More than Americans have serious difficulties accessing credit. They do not have a credit file with the big three credit reporting agencies—Experian, Equifax, and Transunion—as we call them. As usual, minority communities are hit hardest by this crisis. Nearly a third—31%—of Hispanic consumers and 25% of Black consumers are credit invisible or unscorable. Meanwhile, only 16% of White and Asian consumers are in this cohort. This is especially true for immigrants, who face their own set of challenges. Their credit histories from their home countries do not carry over to the U.S. credit system, leaving them underserved.
We need to remind lawmakers that more than 90% of renters pay their rent on time. Without robust data collection and reporting systems in place, far too many of them are not receiving the credit they have earned. Pay history for rental housing can now be reported to credit bureaus by commercial housing services. Yet they frequently impose exorbitant fees for this invaluable service. As a consequence, billions of dollars in potential and expected financial data are never reported. This is causing millions more Americans to lack any meaningful representation in today’s credit system.
The Financial Impact of Credit Invisibility
This absence of documented rent payments has resulted in a jaw-dropping $5.3 trillion still available to be claimed in new credit scores. This wasted potential of rental payment history is a massive, untapped financial resource for millions of consumers and our economy at large. Credit scores are on a scale of 300 to 850. They are critical measures of an individual’s creditworthiness and their ability to assume and repay debt. Sadly, for millions of renters nationwide, their predictable rent payments don’t count for anything.
Wemimo Abbey, co-founder of Esusu, co-founding member of Financial Technology for Development, discussed the timeliness of addressing this priority area.
“We’re leaving over $5.3 trillion on the table, we’ve got to do better.” – Wemimo Abbey
In this way, Esusu is closing the credit gap. It uniquely reports rental payments directly to credit bureaus, empowering applicants to build their credit scores upon their rental payment history. The company only reported 10% of rent payments to credit bureaus. Since then, it has dramatically increased the depth and breadth of its efforts.
Barriers Faced by Minority Communities
These statistics show an alarming rate of credit invisibility within minority groups. In fact, as we did in our joint report, Hispanic and Black consumers experience higher rates of being unscorable than White and Asian consumers. This gap further perpetuates the cycle of economic disparity, revealing the systemic hurdles in the financial terrain.
Abbey drew on his experience as an immigrant to describe the barriers that countless people encounter when entering the U.S. financial system.
“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.” – Wemimo Abbey
These predatory lending practices leave people caught in a trap of refinancing and repeat borrowing, deepening their cycle of financial instability. Without access to equitable capital, many more are left without the opportunity to establish a positive credit history.
Solutions and Future Prospects
Esusu knows that democratizing access to credit is more than just a mission statement. That’s why they’ve been doubling down on their efforts to help all renters—especially those in non-commercial housing—benefit from their rental payment histories. Abbey stated,
“We have democratized access because you have a long tail of people who don’t live in commercially managed housing.” – Wemimo Abbey
The initiative aims to deliver real-time data about a month after payments are completed for rental payments. Certain lenders and credit unions will provide additional grace period for payments dropped before they start affecting your credit score. Not everyone allows for this sort of grace period and the consequences can be financially devastating.
As Esusu continues to grow—now valued at $1 billion—its services are becoming increasingly crucial in providing support for those traditionally excluded from the credit system. With this launch, the company is making huge financial waves for millions of Americans. They’re fostering new pathways for everyday people to establish credit based on their rental payment histories.