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UniRush LLC is adding options to its RushCard and Baby Phat cards. Cardholders now can build credit histories based on their ability to show they can pay bills on time using their cards, and they will receive account-activity text alerts on their mobile phones, the New York-based prepaid card provider announced last week.
UniRush decided to add the services because of cardholder demand, Ram Palaniappan, general manager for Cincinnati-based UniRush Financial Services, tells Prepaid Trends. "Almost everything we do is driven by what our cardholders are asking for," he says.
Pay Rent Build Credit Inc., an alternative credit-scoring company based in Annapolis, Md., will compile payment histories for cardholders who choose to use the credit-reporting service, Palaniappan says. The opt-in service is free, he says.
UniRush will report to Pay Rent Build Credit such payments as utility bills, rent, and cable and phone service from participating cardholders, says Corey Stone, Pay Rent Build Credit CEO. "Those are all things where you can establish a history of making regular, recurring payments," he says.
Lenders would factor in cardholders' bill-payment histories into credit decisions in about six months, Stone says. For mortgages, lenders want to see a year's worth of payments, he says.
Though Pay Rent Build Credit's efforts are still in the early stages, early results suggest bill payments can be a good predictor of creditworthiness, says Arjan Schütte, associate director of the Chicago-based Center for Financial Services Innovation, a nonprofit research arm of the Chicago-based ShoreBank Corp. The center has invested in Pay Rent Build Credit.
Pay Rent Build Credit has been working with auto lenders that have made loans based on its credit scores, Schütte says. The loans have performed well, though he declined to provide detailed numbers.
The number of loans is small, and the loans are confined to regional lenders. But the low default rates of the portfolio have shown that the data Pay Rent Build Credit gathers is relevant, Schütte says.
Consumers today face a system in which they can be penalized for falling behind on regular bill payments, but they traditionally have received no credit for keeping up with them, Stone notes. "If you don't pay these kinds of bills and they go to collections, they do show up in TransUnion, Equifax and Experian" credit reports, Stone says. "Paying bills up until [Pay Rent Build Credit's service] has not helped people build good credit; it just kept them from bad credit."
Pay Rent Build Credit has five prepaid card providers that use its services, including AccountNow Inc., Ready Credit Corp., and Futura Card Services, a division of Stored Value Cards Inc., and another which has not yet been announced, Stone says. The company's services are especially helpful for payroll card programs in which consumers have the bulk of their pay deposited to the card account and they use the card to pay bills, he says.
Getting bill-payment data from multiple prepaid card companies will make Pay Rent Build Credit's credit scores more valuable on a national level and make general purpose reloadable prepaid card accounts more like checking accounts, Schütte says.
Next month, Pay Rent Build Credit plans to begin testing its service with an association of check cashers in Illinois that Stone declined to name. During the test, consumers who make utility payments at a participating check-casher location would build a credit file with Pay Rent Build Credit, Stone says.
Besides helping build their credit scores, UniRush is enabling cardholders the option to receive automatic account-balance and transaction text alerts at no extra charge, Palaniappan says. "This gives them another way to keep track of much money they have and keep track of transactions," he says.
Consumers also can choose a feature that enables them to send text messages to UniRush to get such account information as balances and transaction histories, Palaniappan says.
Manufacturers and Traders Trust Co., which is based in Buffalo, N.Y., issues the reloadable, Visa-branded RushCard and Baby Phat Cards. Columbus, Ga.-based Total System Services Inc. processes the card transactions. Consumers pay a $19.95 activation fee to get the card and $1 per bill payment.
Cardholders can reload their cards at more than 28,000 MoneyGram and at more than 10,000 CheckFree locations nationwide. While RushCard does not charge a fee to reload the card, CheckFreePay and MoneyGram charge $3.95 for reloading the card at a participating retail location.
The majority of the funds loaded onto the cards come from direct deposits of payroll and government benefits, Palaniappan says.
"Most of our cardholders put all their money on the card and get all of their income on the card as well," he says.
UniRush encourages consumers to set up direct deposit through a weekly sweepstakes in which cardholders who choose direct deposit can win up to $14,000, Palaniappan says.
UniRush has 1.5 million cards outstanding, spread over most of the country, he says. Consumers can sign up for the card by visiting the company's Web site or by calling the company. The largest source of new card members is word-of-mouth referrals, Palaniappan says.
"When a card member refers friends, the cardholder gets a monetary credit for doing that," he says. Cardholders earn $5 for each referral who becomes a RushCard holder.
