A new service will allow property owners to report tenants' payments to credit bureaus. Could the result ease the eviction crisis?
In an effort to ease the national eviction crisis, a new partnership between fintech company Esusu and Goldman Sachs will allow rent payments to count toward credit scores, a result that will help build credit for tenants and incentivize on-time rental payments. The result could be a win-win for tenants and property owners.
In an interview on CNBC, Abbey Wemimo, co-founder of Esusu, and Margaret Anadu, global head of sustainability and impact at Goldman Sachs, shared the overview of the partnership and what it means for landlords and renters.
Esusu is a fintech start-up with a mission “to unleash the power of data to bridge the racial wealth gap and to dismantle barriers to housing for working families.”
Over 45 million people do not have a credit score in this country. Yet, while landlords have had credit scores on tenants for a long-time, this service allows property owners to report rent payments to credit bureaus. When a homeowner pays a mortgage, they get credit, but when tenants pay rent, they don’t.
“What we’re doing here is giving credit where credit is due,” said co-founder of Esusu, Wemimo, who emigrated to the United States and struggled to borrow money at reasonable rates. He identified a problem and came up with a solution.
“Goldman Sachs is focused on climate transition and inclusive growth,” said Anadu.
Some people can’t participate fully in society due to situations outside of their control. Renters—nearly one-third of society today—are “seven times more likely to be credit invisible,” she said.
A FICO score is supposed to judge someone’s financial health, but for most renters, that is hard to gauge. Even if they pay rent on time, it’s not reflected in their credit score.
From a risk management side, to exclude the largest monthly payment from being applicable to one’s credit score is an inappropriate way to look at renters. By incentivizing on-time payments with a direct correspondence to credit, this service can not only reduce evictions for landlords, but it can positively impact members of society.
“When you increase credit score, when renters are able to report in the way Esusu is allowing them to do,” Anadu said, “what starts with a credit score leads to a greater impact.”
With good credit, renters who previously were held back from opportunities can start a business, get a car, have more job opportunities, and more.
When renters are validated with a higher score and can report their score, opportunity is unlocked. Plus, property owners will experience fewer evictions.