In the U.S., renters annually pay an estimated $1.4 trillion to landlords, yet only about 20% of landlords report these payments to credit bureaus, according to estimates. This gap significantly impacts the credit scores and histories of numerous renters.

While reporting on-time rent payments can substantially improve credit scores, it’s not a widespread practice. Consequently, many renters find themselves with limited or no credit history, a situation known as being “credit invisible.” This invisibility can hinder their ability to secure loans,purchase vehicles,or buy homes. It’s estimated that over 50 million Americans lack a credit history with major credit bureaus like Experian, Equifax, and TransUnion.

Wemimo Abbey, CEO and co-founder of Esusu, stated, “We’re leaving over $5.3 trillion on the table, we’ve got to do better.”

Esusu partners with numerous rental companies and offers a direct reporting line for renters. “We have democratized access as you have a long tail of people who don’t live in commercially managed housing,” Abbey said.

Esusu collaborates with entities like Goldman Sachs, Mercy Housing, and Cushman & Wakefield, along with partnerships with Fannie Mae and Freddie Mac, aiming to broaden the adoption of rent reporting nationwide.

Understanding Credit Invisibility

Credit scores, typically ranging from 300 to 850, reflect an individual’s ability to manage debt and repay obligations. Lower scores or the absence of a credit history can make lenders wary, perhaps leading to higher interest rates or loan denials. landlords may also use credit scores to assess rental applications, influencing their decisions.

“we’re leaving over $5.3 trillion on the table, we’ve got to do better,”

This issue disproportionately affects minority groups. Data indicates that approximately 26% of Hispanic and 27% of Black consumers are credit invisible or unscorable, compared to 16% of White and Asian consumers. Immigrants also face challenges, as their credit history from other countries is not considered in the U.S.

Esusu’s founders, Abbey and Samir Goel, drew from their personal experiences as immigrants to create the company. Abbey recounted, “When we came here, we didn’t have a credit score. We went to one of the biggest financial institutions to borrow money; we were turned away and had to go borrow from a predatory lender who wanted to lend at over 400% interest rate. My mother sold my dad’s wedding ring. We borrowed money from church members and that’s how we got started.”

Abbey noted that when Esusu began, only 10% of rent payments were reported. The company has as helped establish credit scores for 250,000 Americans, accounting for $50 billion in credit activity. Esusu’s valuation has reached $1 billion due to the demand for its services.

Boosting Credit Scores Through Rent Payments

Rent often represents a significant expense for those who don’t own homes. While over 90% of renters pay on time, these payments typically go unreported, leaving no record of their reliability.

Rent reporting can be initiated by either the landlord or the tenant. Many commercially managed housing services have connections with credit reporting agencies but may charge a fee for reporting. Renters can also use services like Esusu,which charges a monthly fee to report payments. Reported payments typically appear on credit reports about 30 days after they are made.

Timely payments are crucial.While some agencies may offer a grace period, others may not, and late payments can negatively effect credit scores.

Other strategies for building credit include becoming an authorized user on a credit card or obtaining a secured credit card. Credit-builder loans, where the loan amount is provided after a certain number of payments, are another option for those with limited credit history.