Establishing credit is hard when getting credit is challenging.
Loans and credit cards are available to low-income persons, but they have hefty interest rates. One Austin business helps individuals develop credit without debt. StellarFi has secured a $15 million Series A investment round to help them achieve that aim.
After selling the banking software Joust to ZenBusiness in 2020, Lamine Zarrad founded StellarFi in 2021. Zarrad wanted to assist immigrants in getting credit after his troubles.
He founded StellarFi on the idea that paying rent and bills on time could boost credit ratings. It charges $4.99 or $9.99 to manage bills and regular payments, including rent, subscriptions, and utilities for members. It helps members pay on time and consolidates payments. StellarFi reports on-time payments to Experian, Equifax, TransUnion, and Innovis.
The firm doesn’t demand credit checks, deposits, or interest. It says first-month members gain 26 points. Signup credit scores average 580.
StellarFi, a public benefit company, helps “financially challenged” communities develop credit. With its additional cash, the startup will develop a marketplace to connect members to lenders.
Zarrad said the company’s growth surpassed expectations since its launch in late June. StellarFi ended the year with nearly $2 million in ARR, double its projection.
“In 134 days, we surpassed $1 million in ARR,” he told TechCrunch. “I’ve developed unicorns before, but never this type of growth.”
Zarrad called StellarFi’s recent financing an “up round” but did not disclose its valuation. The business has raised $22.2 million. Repeat investor Acrew Capital led its Series A, which included Trust Ventures, ATX Venture Partners, Dream Ventures, Interplay, Accomplice Ventures, Vera Equity, FJ Labs, Fiat Ventures, Gaingels, Kelmhurst, Oyster Funds, Hilltop Ventures, Permit Ventures, Kindergarten Ventures, J2 Capital, Socially Financed, and Kapital Ventures.
Zarrad stated every seed investor participated in this round. We added more. Everyone’s pumped.”
Once Signature Bank closed earlier this month, StellarFi’s $5 million venture loan arrangement for runway expansion fell through. It plans to borrow more.
In September, Experian unveiled Boost, a tool that enables renters “earn credit” for paying on time. Zarrad says Experian Boost lets customers link their bank accounts via Finicity, automatically recognizes regular expenditures like utilities and rent, and puts that data into their internal model to display alternate payment practices. In addition, Zarrad notes that TransUnion, Equifax, and Innovis cannot access Experian’s model.
“More crucially, lenders don’t utilize it in credit decisions,” he said. StellarFi acts as a bill-pay manager to help users make on-time payments and sends payments to all four credit bureaus to affect all credit score models.
StellarFi does not provide bank account payment history like Boost. Zarrad told TechCrunch that StellarFi covers the bills, and subscribers repay. Hence, we may establish a credit connection that we disclose to all consumer reporting bureaus utilized by lenders. Our members are insured regardless of whose credit report their lenders to pull.”
Zarrad said the firm is growing quicker this year thanks to affiliate partners and SEO.
“We’ve struck partnerships with neobanks and other fintechs are giving us customers,” he added. “We’re onboarding lenders and financial institutions.”
Zarrad said StellarFi has invested much in affiliate marketing because he feels it builds trust and converts better than “getting online and purchasing individuals on social media.”
The corporation is adding functionality to its mobile app.
“We want to dominate the mobile experience,” he stated. After that, members can receive higher credit and capital. We want partners to help them acquire that money.”
Zarrad revealed that StellarFi has had “zero defaults” but lots of fraud. “But we’ve constructed advanced algorithms to catch it upfront and quarantine attempted fraudsters.”
Acrew Capital invested in StellarFi at the seed stage because it “held significant conviction” in Zarrad and his team’s capacity “to expand another fintech startup, considering their experience establishing Joust,” according to John Gardner.
Stellar meets consumers where they are—internet bills. Its form factor is easy to grasp and link, enabling customers to notice immediate and permanent credit score gains. In addition, he stated via email that Stellar reports to a wider range of FICO models, so the score benefit applies to larger loans like cars or mortgages.
“During the Series A, Stellar’s crew demonstrated obsessive dedication. They enhanced members’ credit ratings in 30 days, expanded to over $1mm in ARR within a few months of launch, and created innovative distribution agreements to reach the relevant consumers effectively.
These growth features excite consumer fintech, especially when there is a clear path to profitability.”
