Americans pay trillions in rent, but few get a credit score boost for it

In the United States, renters contribute an astounding $1.4 trillion annually to landlords of residential properties. However, a mere 20% of these landlords opt to report timely rent payments to credit bureaus. This lack of reporting has significant repercussions for millions of Americans, leaving many without a credit history and rendering them 'credit invisible.' The implications are dire: Without a credit score, individuals struggle to secure loans, purchase cars, or even find housing. Currently, over 50 million Americans are categorized as lacking a credit history with the three major credit bureaus—Experian, Equifax, and TransUnion. Wemimo Abbey, CEO and co-founder of Esusu, highlighted this issue in a recent CNBC interview, stating, 'We're leaving over $5.3 trillion on the table; we've got to do better.' Esusu, a credit reporting service, aims to change this dynamic. Partnering with 75% of the largest rental companies, the platform allows renters to report their payments directly. "We have democratized access because you have a long tail of people who don't live in commercially managed housing," Abbey explained. The company has established partnerships with notable organizations, including Goldman Sachs and Fannie Mae, to expand the number of rental units reporting to credit bureaus. Credit scores, which range from 300 to 850, are crucial for lenders evaluating a borrower's ability to repay debts. A low credit score—or the absence of one—can lead to high-interest loans or outright denial of credit. This financial inequity disproportionately impacts minorities. Data from Oliver Wyman reveals that approximately 26% of Hispanic consumers and 27% of Black consumers are credit invisible, compared to just 16% of White and Asian consumers. Immigrants are often at a disadvantage, as their credit histories from their home countries do not transfer to the U.S. Founders Abbey and Samir Goel were inspired to create Esusu after witnessing their families' financial struggles as immigrants. Abbey recalled, "When we came here, we didn't have a credit score... We were turned away and had to borrow from a predatory lender who wanted to lend at over 400% interest rate." Initially, only 10% of rent payments were reported to credit bureaus. Now, Esusu has successfully established credit scores for 250,000 Americans, facilitating $50 billion in credit activity and achieving a valuation of $1 billion. Rent remains a significant expense for many Americans, with over 90% paying their rent on time. However, the lack of reporting means these timely payments go unnoticed. Reporting can be initiated by either landlords or tenants, and while some commercially managed housing services may charge fees for reporting, renters can directly connect with services like Esusu for a nominal monthly fee of $2.50. To build a credit history, timely rent payments are essential. Alternatives for those lacking credit histories include becoming an authorized user on a family member's credit card, obtaining a secured credit card, or utilizing credit-builder loans, which help establish credit through consistent payment reporting. Esusu's innovative approach not only empowers renters but also highlights the importance of recognizing rent as a vital factor in credit scoring, paving the way for broader financial inclusion.