Are you tired of teaser offers that don’t last, sky-high rates and credit card balances that continue to grow thanks to compound interest? If so, it’s time to take a closer look at Affirm.
RewardExpert spoke with Elizabeth Dixon Allin, Vice President of Communications, about the inspiration behind the innovative micro-lender and how any consumer can take advantage of the company’s alternative to traditional credit card purchases.
Making Credit Fair and Transparent
Allin said that Affirm was founded in 2012 by Max Levchin, a computer scientist who was also a co-founder of PayPal.
“There were a couple of things that really nagged at him about the financial services industry,” Allin noted. These things included credit underwriting, credit scoring and the need for ways to help people build their credit. “He decided to look at how he could make credit fairer and more transparent for consumers,” she continued.
Today, Affirm’s mission is to create honest financial products that improve lives.
“If you have a thin credit file or you’re rebuilding your credit score, it’s really hard to get access to credit,” Allin explained. “But if you don’t have a way to pay for purchases over time, you may have to rely on cash you don’t have or go without items that you urgently need. Affirm was founded to provide an alternative—a way to spread out payments over several months without fees or compound interest.”
Precision Underwriting to Help More Consumers
Allin said that anyone can benefit from using Affirm at one of the company’s more than 2,000 retail partners. “The product is so flexible, it works for anyone,” she continued. “On average, we probably have more female users than male users, but we see strong usage across all age ranges.”
While Allin noted that Affirm’s average user has a near-prime FICO score, she said the company serves consumers with FICO scores that are lower than those served by traditional credit issuers.
“There is not a hard credit score floor at Affirm,” Allin said. “We’ve built really unique underwriting algorithms that don’t just look at your credit score. They look at your entire credit history and repayment history as well as the item you’re buying and the merchant at which you’re making the purchase. This allows us to be a lot more precise with our underwriting.”
How does this precision help the average consumer? “If you need to buy a thousand-dollar mattress but you’re an immigrant or a young person with a thin credit file, or someone who had a bankruptcy eight years ago and are rebuilding your credit, you might not get approved for a credit card. But at Affirm, we can look at your individual history and see that the likelihood that you’re going to pay off that mattress is really high. You’re not a bad credit risk but a great candidate for an installment product.”
Allin noted that Affirm’s algorithms also evaluate the affordability of the purchase given your individual circumstances. “We’re not just handing out money,” she said. “We want to make sure that we’re unlocking the potential for people to use credit they didn’t know they had access to but we don’t want to approve purchases they can’t responsibly afford.”
Easy-to-Use and Convenient Terms
If you’d like to utilize Affirm’s alternative to traditional credit the next time you make a purchase, there are two ways you can do so: at point of sale or through the Affirm app.
“Most people use Affirm at point of sale,” Allin explained. “If you’re on a partner merchant’s website and looking at an item, you’ll see messaging near the price about what your monthly payment could be if you use Affirm. You can then click on that link to learn more about the terms.”
Affirm shows users exactly what they’ll pay each month. There are no hidden fees or nasty surprises, either. “Our interest rates can range from zero to 30 percent,” Allin said. “Over one-third of our loans are made at zero percent though.” Payments can be spread over three, six or 12 months.
“We ask you for five pieces of information,” Allin said. “Your name, phone number, date of birth, zip code and the last four digits of your social. That’s all we need to verify your identity and determine whether or not we can approve your purchase.”
If approved, Affirm will pay the merchant you’re buying from and the merchant will ship the item/items purchased to you. “We’ve heard from customers that paying your loan back is just as easy as shopping with Affirm because it’s so simple and intuitive,” Allin said.
Consumers who download the Affirm app can also shop with Affirm at any merchant in-store or online. “You can buy from anyone, not just our merchant partners,” Allin explained. “When you find something you want to buy, request the purchase amount. If you’re approved, we’ll give you a virtual card number that can be typed in at the register, added to an Apple or Android wallet, or typed in when you’re checking out. This gives you the option to use Affirm as an alternative to credit in more places.”
Merchants currently partnering with Affirm run the gamut from women’s and men’s fashion, sports and fitness, electronics and home décor retailers to travel and automotive companies. Allin said that Affirm recently launched a formal partnership with Wal-Mart and will have additional merchants coming on board in 2019. “We anticipate we’ll add thousands of new merchants before the end of the year,” she concluded. “There are some major household names that we’re really excited for.”