Today, more than 50 million Americans don’t have a credit file with the big three credit bureaus—Experian, Equifax, and TransUnion. This predicament underscores a pressing, systemic challenge in our philanthropic ecosystem. The Hispanic and Black communities are the most affected. Around 26% of Hispanics and 27% of Blacks are considered credit invisible or unscorable. In sharp relief, just 16% of White/Asian consumers are part of this group. This unavailability of credit visibility poses serious obstacles. This effect is particularly hard on law abiding renters who pay their rent on time every month.
A fun fact that few Americans are aware of is that over 90% of renters pay their rent on time each month. Since rental payments are rarely reported, these timely payments go unreported and do nothing to boost their credit scores. This omission is a further perpetuation of the cycle of financial invisibility. It especially harms immigrants, whose credit histories from their countries of origin are commonly excluded by the U.S. system.
The Challenges of Credit Invisibility
Credit invisibility is the largest barrier to financial stability for millions, including one in five Black Americans. As explained by Wemimo Abbey, co-founder of Esusu, “When we came here, we didn’t have a credit score. We went to one of the top eight banks in America and asked for a loan, but they refused our request. This means that we had no other option than to take a predatory loan where the interest rate was more than 400%. This experience proves just how far the absence of a credit score can push people away from ruinous financial choices.
The implications of being credit invisible go far beyond limited access to current borrowing needs. Credit scores affect your ability to carry debt under wide-ranging parameters that stretch from 300 to 850. These scores affect your overall ability to pay your bills on time – including your credit cards. Without the safety net of a regular credit history, millions of Americans find it increasingly difficult to afford basic necessities. This lack of access can compound their economic distress.
Well-designed, commercially managed housing services could help fill that gap. That they sometimes have close ties with one or all three credit report providers. They can charge fees for reporting rent payments on time. This practice is done with great inconsistency across housing providers. Consequently, millions of consumers are unable to take advantage of the positive credit-building opportunities even available to them, despite their timely rent payments.
Esusu’s Innovative Approach
To change this, Esusu has become a powerful force. Until recently, the firm only reported 10% of rent payments to credit bureaus. Now, it’s growing its services based on these early successes to give renters more prominence in the credit scoring world. Soon you’ll see your regular rent payments appear on your credit report. This usually occurs within 30 days of your payment being posted. Implementing this correction would give millions of renters the opportunity to build their credit score more quickly.
Wemimo Abbey emphasizes the importance of this innovation: “We have democratized access because you have a long tail of people who don’t live in commercially managed housing.” This declaration embodies Esusu’s mission to build financial opportunities that foster equity for everyone, wherever they reside.
Despite the benefits, challenges remain. Many agencies provide a grace period of 30 days for missed payments, meaning your credit score won’t be negatively impacted immediately. Other agencies aren’t nearly as forgiving. These types of inconsistencies are added obstacles for others working to establish or improve their credit.
The Path Forward
Rental payments need to be reported differently, and this is an urgent necessity. Abbey points out the staggering economic loss tied to unreported rental payments: “We’re leaving over $5.3 trillion on the table, we’ve got to do better.” This figure not only highlights the potential for economic growth but emphasizes the urgency for reforms that would facilitate greater access to financial resources for millions of Americans.
The demand for services like Esusu is skyrocketing. The company’s valuation has soared to $1 billion, reflecting a powerful market demand for solutions that address renters’ credit invisibility. By creating pathways for renters to build their credit histories, companies can empower individuals to access better financial products and services.