StellarFi lands $15 million to help people build credit by paying bills and renting on time

Building credit is hard when it’s even hard to get credit.

And while it’s not impossible to get loans or credit cards, they’re usually offered at high interest rates to people who can least afford them.

An Austin-based startup is here to help people build — or get — credit without going into debt. And this startup, StellarFijust closed a $15 million Series A funding round to help it achieve that goal.

Lamine Zarrad started StellarFi in 2021 after selling another fintech company he started, banking app Joust, to ZenBusiness in 2020. Having faced his own struggles obtaining credit as an immigrant, Zarrad was looking for a way to help others access credit.

He started StellarFi on the premise that people should be able to see the benefits in their credit scores just by doing everyday things like paying rent and bills on time. It does this by charging a subscription — either $4.99 or $9.99 — to handle member bills and recurring payments like rent, subscriptions, and utilities. Its goal is not just to help consolidate payments, but to ensure that members pay on time. StellarFi then reports these on-time payments directly to the four major credit bureaus – Experian, Equifax, TransUnion and Innovis.

The company does not require a credit check or deposit and does not charge any interest. He claims that members see an average increase of 26 points in the first month. The average credit score of users when signing up is 580.

As a charitable enterprise, StellarFi’s mission is to help “financially disadvantaged” communities by helping them build good credit. With its new capital, the company intends to build a marketplace to then connect members to lenders.

Since launching its offering in late June, the company’s growth has exceeded expectations, according to Zarrad. StellarFi ended the year with over $2 million in annual recurring revenue (ARR), roughly double what it expected.

“In 134 days, we had reached $1 million in ARR,” he told TechCrunch. “I’ve built a unicorn before, but I’ve never seen this kind of growth.”

Although Zarrad did not disclose the company’s new valuation after its latest increase, he did share that it was a significant “increase”. In total, StellarFi raised $22.2 million in funding. Repeat backer Acrew Capital led its Series A, which included participation from 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.

“Every seed investor has been in this round,” Zarrad said. “And we added new ones. Everyone is energized. »

StellarFi was to take out $5 million in venture capital debt from Signature Bank for the runway extension – a deal that fell through once that institution was forced to shut down earlier this month. He plans to always guarantee the debt of another institution.

Last September, Experian – perhaps in response to the growing number of fintechs tackling this problem – launched a new product called Experian Boost which, in its own words, allows people to “get credit” for paid their rent on time. According to Zarrad, Experian Boost allows users to link their bank accounts through Finicity, then automatically identifies certain recurring bills like utilities and rent and pulls that data into their internal model designed to present alternative payment behaviors. This model resides solely with Experian, Zarrad points out, because TransUnion, Equifax or Innovis do not have access to it.

“Most importantly, it is not used by lenders in credit decisions,” he added. In contrast, as mentioned above, StellarFi works as a bill payment manager to help members keep making payments on time and reports payments to all four credit bureaus, to impact all models. credit score.

“Unlike Boost, StellarFi does not report payment history from linked bank accounts. Instead, StellarFi pays bills and then members reimburse us,” Zarrad told TechCrunch. able to create a credit relationship that we report to all bureaus that generate consumer reports used by lenders, meaning our members are covered regardless of the credit report of their lenders.

The company added affiliate partners and is investing in SEO and is growing even faster this year, according to Zarrad.

“We have signed contracts with neobanks and other fintechs send their clients to us,” he said. “We are still integrating lenders and financial institutions.”

StellarFi has put a lot of eggs in the basket for affiliates, Zarrad said, because he believes it builds trust and conversions “are much higher” compared to “going online and buying people on social networks.” social”.

The company intends to develop more features and is still developing its mobile app.

“Our next goal is to completely conquer the mobile experience,” he said. “Once this is done, members can not only get better credit, but also access capital. We want to help them get that money through partners.

Surprisingly so far, Zarrad said StellarFi has had “zero defects” but has seen tons of fraud. “But we’ve built sophisticated algorithms to catch it ahead of time and quarantine fraud attempts.”

Acrew Capital’s John Gardner said his firm first invested in StellarFi at the seed stage because it “had a strong belief” in Zarrad and his team’s ability “to scale another fintech company. , given their success in building Joust”.

“Stellar’s approach is exciting because it caters to consumers where they are – internet bills. We believe this form factor is much easier for users to understand and relate to, helping them see rapid and persistent increases in their credit score in a relatively short period of time. Stellar also reports on a broader set of FICO models, meaning the score advantage applies to larger loans, like auto or mortgage,” he wrote via email. mail. “When it came time for Series A, it became apparent that the Stellar team could execute their plans with manic focus. They evidently improved credit scores within 30 days for members, increased to over $1 million in ARR within months of launch and set up unique distribution partnerships to effectively reach the right audiences.For consumer fintech, we’re really excited about these growth characteristics, especially when there’s a clear line of sight to profitability.

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