Throughout their high school years, college bound students rack up points in their sports endeavors, receive recognition for their arts activities and earn the grades needed to head off to a postsecondary education institution. What they don’t earn in those formative high school years is a credit score needed to find an apartment. For international students inbound to the U.S. from abroad, the lack of credit history is even more challenging.
San Diego-based startup HUGS (Housing Undergraduate & Graduate Students) is looking to solve this issue of “credit invisible” students that according to the Consumer Financial Protection Bureau affects around 80% of 18- and 19-year-olds.
“Finding housing in San Diego is a major challenge for students in this area and is a problem that is further compounded by the additional hurdles new-to-credit consumers have to face in the apartment search,” said Carl Dumesle, co-founder and CEO of HUGS.
Dumesle founded HUGS from his own experiences as an international student from Haiti. He came to the U.S. in 2019 to earn an MBA at University of San Diego and had difficulty finding a place to live.
“For international students, you come here, and you have nothing. You don’t even have a U.S. bank account, no credit history – nothing,” he said.
Dumesle and a group of other international students at USD developed the basic idea for an alternative way to score the financial health of international students utilizing the available data that is provided to the federal government for student to get their visas. “That includes a lot of financial data that we’re able to read with our own proprietary system,” he added.
Dumesle and Bria d’Amours, an MBA student from Montreal, pitched HUGS at the inaugural Fowler Business Concept Challenge and took the top prize of $15,000. Two years and $156,000 in friends and family funding later, HUGS was officially launched as a company in August 2021.
Expanding Beyond International
Since its initial launch, HUGS has operated pilot programs at USD and UC San Diego, helping over 200 students find housing. “When we launched our first year we did about $90,000 volume,” Dumesle said. “Last year we did about a half a million in volume. And we’re on track for about $1.5 million this year.”
Very early on after HUGS launched to its program to help international students, Dumesle said the company “evolved” after getting requests from U.S.-based students to help them with housing issues like landlords asking for two to three times rent for security deposit, or “flat out just denying them because the market was so hot.”
“Because it turns out when you’re young you also don’t have much to show on your credit history – you’re what’s called a thin file,” he added. “So, we started looking for solutions to help them out.”
Those solutions came into more focus in August of last year when HUGS began working with consumer-permissioned credit bureau company Nova Credit to use its cash flow-based underwriting system Cash Atlas, to evaluate a student’s financial health by analyzing bank transaction data, such as cashflow, and generating a complete risk profile for lenders. After several months of piloting the system, HUGS and Nova Credit officially announced the launch of the partnership last month.
“The apartment rental process is historically known for being challenging to navigate. For younger students without thick credit files, there is an added layer of pressure to demonstrate they are a trustworthy tenant. Until recently, these consumers have had to go through added layers of security such as paying a large deposit or finding a co-signer to get landlords to accept their applications,” said Misha Esipov, co-founder and CEO of Nova Credit. “Through this integration, landlords on the HUGS network will now be able to benefit from the power of cash flow underwriting using Cash Atlas and students can start this new chapter of their lives on stable financial footing.”
Plans for 2023
With its HUGS Score solution for international students and the Cash Atlas system in place for U.S. students, Dumesle said HUGS is hoping to expand its reach beyond San Diego and offer its programs in other markets by the beginning of Q4 this year.
The company has set its sights on San Francisco, another metropolitan area in high demand for housing and a high population of college students. HUGS hopes to end the year with 20 school partners in the state, which will be the company’s focus area before taking on the challenge of operating in other states with different landlord/tenant rules, Dumesle said.
HUGS is also looking to raise capital on its first two years of experience. “Now we have enough traction and data to go and raise a pre-seed round later this year,” Dumesle said.
CEO: Carl Dumesle
Headquarters: San Diego
Business: Alternative credit scoring solution for college students
Notable: HUGS was the top winner of the inaugural Fowler Business Concept Challenge pitch competition.