Americans pay trillions in rent, but few get credit score boost for it
Reporting rent paid on time to credit bureaus can significantly boost credit scores, but since it has not traditionally been a common practice, some renters end up having no credit history at all, making them "credit invisible," limiting their ability to get a loan, a car, a house and a lot more. Over 50 million Americans lack a credit history with the three major credit bureaus: Experian, Equifax and TransUnion.
"We're leaving over $5.3 trillion on the table, we've got to do better," said Wemimo Abbey, the CEO and co-founder of Esusu, which was named to the 2025 CNBC Disruptor 50 list, in an interview on CNBC's "Worldwide Exchange" on Wednesday.
Esusu is a credit score reporting service which has partnered with 75% of the largest rental companies and more recently created a direct line for renters to report their rent payments. "We have democratized access because you have a long tail of people who don't live in commercially managed housing," Abbey said.
Esusu has deals with Goldman Sachs, Mercy Housing, and Cushman & Wakefield, and partnerships with Fannie Mae and Freddie Mac, to increase the number of units nationally that report rent as part of credit.
Credit scores, which range on a scale of 300-850, indicate the ability to pay back bills such as credit cards, and manage and limit debt owed. The lower a score, or the lack of any credit score at all, makes lenders hesitant to extend money, or they might charge extreme interest rates on a loan. Some landlords require a credit score on file to determine eligibility for a rental application, and while it's not the only considered data point, it may influence the landlord to not approve an application.
This financial inequity significantly impacts minorities, with approximately 26% of Hispanic consumers and 27% of Black consumers being credit invisible or unscorable, compared to 16% of White and Asian consumers, according to data from Oliver Wyman. Immigrants are also more susceptible to invisibility as their credit file in the U.S. does not take into account their credit history in their origin country.
Esusu founders Abbey and Samir Goel grew up watching their families struggle financially as immigrants from Lagos, Nigeria, and New Delhi, India, respectively, which was a founding motivation for Esusu.
"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," Abbey said. "My mother sold my dad's wedding ring. We borrowed money from church members and that's how we got started."
Abbey said when Esusu started, only 10% of rent payments were reported to credit bureaus. Esusu has established credit scores for 250,000 Americans leading to $50 billion in credit activity, Abbey said.
The startup's valuation has now reached $1 billion based on demand for the services.
Rent is one of the largest expenditures for most Americans who do not own a home. More than 90% of renters pay rent on time, but since it's not reported, there's no record of it.
Reports can be initiated either by the landlord or by the tenant. Commercially managed housing services may already have connections with one or all three credit report services, but may charge a fee to report it.
Renters also have the option to directly connect with rent reporting services like Esusu, which charges a monthly fee of $2.50 to report timely payment on the renter's behalf. The record of the amount paid is expected to show up roughly 30 days after it's been paid.
But paying rent is not enough; it needs to be paid on time. While some agencies may give 30 days to make up for the missed payment, others may not, and that can negatively impact a credit score.
There are some other ways to build credit in addition to the rent reporting for those who lack credit histories or are looking to increase their credit scores. Becoming an authorized user on a family member or friend's credit card is one way. Getting a secured credit card, that has no annual fee, is another option. Using a credit-builder loan, in which banks provide the total loan amount after you've made a certain number of payments, and report your payment activity to the credit bureaus, is also an option for those with limited credit history and those who are credit invisible.
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