While the concept of one’s financial reputation has existed for millenia, credit reporting organizations only started popping up in the 19th century. For over 100 years, credit reports would explicitly include information about one’s personality, health, race, and religion - to name just a few. All things that had no bearing on whether a person should be approved or denied for a loan.
In 1974, the Fair Credit Reporting Act legally barred lenders from using gender, marital status, race, nationality, religion, age, or receipt of public assistance as reasons for denying someone credit. The Fair Credit Reporting Act was a big part of why the credit scoring model was universally adopted.
The credit scoring system and the Fair Credit Reporting Act were, in theory, designed to be fact-based and neutral ways of determining someone’s financial responsibility. But it’s not difficult to see that this system isn’t working for millions of students, young adults, and Americans trying to make ends meet.
Young adults are getting the short end of the stick
When it comes to building credit as a young adult, credit cards are often the most logical and straightforward way of getting started. Pretty much everyone knows someone who uses a credit card, and credit cards are a seemingly easy way to build credit with your normal spending. But it’s not that simple.
When you want to open most credit cards, you need to have your credit checked. But most credit card companies won’t give someone a credit card if they don’t have credit history. So where is a young adult with no credit supposed to start? Money is a taboo subject and isn’t usually taught in schools, so a lot of young adults end up completely on their own.
If you somehow manage to get a credit card with no credit score, you’ll usually come face to face with confusing terms and conditions. You might end up on the hook for fees that you didn’t even know existed. If you make even one mistake, you can end up paying an interest rate above 20% that keeps you in debt for months - or even years.
The process might work for someone with a steady income and an intimate knowledge of personal finance, but it doesn’t work for your average young adult who’s just trying to build a foundation for their financial future. It’s why Fizz is so important. Not only do we help young adult build credit without fees and interest rates, we also aim to educate so that no one is left in the dark when it comes to their personal finances.
Inequality in the system
The current credit building system excludes many young adults because of how hard it can be to get started. But there are deeper rooted systemic inequities based on race and socioeconomic background (among others) that show the system to be downright predatory - and illuminate the pressing need for financial products like Fizz.
Building credit and being financially responsible isn’t easy, but it’s even harder if you come from an underprivileged background. Having a parent or mentor who can help you learn about your finances or one who can help you get your first credit card are huge advantages. Without these advantages, you’re more likely to miss out on building credit altogether. And if you do get a credit card, it’s far easier to make mistakes it if you haven’t had the opportunity to build up a solid base of financial knowledge.
It’s also worth noting that messing up (or forgoing building) your credit early in life has long lasting effects. Coming from an underprivileged background means you have fewer options if you messed up early. It doesn’t matter if you have a paycheck and are financially responsible now - a damaged credit score from years ago can still make your life more difficult and more expensive. It’s this dynamic that holds people down financially.
The system is broken, and we know it. So what can we do to fix it?
Fizz is the solution
At Fizz, we’re standing up to this outdated and unfair model used to determine financial worthiness. While we can’t quite abolish the system of credit scores altogether, what we can do is make it easier for people to succeed and thrive, no matter their socioeconomic background, access to resources, or financial education growing up.
First and foremost, Fizz helps people build their credit. Whether you’ve already gotten started or are completely new to the issue of personal finance, you can grow with Fizz. We don’t check your credit because we don’t think should need credit to start building it. And we don’t charge fees or interest, because you deserve to spend money on things you care about.
Just as importantly, we’re going above and beyond to make sure young adults have answers to the financial questions that lots of people are too afraid to ask. We want you to be able to learn about managing your personal finances safely and responsibly, and we want everyone to be prepared for the future - no matter what structural barriers you might be up against.