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November 2013 EDITION

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November 15, 2013

5 Questions with Rod Ebrahimi, CEO and co-founder of ReadyForZero.com

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ReadyForZero.com founder and CEO Rod Ebrahimi describes himself as “an entrepreneur who uses technology to solve problems, build businesses, and create products that people find useful.” On occasion, Rod writes for Forbes, Fast Company and Lifehacker.com. You can find and follow him here.

A background in high-tech (he launched his first company, an internet service provider, while still in high school) led to a series of executive and leadership roles at Silicon Valley startups, the latest of which, ReadyForZero, tackles personal finance and debt reduction using web- and mobile app-based technology. In October, ReadyForZero announced that it has incorporated the VantageScore 3.0 credit scoring model into its personal finance toolkit. In the wake of that announcement, VantageScore chatted with Rod about the intersection of technology, debt management, credit scores, and personal behavior.

1. How does ReadyForZero.com help consumers, and what are its goals?

Our team’s mission is to use technology to help consumers manage debt and credit on their own. The story behind our founding is a personal one. The original inspiration behind ReadyForZero came after our friends and family started asking us where they could go to tackle their personal debt online. Existing tools focused too much on budgeting, whereas managing debt and credit were the most painful problems for the average consumer. In 2010, we decided to focus full-time on building easy-to-use tools that help people make progress toward their debt repayment and credit goals. Our vision for ReadyForZero.com is to become the most trusted resource for managing debt and credit – automatically. In addition, we hope our company can bring an additional level of transparency above the existing “noise” and misinformation surrounding personal debt.

Here’s how it works: ReadyForZero allows consumers to link their bank and credit accounts to create a free debt repayment plan based on their ability to pay. Then, progress on the plan is tracked automatically and the plan can be upgraded to enable one-time and recurring payments, credit monitoring and other premium features, at the user’s discretion. ReadyForZero has won awards for its online and mobile tools but, more importantly, our tools have helped Americans pay down over $120 million in debt. Our users tell their own stories best and you can read a few of their success stories.

2. What have you determined to be the areas in which consumers are most in need of information when it comes to managing their credit accounts wisely?

The ability to take action in an informed way is by far the area consumers need help with most. It’s not enough to educate – we’ve determined that the knowledge has to be actionable in some way. For example, ReadyForZero detects checking deposits and can use that to suggest payments to a specific debt as well as calculate the interest and time savings for each payment. This combines education with a way to take action automatically. We have also released a set of automated payment options that allow consumers to “set it and forget it” in a way that’s personalized to their financial situation while tracking their credit. Personal finance can be complex, but if you can use technology to provide personalized education and provide ways to take action, consumers are more likely to manage their credit wisely.

3. What about the VantageScore 3.0 model made it a good fit for the users of ReadyForZero.com? 

When our users asked for a way to track creditworthiness from within their ReadyForZero plans, we decided on the VantageScore 3.0 model because it:

1)    supports a larger number of “thin-file” consumers who may be in the credit-building phase of the credit lifecycle;

2)    better accounts for collections/delinquencies, especially ones that were paid or settled;

3)    reflects the behaviors that are most indicative of post-recession risk: credit utilization and balance-related behaviors that are strong, forward-looking indicators of risk for both consumers and lenders; and

4)    is not just an educational score, but something lenders actually use.

A single credit score is an important indicator of creditworthiness, but it’s never the complete story. We use the VantageScore 3.0 score as the leading indicator of a user’s overall credit health alongside progress toward their debt repayment goals. In this way, the VantageScore 3.0 model, in our opinion, is the ideal “creditworthiness barometer.” Of course, there are hundreds of scores and models, but for our particular use case we wanted something holistic that would serve as a reliable indicator into the future and help users understand how their specific actions on ReadyForZero can impact their creditworthiness over time.

4. What can other industry participants learn from ReadyForZero’s approach to financial literacy?

Most credit information and education is more valuable within the context of specific financial goals. This means, ideally, it should be immediately actionable, not just informational. In our case, actively managing personal debt better (automating payments, making extra payments whenever possible, etc.) has a real affect on your credit, and we highlight this in context of a user’s actions. I believe the industry will begin to do more of this type of education where the information is combined with actionable recommendations that apply to someone’s unique financial situation. We use a lot of personalized data to encourage users to take the right actions and positively influence their financial behaviors toward specific goals. Literacy goes hand in hand with the ability to take action. Yes, knowing is half the battle, but the other half is a having a real way to take action, online or on the go. Technology will help us get there faster.

5. How has your background in Silicon Valley and as a startup prepared you for building ReadyForZero?

At the core of every significant innovation in Silicon Valley is a real problem or “pain point” that is affecting the daily lives of people all across the country (or the world). Companies like PayPal and Google were built to solve the changing needs of consumers, and we’re no different. Yes, my co-founder and I both came from Silicon Valley technology, product and business backgrounds. In fact, my co-founder Ignacio [Thayer] came from Google, where he helped lead their machine translation (translate.google.com) efforts. We’re accustomed to a fast pace that doesn’t let up. Unfortunately (or perhaps fortunately?), we quickly found that financial technology moves quite a bit slower than other consumer technologies because of the regulatory environment and legacy infrastructure. This has required us to get creative in order to maintain a pace our Silicon Valley team is accustomed to!