What you earn, how much you owe, where you went to college, what you do for a living — they're all variables that online lenders and credit start-ups think are predictors of whether you will repay.
But Doug Ricket thinks there's another, more powerful factor: the fear of missing out.
He's the founder and chief executive of PayJoy, a San Francisco start-up that offers leases for smartphones and targets buyers who have little or no credit history and can't get the kind of low-cost payment plans offered by the major phone carriers.
It's not the only company in that business — but it is the only one that can remotely shut down your phone if you don't pay up. And the only one whose business model traces its roots to an African power utility.
Here's how it works.
At the end of the month, if a customer hasn't paid, the phone won't do much at all. The only numbers that can be dialed are 911 or the PayJoy customer service line; the only app it can open is PayJoy's, which — no surprise — asks for a payment.
No texts. No calls. No "Pokemon Go."
"When the lock engages, the phone is still clearly on — you can see that friends are messaging you on Facebook, but you can't see the messages or respond to them," Ricket said. "The whole digital world is there waiting for you. It encourages people to pay so they can get back online."
That might seem like a uniquely American proposition, predicated on the notion that the smartphone is among the tools one can no longer live without, but the idea behind PayJoy did not come from Silicon Valley. Rather, Ricket said he stumbled across the idea in Gambia, making it one of a handful of examples of financial tools created for developing countries that have found their way to the United States.
After earning degrees in computer science and electrical engineering from MIT, Ricket joined the Peace Corps and spent two years in the small West African nation, teaching university courses and volunteering with its national electric company.
He recalls a cumbersome system for making sure customers paid their monthly electric bills: If customers got behind, the power company would take their electric meter and wouldn't reinstall it until customers paid a fine. When Ricket went back a few years later, he saw something different.
Under the old system, customers used electricity for a month, got billed for it later and were asked to pay in one lump sum. The new technologically advanced system used a pay-as-you-go model — customers would visit a kiosk, pay for as much or as little power as they wanted and get a code to type into their in-home meter.
"So you go to the corner shop, you pay $10, enter the code and now you've got 50 kilowatt hours of electricity," Ricket said. "The meter counts down to zero, and then the lights shut off. It fit with the ability of people to know how much they were spending, and their desire to pay for it in small increments."
Between 2009 and 2011, Ricket took that idea and applied it to another type of hardware, helping San Francisco start-up d.light design develop a pay-as-you-go model for solar lighting kits sold in India and East Africa.
The kits sell for about $200, which is more than most of its customers — families who still use kerosene to light their homes — could afford upfront. Instead of selling the kits on credit, d.light opted for a pay-as-you-go approach, allowing customers to pay $25 upfront, then about 40 cents a day. To get customers to keep making those daily payments, Ricket and others needed to figure out a way to remotely disable the product.
"We had to make the lights turn off so that people would pay," he said. "People don't have access to credit, so you have to bake this system into the hardware."
Indeed, in much of the developing world, there's little or no formal credit scoring system, opening the door for pay-as-you-go systems or for new kinds of credit scoring that look nothing like American FICO scores, said Shivany Siroya, chief executive of Tala, a Santa Monica start-up that offers small loans to customers in Kenya, Tanzania and the Philippines.
Tala underwrites its loans based on, among other factors, information gleaned from borrowers' phones — when they make calls and how a customer's phonebook is organized. Other start-ups are taking a similar approach, all because there's little if any traditional credit information available.
"People do not have what we call a financial identity," Siryoya said. "The issue is not just the fact they don't have a credit history with a bureau, but they don't have the equivalent of a Social Security number or a national ID."
The challenges in the United States aren't nearly as severe, but, according to federal estimates, there are as many as 45 million Americans with little or no credit history, creating a large and enticing market for investors.
PayJoy, which is backed by venture capital firms including New York's Union Square Ventures and Hollywood's Core Innovation Capital, started offering its smartphone leases last year in Los Angeles and the Bay Area and has since expanded into Florida and Texas. Ricket said PayJoy leases are available through several hundred prepaid phone shops.
For now, PayJoy only works with phones running Google's Android operating system, though Ricket said he hopes to eventually be able to offer leases for iPhones as well. To qualify for a PayJoy lease, customers need to present a government-issued ID — a foreign drivers license will work — and have a Facebook account, which PayJoy uses to verify customers' identity.
When customers want to finance a phone through PayJoy, the store installs PayJoy's software and takes a down payment of between 20% and 30% of the phone's retail price. Customers then make fixed monthly payments for anywhere from three months to a year. Depending on the length of the lease, customers can end up paying as much as 50% more than the retail price of their phone.
That's pricey compared with the interest-free financing customers with decent credit can get from major phone carriers, but much less expensive than competitors' lease plans, which can more than double the price of a phone.
Ricket said he hopes to be able to offer cheaper plans once the company is more established and can convince investors that customers are likely to keep paying for their phones.
"If we can show 10,000 customers paying on time, it becomes statistically significant," he said.
As PayJoy continues to expand in the United States, it's making an international push too.
Last month, the company started offering its leases to customers in Mexico. It has a deal with Telcel, Mexico's largest mobile carrier, and has already rolled out in a handful of Telcel retail stores in Mexico City.
Ricket's sees India as the market with the most promise. But he wants to first gain experience in other foreign countries, including Malaysia, Indonesia and Pakistan, before venturing there.
"It's a market with more than 1 billion people in a cash economy with little access to credit," he said. "No one's solving the finance problem for 1 billion Indians this year. The problem isn't going anywhere."