Hatching a Great Idea on Campus: How a business born at USC is paving a path to better financial health for low-income students
Michael Broughton might have seemed like an unlikely candidate to launch a finance business when he arrived at USC barely able to cover his freshman tuition. Today, thanks to support from the university community and the Blackstone LaunchPad, a national network promoting student entrepreneurship, Broughton and his diverse team have come up with a unique solution to help students improve their credit scores, giving them a better chance at qualifying for everything from low-interest credit cards to better car insurance rates and easier approvals from landlords.
Michael Broughton is a junior at the University of Southern California and founded Hatch Credit in 2019. Through close collaboration with USC and the LaunchPad network, Michael has brought the power of building credit scores to thousands of students across America and plans to expand outreach to an audience of 100,000 students by the end of the 2020-2021 school year.
Like many students, Michael Broughton began his freshman year at the University of Southern California with anxiety about how to finance his education. He came from a military family, spending his high school years mostly on army bases in Asia, and was in need of student loans. When he tried to get a loan, however, he was told he didn’t qualify because he didn’t have a credit score. When he asked how to address that he was told he needed to show evidence of a credit history. He was frustrated and confused by what seemed like a vicious cycle he couldn’t escape.
When Michael subsequently learned that over 70% of college students – predominantly low income and from non-traditional backgrounds – have no viable way of building their credit score, he decided to take action into his own hands. Today, Michael’s business, Hatch Credit, is providing a solution to help those students build and improve their credit scores, providing access to credit cards, loans and a brighter future.
Hatch Credit has its origins in a business school freshman course about start-ups, where Michael was asked to consider a problem and think about a business approach that would lead to a solution. “The class is designed to get students involved in entrepreneurship earlier in their career,” says James Bottom, head of the Blackstone LaunchPad center on campus, who teaches and hosts the class. Michael thought about the issue of student credit and an idea was born. “I was trying to solve a problem specifically to help low income students like myself,” he says, “I never realized it could become a successful business.”
“Hatch Credit operates on the simple but innovative idea that while students may not have a traditional credit history of credit card or loan payments, there are many indicators that can be used to provide a measure of their creditworthiness.”
Hatch Credit operates on the simple but innovative idea that while students may not have a traditional credit history of credit card or loan payments, there are many indicators that can be used to provide a measure of their creditworthiness. These include subscription records and, in the case of many college students who live off campus, proven histories of paying rent and utilities. Hatch has created an app that allows students to enter this kind of data in a quick and efficient manner that can be rapidly analyzed and communicated to credit bureaus, helping them increase the critical credit scores that help determine eligibility for credit cards and all types of loans.
The impact of the Hatch approach is transformative. Samuel, one of the first students to participate in the initial cohort at USC, saw his credit rating jump from a 503 (considered “very poor”) to 708 (on the border of “good” and “excellent”) just two weeks after entering his rental payment history data. For Samuel, this meant getting approval for his first credit card.
Building the business hasn’t been easy. But today, after what Michael describes as “many pivots,” Hatch Credit is on an amazing growth trajectory. Michael won $60,000 in three national pitch competitions over the past six months and has already attracted investors, most notably from USC’s Marshall School of Business Venture Fund.
“Michael was as poised as many CEOs who pitch to our Investment Committee,” said Jon Korngold, head of Growth Equity at Blackstone and the lead judge at the Blackstone LaunchPad Propel student pitch competition where Broughton won $25,000. “He is an impressive entrepreneur and I look forward to watching Hatch grow under his stewardship.”
““Michael was as poised as many CEOs who pitch to our Investment Committee... He is an impressive entrepreneur and I look forward to watching Hatch grow under his stewardship.””
Having already served over 250 students on the USC campus, the company launched a beta program on March 1st, reaching 10,000 students on 3 additional southern California campuses. The app is readily available today at www.hatch.credit, or students can get it by contacting team@hatch.credit. The company plans to expand to both IOS and Android soon, with goals to reach 100,000 students nationwide by the end of the 2020-2021 school year.
Access to the app is free for students and not only helps them build credit, but also connect with credit card opportunities tailored to their spending habits. “We have partnered with select financial institutions like credit unions and neo-banks, those who can help students get the lowest rates tailored to their spending habits,” says Broughton.
“This is really going to change the status quo,” says Broughton. “Students often end up having a bad credit score after college because they’re paying off student loans. We’re flipping that so that students finish college with a great credit store. It’s really revolutionary and will help students’ overall financial health.” Broughton notes that a stronger credit score after graduation could qualify his clients for a host of other things including higher borrowing limits, lower car insurance rates and a better chance of getting approval from a landlord on a rental application.
Michael’s path to entrepreneurship involves a mix of personal determination plus the helping hand of key mentors and advisors. Among other support, the Blackstone LaunchPad put him in touch with the head of the USC Credit Union, who had him develop a report on obstacles to credit for low income students on campus; at 19, he was even invited to join the board of the $600 million organization.
Broughton, who will start his senior year next September, admits that balancing his roles as a student, board member of a Credit Union and entrepreneur isn’t easy and says that time management has been crucial. Also crucial is the help of his team of 11 USC students from different backgrounds. Broughton credits the team’s diversity with bringing together multiple perspectives and helping to create something that is unique. “We come from families and situations where we weren’t the most rich or most successful people in the room,” he says. “We all understand the problem at a personal level and strive to put students first.”
“For most of our students, it’s not that they’re not getting a great education, but in special circumstances like Michael’s, they have an opportunity to get a very unique education in how to build a business, scale it and raise venture capital... through the Blackstone LaunchPad and other classes at USC, we’re giving them [the] confidence to begin.”
Broughton is not only forging a unique solution for lower income students, he’s also blazing a path for those who wish to pursue entrepreneurship while in college. “For most of our students, it’s not that they’re not getting a great education, but in special circumstances like Michael’s, they have an opportunity to get a very unique education in how to build a business, scale it and raise venture capital,” says Bottom about how ventures like Hatch and others are being built on campus. “It’s difficult but hopefully through the Blackstone LaunchPad and other classes at USC, we’re giving them [the] confidence to begin.”
Broughton was recently selected to join the Lift program, a virtual pre-accelerator operated by Techstars to help the most promising teams drawn from Blackstone LaunchPad’s 24 campus programs. This will give him access to national fintech experts in the Techstars network as well as Blackstone employees who serve as volunteer mentors. He hopes to get a host of ideas on how he can develop the business going forward. For now, it has already paid off in terms of how he measures success. “One of the mentors I met through Techstars was a really successful entrepreneur who cautioned me to avoid using revenue and profits as our primary metric.” says Broughton. “As a result, we have changed our internal metric to be about how many credit scores we can improve and how many student lives we can change. We realized that this business is about impact rather than just the numbers.”
“We have changed our internal metric to be about how many credit scores we can improve and how many student lives we can change. We realized that this business is about impact rather than just the numbers.”