder (2024)

Credit isn’t a new concept — in fact, it’s existed to help people borrow from one another for thousands of years. Consumer loans were given as early as 3500 B.C. for agricultural purposes, but the credit world we know — modern consumer credit — came about in the early 1800s. It’s said that a group of English tailors gathered to compare notes on who wasn’t paying their debts, and modern credit reporting was born.

In the early 1900s, when cars were becoming more accessible, people still didn’t have the cash to buy them, so companies like GM started to lend buyers the money they needed to complete the transaction. This kicked off a trend of buying larger ticket items like furniture and appliances using credit — consumers could now afford to buy things they couldn’t pay for upfront with a little help from a line of credit.

Based on how often consumers would pay back their loans, how many outstanding payments someone had, and other data, the earliest credit scores were developed. However, because many individual retailers managed credit and it was hard to track down every loan a person might have, the system wasn’t as efficient — or as fair — as it could be. But when credit cards hit the market, everything changed. With the ability for consumers to buy with one central card, credit scores became more centralized — and therefore, more fair (or so we thought).

In 1989, the first traditional scoring models were introduced as a fair and unbiased way of evaluating the probability someone would pay back a loan. The models were based on payment history, amounts owed, credit mix, new credit, and credit history length. They were also based on the average, middle-class American who was middle-aged and well-established in the existing financial system. Because of their reliability, folks started using traditional scoring models as a predictor for many factors: auto insurance rates, housing applications, employment backgrounds, and more.

However, over time, the average financial situation began to change — but credit scores did not. The model of the average middle-class American, upon which traditional scoring was originally based, is no longer the same.

For example, many individuals don’t get credit cards at a young age. Without credit, these people will later struggle to get a home loan, buy a car, or get insurance. And for those who do get credit cards — and maybe don’t understand how they work — bad credit follows them like a rain cloud on a sunny day.

The reality of credit has vast impacts on peoples’ life decisions, especially Chime’s members, who represent the current average American — not the one upon whom traditional scoring models were built. For example, in most states, it costs more to get auto insurance if you have bad credit than if you have a driving under the influence (DUI) charge on your record.

“This situation puts so many people in a severely disadvantaged spot due to fees they pay, the discrimination they face, and the disadvantages they’re at when it comes to reaching their financial goals,” explains Taylor Lentz, a member of the Product team at Chime.

The rich history of credit — and the implications it has for the financial health of today’s consumers — is what got Taylor excited about helping Chime’s members build credit in a different way. And in 2018, when Chime’s research team surveyed members to understand what they wanted from Chime, help with credit emerged as a central theme. Not only would a credit product help Chime members build credit, but it would also help them fit into traditional credit modeling with a product catered to their habits and behaviors.

The team’s work started with understanding credit: its history, pitfalls, strengths, and where it could be improved. It involved figuring out how to design a new way to build credit that would put members’ goals and experiences first.

They uncovered that though many Americans don’t qualify for a regular credit card, they would often qualify for a secured credit card regardless of their credit score. This kind of credit card works when a consumer gives a small deposit to a bank to securitize a line of credit. Consumers can then charge money to the card and must pay off their balance at the end of each month. When they close their account, they get their original deposit back.

Though this model seemed promising, it made members essentially give money to a bank and pay to build credit. And even if they had the funds to pay a deposit, coming up with the money to then pay off the card could be difficult — many people would spend on the card to make up for the deposit they’d put down.

At the end of the month, people with secured credit cards would often make a minimum instead of full payment, leading to accruing interest and a lower credit score. “For someone with comfortable cash flow, a secured card is great,” Taylor explains. “But for Americans who don’t have a large cash buffer, it’s not okay — so we decided we’d reinvent the secured card.”

Instead of permanently holding the money provided when a member opens a card, like most secured cards do, we would instead let them use it to pay their balance every month. Members would get a credit limit equal to the amount they put aside for their card, and, at the end of the month, be given the option to pay off their balance with the money they already set aside — thus avoiding the pattern of using the credit card to make up for the deposit.

This allows Chime members to spend responsibly, within their means, using credit. “We don’t see credit cards as a tool for emergency cash flow, or to buy extra fun things with free money, we see them as a primary means to demonstrate trustworthy payment history and responsible behavior”, explains Taylor. There are other tools, like SpotMe, for getting a bit of cash in a pinch with their debit card. To Chime, maintaining good credit means using credit cards for normal spending and paying back in full each month.

When they came together to create the solution and implement it, the team started with assembling a diverse team before they got to work. “Building a diverse team with different credit backgrounds was essential to the success of this product,” Taylor says. “It empowered us to build so much more empathy into how we’re designing and talking about the product.”

The team of Chimers was made up of immigrants — people who had to start on a secured credit card when they arrived in the US to build credit — people who overspent in college, people who had experienced debt and bankruptcy, and people who had never had a credit card before. “We were building the product for our teammates and for our members.”

Launching Credit Builder sounds like it was easy, but the team came up against numerous challenges throughout the process. Their biggest challenge was helping members overcome the fear and anxiety that exists around credit. For many members, having a history of credit mistakes or a lack of information to make credit decisions has left them with a severe doubt of credit and hesitancy to build it. To address that, Taylor and the team needed to meet members where they are, building atop Chime’s values of being member-obsessed and human. Credit Builder’s design and interface would need to be encouraging, friendly, and easy to access for all members. “We knew that our members were coming to Credit Builder with a wide range of history and exposure to credit, and we wanted to create an environment that felt inclusive regardless of experience”. In an industry where people are typically judged by their credit score before they get a card, this was a new and exciting approach.

The team also needed to address what Credit Builder is and why it exists. What the team’s research has found is that comprehension builds trust, trust builds confidence, and confidence builds adoption — all wins for the team and members. So they were very clear in the product’s messaging how the product works, how to use it, how to build credit, and why to trust Chime to help them do so.

Before people signed up, Taylor and the team thought about what optimal use would look like. They knew that people who signed up would want to build credit, so they set out to understand what information would be helpful — like examples and guidance on what to do, how to build credit — and the best way to convey the nuances of the card.

The reality of credit is that many narratives exist and are passed down, and many Americans are afraid of credit because of how it’s disadvantaged them in the past. To change that story and achieve the credit building that Chime members are looking for, it was imperative that Chime explain that it does not report credit utilization (i.e. the percent of a credit line used) because of the charge card nature. Most importantly, members benefit when they make on-time payments, which is one of the most important factors in building credit. “Because our model is so drastically different from traditional credit, it was crucial that we make it crystal clear in our messaging,” says Taylor.

The results of this messaging — and members’ understanding of how the card works — ultimately contribute to member empowerment. “Our early product tried to message a lot of magic — we’d say things like, ’Build credit, don’t worry about the details,’” explains Taylor. “But by bringing comprehension around what’s actually happening to the forefront and sharing the nitty-gritty, our members find real power in owning their credit story.”

When Credit Builder originally launched its waitlist in the summer of 2020, over 600 thousand people joined, and today, millions of members have signed up. “We considered our launch to be a huge success and are so excited about what it means for the future of credit for our members,” Taylor says. “At the beginning, we couldn’t make cards fast enough for members who wanted them,” she explains. Now, Credit Builder is available to all Chime members. “We’re continuing to learn and iterate as more and more members sign up, and we can’t wait to see what this new credit experience means — not just for our members, but the industry as a whole.”