Fintech startup tries to help consumers fix credit report errors

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A fintech startup called Upturn, launching Thursday, is attempting to solve a critical problem in the modern financial age: inaccuracies in credit reports.

Upturn was incubated by and is currently owned by BBVA’s New Digital Business unit, the bank’s fintech lab and part of its mission to fend off competition by innovating from within. (Simple and Propel Venture Partners are also in its portfolio.)

Credit reports have surpassed debt collection as the largest complaint category, according to data released by the Consumer Financial Protection Bureau last month. Roughly 31% of all complaints to the agency were about credit reports and the majority — 64% — of those were about inaccurate information on reports.

Federal Trade Commission studies have found that about 25% of credit reports have errors. There are many causes of this — including inaccurate data from lenders, healthcare providers and collections agencies; misidentification and erroneous linking of people to reports; and lack of an effective means of fixing errors.

That last problem is what Upturn is trying to fix. It’s offering a free online tool consumers can use to detect and dispute inaccuracies in their credit report.

Rod Ebrahimi, founder and CEO of Upturn, got the idea for the company from his own experience with credit report errors. In one case, a collections agency called him repeatedly about an emergency room visit in a state he’d never been to. Someone had apparently stolen his Social Security number. After much back and forth, he was able to resolve the issue on his own.

“I’m astute about my credit, I check my full credit report once or twice a year,” Ebrahimi said. “But I didn’t catch it until they were calling me. That’s too late. When that showed up on my report, I should have been notified that there was a new collection in my report. That feedback loop doesn’t exist today.”

Ebrahimi previously co-founded and ran ReadyForZero, a personal debt and credit management software company that was backed by Y Combinator and sold to Avant in 2016.

In a survey Upturn conducted early on, it asked Americans where they think their credit report data comes from. More than 50% believed it came from a database maintained by the government.

“There’s a lot of misinformation out there, and people feel like they’re totally powerless,” Ebrahimi said. “We want to change that dynamic and put power back in the consumer’s hands.”

Upturn pulls credit reports on its users’ behalf at least three times a month and analyzes the data for signs of something amiss. It draws on external sources like the CFPB’s complaint database. If a collection agency that is constantly being complained about shows up on a report, it’s worth a closer look, for example.

Upturn says it also makes the credit reports easier for consumers to read.

“One thing we’ve done on the user experience side is let you review items one at a time, instead of having this giant report where your eyes glaze over,” Ebrahimi said.

Additionally, it tries to show common names for companies, rather than obscure holding company names consumers are unlikely to recognize.

“Over time we will get better at doing that, because there are thousands of creditors out there,” Ebrahimi said.

When a consumer spots an error in their report, Upturn pushes the correction through to the credit bureau through its relationships with all three major bureaus.

“Keep in mind credit bureaus’ customers are not consumers,” Ebrahimi said. “If you try to get anything done through [the credit bureaus’] online dispute forms, it’s not trivial to do that. We can take that burden and make it easier for consumer because we have that relationship.”

Upturn’s error resolution process is completely automated. The company has resolved 350 error disputes already while it’s been in beta mode. It’s working on algorithms that will detect likely errors and offer personalized guidance to help consumers improve their creditworthiness.

Ian Ormerod, head of new digital businesses at BBVA, said his group is always looking for opportunities for “positive disruption.”

Upturn was appealing because of its focus on the underserved, Ormerod said.

“We feel there is a significant portion of people who are not being served as they could be by the financial services sector,” he said. “Upturn sits squarely in that box.”

Penny Crosman welcomes feedback at penny.crosman@sourcemedia.com.

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