To understand the importance of rent reporting and cash-flow, consider the trouble Abbey Wemimo says his family had borrowing money from a bank in the United States after emigrating from Nigeria. 

Due to a lack of credit history, his mother was turned down. The inability to access the mainstream banking system forced the family to instead take out a high-rate personal loan instead, setting back their wealth-building efforts.

That’s among the reasons why Wemimo and his colleague, Samir Goel, co-founded Esusu, one of a group of fintechs and “rent techs” active in the sector.

“Where you come from, the color of your skin and particularly, your financial identity, should never determine where you end up,” Wemimo said.

Goel, whose family emigrated from India, said he had a similar experience, seeing his parents navigate limited options for banking and shelter because they lacked the credit history needed to get more mainstream loans with lower rates.

“The thought I was left with was that it just shouldn’t be so hard for people that are putting their best foot forward every day to have that opportunity,” said Goel.

The ability to see that tenants fulfilled their rent obligations can improve the typically more credit-based payment track records that lenders use to determine who qualifies for financing and at what price.

“We definitely see people going from invisible to visible, and we see people that have decent average scores get better scores, up to 60 points of improvement,” said Jonathan Lawless, director of homeownership at Bilt Rewards, another fintech that helps people establish credit.

A growing group of startups have increasingly worked to get landlords engaged and to facilitate the transfer of data to the credit bureaus, who confirm it makes a measurable difference for scores.

“Unscorable is the cohort in which we see the greatest, most dramatic effect,” said Maitri Johnson, vice president of tenant and employment screening at TransUnion, noting that in some cases they can go from being credit invisible to a 657 score after several months of rent reporting. People with subprime credit scores also can see incremental gains over time, Johnson said.

Research suggests that making a greater number of people credit visible would allow lenders to connect to the future homebuyers they want to reach and help to fulfill the Biden administration’s aims to address systemic barriers to racial equity in homeownership.

“In 2021, millennials with an annual income of more than $50,000 submitted 39% of all rental apartment applications,” noted John Paasonen, co-founder and CEO of mortgage technology vendor Maxwell. “That cohort represents a substantial opportunity for lenders, and rent reporting could provide a viable tool to discern which renters are positioned to qualify for mortgage loans.”