Inflation has been rising faster than employee income in 2022, putting American workers in a tough spot. The latest data shows that U.S. private sector wages increased by 5.7% in the first half of this year, which is a healthy jump but when adjusted for inflation, wages actually dropped by 3.1%[1].
This puts additional pressure on employees who are already struggling to make ends meet. A recent survey by the Federal Reserve found that nearly a third of all Americans (32%) have trouble paying for an unexpected expense of $400 or more[2] , and more than 41% of full-time employees report living paycheck to paycheck, up from 38% in 2019[3] .
When your employees need a loan—whether it’s to pay for unexpected medical expenses, to fix a car or to pay down expensive debt —most banks will immediately ask for their credit scores, which presents a barrier for many people. In 2022, roughly 45 million Americans were shut out of bank financing because they either had credit ratings that were too low or no credit rating at all[4].
Kashable was founded to help employers provide financial wellness benefits, including credit monitoring tools, financial coaching and low-cost loan programs, to employees who might otherwise be invisible. We use a unique underwriting process which takes employment into consideration, rather than just credit scores, to qualify borrowers for financing. In the current environment, where the labor market is tight but real wages are eroding, Kashable’s low-cost loans can offer a critical safety net for employees.
Our company’s two founders, Einat Steklov and Rishi Kumar experienced how difficult a lack of credit history can be when they first came to the United States, as immigrants.
“We both came to the U.S. going to good schools with bright futures and high-paying jobs ahead of us,” Kashable’s co-founder Rishi Kumar explained. “But just by virtue of the fact that we hadn’t grown up here, we didn’t have any credit history to speak of. Without that, every little step—like leasing an apartment or buying a car or even getting a postpaid phone plan—becomes much more difficult. There are so many people that don’t have a rich credit report, and it’s not because they’re badly behaved. Many times, it’s a function of circumstance.”
An innovative underwriting process based on income
How do you underwrite loans for people with low or non-existent credit scores? It turns out that steady employment and income are a very reliable indicator of the ability to repay loans.
Kashable’s approach was modeled on the group insurance industry, which is delivered primarily through group plans sponsored by employers. “When you enroll into the group health or life insurance from your employer, it tends to be a lot cheaper than anything that you can buy by yourself. That’s because the insurer is able to look at the profiles of the full workforce and underwrite it as a group,” said Kumar. “They know they’re not going to get a lot of adverse selection so they can offer coverage at a lower cost. At Kashable, we take a similar approach with lending.”
By taking a group-based approach to lending, Kashable can provide low-cost loans to a broader spectrum of people, Kumar said. “In many sectors and industries the workforce is very stable: hospital nurses and staff, logistic workers, school teachers or manufacturing facilities. We can underwrite a loan even when employees don’t have the rich credit history or prime credit scores that other lenders require,” he added. “We base it on their employment data.”
Kashable’s patented system integrates directly with HR and payroll systems to obtain the employment data, and we combine that with other information from credit rating agencies. Furthermore, the process is largely automated, making it a fast and convenient way to repay the loan. “The most important aspect of the Kashable loans is that we can say yes to a lot more people that other lenders might deny in addition, the savings that we achieve through automation and efficient processes allow us to make lower cost loans to employees,” Kumar said.
Indeed, Kashable approves over 90% of applicants. By comparison, the odds of credit card approval for applicants without credit scores was 15.6% in 2020[5] .
Kashable reports borrowers’ payment history to credit bureaus, employees have an opportunity to establish or improve their credit ratings. By the time they repay their Kashable loan, 80% of borrowers who have never had a credit score with the major credit bureaus have established one[6]. Additionally, more than half of repeat borrowers are able to improve their FICO scores by an average of 44 points[7]. Kashable provides employers with a comprehensive suite of financial wellness services like a credit monitoring tool, financial coaching and savings accounts, which can set your employees on the path to lifelong financial security.
Many working American have seen the value of their wages eroded by inflation–and they have fewer resources to cover unexpected expenses. Luckily, Kashable offers a unique, and inclusive way of obtaining financing—and it may be just what your employees need to get started on the road to financial wellness.
[1] “As wages in the US continue to rise, what’s the state of the economy?” The World Economic Forum, August 5, 2022. https://www.weforum.org/agenda/2022/08/us-wages-economy-private-sectors
[2] Economic Well-Being of U.S. Households (SHED), The Federal Reserve Bank, May 2022. https://www.federalreserve.gov/publications/2022-economic-well-being-of-us-households-in-2021-dealing-with-unexpected-expenses.htm
[3] 2022 Global Benefits Attitudes Survey
[4] “More than 45 Million Americans are Either Credit Unserved or Underserved; Approximately 20% Migrate to Being Credit Active Every Two Years,” TransUnion. April 7, 2022. https://www.globenewswire.com/en/news-release/2022/04/07/2418433/0/en/More-than-45-Million-Americans-are-Either-Credit-Unserved-or-Underserved-Approximately-20-Migrate-to-Being-Credit-Active-Every-Two-Years.html
[5] Credit Card Market Figure Data, Consumer Financial Protection Bureau, 2021. https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2021.pdf
[6] Based on Kashable data from borrowers from May, 2016 to February, 2021
[7] Based on Kashable data from borrowers from May, 2016 to February, 2021
Yes thank god for Kashable has helped me ion so many ways each year it was a blessing to me I was so crushed when I applied over 5 times and wasn’t approved because my score has been less than it it is now but I was approved the only difference is that I changed station I am not at the old station I am at a new station and since being here I haven’t been able to get approved so just a little concerns but above all you have been a blessing and I would like to continue to be able to apply and get approved