Milestone Esusu, the financial technology company focused on empowering renters to enhance their credit score, achieved a major milestone. In recent weeks, its valuation has skyrocketed to $1 billion! This accomplishment reflects the growing demand for services like Esusu that report rental payments to credit bureaus. It would go a long way toward filling a major gap in the credit reporting system. The company’s mission is especially relevant considering that at least 30% of American renters are still unscored or credit invisible.
Wemimo Abbey, co-founder of Esusu, emphasized the critically urgent nature of the moment. “When we started, only 10% of rent payments were reported to credit bureaus,” he stated. This lack of acknowledgment for on-time rent payments leaves many renters without a reliable credit history, despite more than 90% consistently paying their rent on time.
The Impact of Rent Payment Reporting
Today, the core mission of Esusu focuses on making sure that rent payments are reported to the three largest credit bureaus. Abbey emphasized the enormous potential for improvement, asserting, “We’re leaving over $5.3 trillion on the table. We’ve got to do better.” This graph indicates the overall estimated value of rent payments. If these payments were properly reported, they would be a much bigger factor in improving consumers’ credit scores.
These renters encounter a myriad of systemic obstacles to establishing and improving their credit scores. More than 50 million Americans don’t have a credit file at all with the big three credit reporting companies—Experian, Equifax, and TransUnion. Almost 1 in 4 (26%) Hispanic consumers are credit invisible or unscorable. In fact, 27% of Black consumers are in the same predicament. By contrast, only 16% of White and Asian consumers face the same burden.
Abbey’s experience points to a much bigger problem in today’s housing market. “We have democratized access because you have a long tail of people who don’t live in commercially managed housing,” he explained. This highlights the need for innovative solutions that can reach marginalized communities and assist them in building a financial foundation.
Challenges in the Credit Landscape
Despite the high percentage of timely rent payments, many renters remain unscored due to the traditional banking system’s focus on credit cards and loans. Missed payments will have a negative impact on your credit score. Usually, agencies only give you 30 days to fix any reported late payments. Unfortunately, for individuals with zero credit history, those chances just don’t exist.
The reality is even more dire for immigrants in the United States. Their foreign credit histories often do not translate into their new U.S. credit files, making them particularly susceptible to credit invisibility. For most immigrants it is a hurdle to even pursue a loan or financial assistance, something Abbey explained is a fearsome challenge from his own experience.
When we moved here we didn’t have a U.S. credit score. Abbey shared their journey through one of the biggest banks in the country. They went to borrow money and were denied, leaving them with no choice but to go to a predatory lender where they faced interest rates stretching to an eye-watering 400%. This experience underscores the urgent need for reform in how financial institutions view and engage with potential borrowers who lack traditional credit histories.
Solutions and Future Directions
Esusu’s model for making on-time payment reporting a reality to find a way forward to making renters more financially inclusive. Working hand-in-hand with property managers and landlords allows Esusu to simplify the process for renters and make it easily accessible. Standalone commercially managed housing services often charge residents for payment reporting. This practice can further deter small, mom-and-pop landlords from participating in these programs.
To further create equity, Esusu is expanding its platform. The craziness comes in when the company insists on immediacy of rent payments in order to increase people’s credit scores! This renter-friendly initiative is a win-win—helping financial institutions fill in the gaps to more accurately assess potential borrowers as well.