Perch CEO Michael Broughton

Leaders In Lending

Perch CEO Michael Broughton On Building An App That Builds Credit

Bruce Upbin

March 12, 2021

Michael Broughton, like a lot of entrepreneurs, started his company out of personal frustration. In his case, due to a thin credit history, he was unable to get a student loan to finish his four years at the University of Southern California. Rather than start a ruckus, he started Perch, a mobile app that helps consumers build their credit score by reporting to the bureaus recurring payments like Netflix or Spotify subscriptions or monthly rent. Perch launched earlier this year after emerging from the vaunted startup incubator Y Combinator with influential backers such as Softbank, Sequoia Capital, General Catalyst, and Jay-Z.

In the latest episode of Zest AI’s Leaders In Lending series, Broughton sits down with our CEO Mike de Vere to talk about what it’s like to grow up in a big family, life as a 22-year-old founder, and how Perch is already changing lives.

“If someone can pay their Netflix, Spotify, rent, and utilities on time, I think it proves that you can handle your first loan or first credit card, if guided correctly and without predatory practices,” says Broughton.

Some Perch users have seen their credit scores jump from mid-500s to over 700, which gives you indication just how much traditional credit scoring is failing tens of millions of Americans. In a 2020 report, Brookings’ Aaron Klein identified how credit scores are highly correlated with race, a relationship that leads to all sorts of disparate outcomes. Klein writes, “More than 1 in 5 Black Americans have FICOs below 620, as do 1 in 9 among the Hispanic community, while the same is true for only 1 out of every 19 white people.” And, according to a 2019 report by the Urban Institute, “33% of black households with credit histories have insufficient credit and lack a credit score, while only 17.9% of white households have missing credit scores.”

If you can't get credit, it's hard to build wealth. If you don't have wealth to begin with, it's hard to build credit. This Catch-22 is at the root of the stubborn racial wealth gap in the U.S. According to the Fed, the typical white family has eight times the wealth of the typical Black family and five times the typical Hispanic family’s wealth.

“In order to start building your credit,” says Broughton, “you ironically have to either go into debt or increase your spending habits. For people who may have like $50 or $100 in their account, they can't go through that process. We asked, ‘How can you give people access without forcing that habit on people?’”

Watch previous episodes of Leaders In Lending:

How Climb Credit Is Creating The Payments Layer For Reskilling America

How VyStar Credit Union, Harley Davidson, First National Of Omaha Are Mainstreaming AI In Lending

Three Top Lenders Explain Their Approach To Getting Innovation Done



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