Property developer and startup join forces to boost renters’ credit scores2 min read . Updated: 24 Nov 2021, 05:51 PM IST
- Initiative is aimed at helping affordable-housing residents improve their scores
A New York City developer and fintech company are ramping up an initiative to help tens of thousands of affordable-housing residents across the U.S. boost their credit scores.
Related Cos. is working with Esusu, a startup company that automates rental-payment reporting to the three major U.S. credit bureaus, allowing tenants who pay their monthly rent on time to establish credit histories and boost their scores.
The two companies launched the partnership about 18 months ago with around 19,000 units. They are now expanding rent reporting for tenants in more than 50,000 units of Related’s affordable-housing portfolio, from New York City to Miami and Chicago.
Landlords aren’t required to report rental-payment history to credit bureaus, and most don’t. Without this information, it is difficult for mortgage lenders to assess the credit quality of first-time home buyers, said David Dworkin, chief executive of the National Housing Conference, a nonprofit affordable-housing advocacy group.
“Your housing payments are the most consequential and predictive measurement of your ability to pay back your loan on time," Mr. Dworkin said. Rental-payment reporting makes a significant difference in helping people get approved for a home loan, he added.
Esusu earlier this month unveiled a new initiative with Freddie Mac’s multifamily division to provide incentives and discounts to landlords that use the company’s rent-reporting technology. Fannie Mae, through a different initiative, recently started helping lenders factor in borrowers’ history of rent payments when weighing those applicants’ qualifications.
In Related’s pilot program across 19,000 units, it found that 71% of enrolled residents’ credit scores increased by an average of 32 points. Rent reporting also helped 2,300 renters who previously didn’t have credit scores establish financial identities, according to Esusu.
“It is an extraordinarily high percentage of people who are benefiting," said Jeffrey Brodsky, vice chairman of Related Cos.
Esusu charges landlords $2 a month per unit to use the platform. Related will take advantage of discounts offered by the Freddie Mac partnership, Mr. Brodsky said. There is no cost to tenants.
Esusu reports only on-time rental payments and other positive data to credit bureaus to avoid double-penalizing people who miss payments, said co-founder Samir Goel. Going through the collections and eviction processes harms delinquent tenants’ credit scores.
Mr. Goel and his co-founder, Abbey Wemimo, started Esusu in 2018 and its rent-payment reporting technology is now used by landlords of more than two million rental units across the country. The name of the company derives from Yoruba, a language spoken in Mr. Wemimo’s native Nigeria, and refers to the founders’ desire to grow their business by building community. Esusu has raised more than $14 million, including money from Serena Williams’s investment firm that focuses on startups founded by women and people of color.
The company is sharing a subset of its data with the Urban Institute, a nonprofit research group that is studying how rental-payment reporting affects credit scores. Researchers are particularly interested in determining how much the credit scores are affected, said Jung Hyun Choi, a senior research associate at Urban Institute.
“How the credit score is measured, it’s kind of like a black box," Ms. Choi said.
This story has been published from a wire agency feed without modifications to the text
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