How OppFi Can Say Yes to Credit When Traditional Banks Say No

U.S. consumers hold a record $1.2 trillion in credit card debt. Right now, households are in a holding pattern, where the growth in card balances has been muted, and a spending pullback has begun in the face of tariffs and trade wars.

PYMNTS Intelligence has found that 67% of the U.S. population lives paycheck to paycheck, so credit can be a vital lifeline towards meeting everyday expenses. Through the past three years, as inflation spiked to near double digits and FICO scores have remained lofty (averaging north of 700), there’s still a wide swath of the population — 60 million individuals, 15 million of whom are unbanked and 45 million are underbanked — that remains shut out from the traditional channels of financial services.

Credit Access is a Widespread Issue

“The credit access issue has not been solved,” Todd Schwartz, CEO of FinTech platform OppFi, told PYMNTS’ Karen Webster, adding that a vicious cycle exists in the quest to create credit worthiness. “If you’re not able to get a car or a home loan, how else do you build credit? It’s a real issue and it needs to be figured out.”

For many of the individuals shut out from traditional credit, buy now, pay later plans have been a help, but the larger backdrop is that the aforementioned 60 million people have had missteps in their financial lives, have had to grapple with medical emergencies or other life changes, and the simple fact is that most of us have not been taught personal finance skills in school.

“It’s hard to rebuild your credit,” he told Webster, “because to rebuild your credit you need more credit to prove yourself — so you’re already starting behind the eight ball … there are people who just don’t have credit because they have never applied for it or don’t use it. They rely more on debit cards and cash flow.”

OppFi, which seeks to expand credit access through a platform model that connects individuals with community bank partners and personal loans, is focused on the population that falls in the FICO range below the 650 mark, where traditional lending options thin out.

Borrowers must have regular sources of income and checking/savings accounts — and the company reports the loan repayment progress to the credit bureaus, which in turn helps OppFi’s customers build their credit profiles while getting the funds they need to meet the demands of emergency or unplanned expenses.

In another initiative, the company has partnered with financial app Zogo, which allows users to earn rewards and gift cards while improving their financial literacy.

“This is a way for us to give back and make sure that people understand the products that they are using,” Schwartz said.

Fine-Tuning the Model

Earlier this month, the company reported fourth-quarter results that detailed that net originations across its platform were up 11%, and net charge-offs had decreased markedly year over year. Guidance for current year revenues anticipate growth in the high-single digits to low-teens percentage points.

He noted to Webster that there’s been “strong demand across our business” as the company has revamped its underwriting models — a nod to the fact that navigating through the inflation surge that began in 2022, a 4% spike in interest rates and ensuing defaults has led the firm to “look at the customer from a lifetime perspective as opposed to short-term repayments.”

That approach, he said, smooths out volatility, and OppFi’s automated approval levels are touching 80%.

There are no prepayment penalties tied to the loans — and in fact, there’s what Schwartz termed a “returns policy,” where consumers can decide, if they want, to give the principal back with no attendant return fees.

“If someone pays to term, they’re paid in full,” Schwartz said of the loans, “so it’s all easy to use and understand.”

The banking partnerships in place with OppFi, Schwartz said, also benefit from the platform’s two-sided approach, as underwriting at the bank account level based on cash flows improves credit risk assessment.

“There’s a lot of growth ahead this year for our company, and there’s a lot of growth ahead for our consumers — and if challenging times are ahead, we’ll be there for them,” Schwartz said.