Carla Harris: Many immigrants come to the United States dreaming of better economic opportunity. But while they work hard, contribute to America's workforce and help stimulate the economy, millions of immigrants still find themselves unable to achieve financial stability in the U.S. simply because they lack one thing:
A credit score.
It's just a three-digit number but for those without it, they are "credit invisible". That means they face getting rejected for loans or credit cards, challenges in securing housing, and even higher insurance costs. Of the forty five million people in America who the Consumer Financial Protection Bureau has identified as “credit invisible”, immigrants are some of the most likely to face higher hurdles to building a score-- from not being able to transfer their international credit histories to not being educated on the importance of a credit score. In fact, a recent survey commissioned by Nova Credit found that nearly half of immigrants said a U.S. credit card is hard to obtain.
On this episode, we hear from entrepreneurs creating credit solutions to give immigrants a pathway to creditworthiness.
Samir Goel: This isn't a business serving the minority. We're serving the majority. There are more people in America that struggle with credit, struggle with financial access and inclusion than those who don't.
Carla Harris: This is Samir Goel. I speak with him and his co-founder, Wemimo Abbey, about how they are using rental payments to help those who are credit invisible establish their financial identities.
Carla Harris: Welcome to Access and Opportunity, I'm your host Carla Harris. And we're telling stories of individuals working to drive change within their communities. We provide context about systemic inequities and share tangible examples of how ideas around access and opportunity are being made real every day.
Carla Harris: Wemimo Abbey and Samir Goel co-founded Esusu, a fintech that reports monthly rent payments to major credit bureaus to help renters in three million units across all 50 states boost their credit scores. Inspired by their respective immigrant-centered upbringings, they recognized that the biggest barrier to entry in the financial system is not having a credit score.
I sat down with Wemimo and Samir to discuss how immigrants are financially marginalized, what Esusu is doing to change that, and the steps immigrants can take to set themselves up for credit building success.
Carla Harris: Before we begin, I want to note that I spoke with Esusu founders when Wemimo was still going by his last name. So during the interview, you’ll hear us refer to him as Abbey.
Carla Harris: Abbey and Samir, thank you so much for being here with me today. It's a pleasure to have you both on the show. Are you ready?
Wemimo Abbey: Yes.
Samir Goel: We're ready.
Carla Harris: All right.
Samir Goel: Thanks for having us.
Carla Harris: Okay. Let's jump right in. So let's get into the relationship between being an immigrant in the United States and the ability to access financial opportunities. You both grew up in immigrant households. Can you share a bit about your respective upbringings and role that that played in your understanding of the financial systems that are currently in place in the United States? Samir– why don't you go first?
Samir Goel: For myself, I grew up in an immigrant family from New Delhi, India, and our pathway to pursuing the American Dream was just harder than it should have been. My father was mugged on his first day in the country. We didn't really have a place for shelter. And most of my upbringing was watching my parents work miracles with no credit and very limited financial resources so that I could have some of the opportunities I’ve been afforded.
Carla Harris: Wow. Okay, and Abbey?
Wemimo Abbey: My story as an immigrant started in the slums of Lagos, Nigeria. I lost my father at the age of two, and I was raised by my mother and two sisters. One thing my mother fundamentally believed in was the importance of education, and that's what led me to America. I immigrated from 80 degree weather in Lagos to negative 22 degrees in Minnesota. My mother and I, we walked into one of the biggest banks to borrow money, we were turned away and we had to go borrow money from a predatory lender at over 400% interest rate because we didn't have a credit score.
Carla Harris: Oh my goodness. 400%?
Wemimo Abbey: Yes. And in addition to that, it didn't stop there. My mother pawned my father's wedding ring and a bunch of other jewelry, and that's how we got started in the United States.
Carla Harris: Wow. And Samir, in what ways is the American credit system, in your mind, stacked against immigrants that keeps them from achieving any sort of viable financial identity.
Samir Goel: One of the things we love to say is the credit system treats you as though you're guilty until you're proven innocent.
Carla Harris: I would agree.
Samir Goel: And that burdens immigrants. That burdens low income Americans. That burdens college students that don't grow up in a wealthy family but it's particularly acute for immigrants because when you arrive, you don't understand what the credit score system is. Frankly, it's quite esoteric and unique to the United States. And the sad part about it is that because you don't know about it and because you don't have an identity, you're gonna be forced to pay more for everything. Like Abbey talked about, he and his mother took out a 400% payday loan, but that experience is shared by millions every day, and the reason is because there's no data for lenders to be able to underwrite their risk. And so because we can't do that, by default we kind of grade everyone an F. And so that prohibits people from oftentimes getting a job, qualifying for a lease, getting enough cash when there's a medical emergency. Forget about home ownership. That's not even in the picture, right? And so that's really how this kind of stacks up. And it's almost like death by a thousand paper cuts because your credit system is really your lifeline in the United States. And America's been built on this concept of cheap debt, and the credit score is at the very center of that.
Carla Harris: Yeah, and let's just connect the dots there because you just said so much is built on credit, and we could argue that credit leads to financial stability, right? Because if you are having an issue with cash flow, for example, being able to have the credit can allow you to at least pay your bills on time, which as we all know, definitely contributes to a credit score and it also gives you the ability to get a mortgage, which we all know the foundation to building wealth is home ownership. So if you do not have the credit, then it's hard to obviously get to the house or the mortgage that will allow you to have that building block to building wealth. And you also just made a very interesting point Samir about being assumed guilty before being proven innocent, because if you have absolutely no credit, there's an assumption that you won't pay. So there's an assumption that you're not going to do the right thing.
According to a 2020 report by the Consumer Financial Protection Bureau, over 45 million people in the U.S. are deemed “credit invisible”. Let's just say we waved a magic wand and those 45 million people would now become visible. What impact do you think that would have on the U.S. economy?
Wemimo Abbey: Massive impact. And we're gonna put it in math terms cause numbers don't lie, right?
Carla Harris: Amen.
Wemimo Abbey: For those 45 million people that don't have a credit score, the average debt in the United States is $92,000. If you do that math, we can unlock north of $4 trillion in liquidity in the American economy. That's not only good for our GDP, that's good for opening doors for folks that have been fundamentally left behind and less stress on our social welfare system. So it's in our best interest collectively as a society to make sure the 45 million people that are not seen by the credit system today are seen so they can get quality access to financial products.
Carla Harris: Okay. You're right. The numbers don't lie. I agree. And that's a huge number and a huge opportunity.
Carla Harris: Let's talk a little bit about Esusu. What ultimately led you all to start the company?
Samir Goel: Carla, we had both had these shared experiences of financial marginalization, and that was kind of the impetus for us to launch Esusu. And our core belief is that no matter where you come from, the color of your skin or your financial identity, it should never determine where you end up in life.
Carla Harris: So if I could say it in a different way, financial marginalization is really being at the edge of what's going on around you, in many ways not even being seen. You're there but you're marginalized because you can't participate in the same way. Is that fair?
Samir Goel: Precisely.
Wemimo Abbey: Yeah, and one thing that we saw is when you pay your mortgage that data is reflected on your credit score. Today, there are 45 million people in this country that either have no credit score or they have a thin file, which means they don't have a lot of credit activity. A majority of those people are renters. But when you pay your rent, that data doesn't reflect on your credit profile, which is predominantly low to medium income people. So what we found out is this eureka moment of how about we capture the largest expense which accounts roughly 35 to close to 60%, for low to medium income, their monthly expense on rent? And that's what we did. We build the plumbing of capturing rental data, transforming it and reported it into the credit rating agencies to help people establish or build their credit scores. And voila, with Esusu's presence now, when you pay your rent, you can also get credit for it. And what we believe that is giving credit where credit is due.
Carla Harris: Let's talk a little bit about your business model, and maybe Samir, you can talk about that. How do you all make money?
Samir Goel: So we tried to be very intentional when we built our business model. The way in which we make money is we charge the landlords a one time setup fee of $3,500, and then we charge two dollars per unit per month. And the reason we use this business model is so that way we can put the cost burden on the landlords and provide enough value that they find it worthwhile to pay for this, rather than putting that burden on the renter. Oftentimes our renters are already low income, Black and brown communities that are disadvantaged, we don't wanna put an additional cost burden on them for something that frankly they should be having access to anyway. And for the landlord, right? We increase on time payments. We make sure that their cash flow is healthy. We make sure they have better relationships with their renters. And for those who are socially minded, we give them a playbook to execute that.
Carla Harris: Excellent. Excellent. So talk to us about the process of how did you talk to Experian and Equifax and TransUnion to get them to accept this data and to get them to now think about the credit score a little bit differently. That had to be a sale in itself.
Wemimo Abbey: It was a big sale but fortunately we had regulatory tailwinds that helped us out with this. In 2013, there was the Credit Access Act that passed that essentially compelled the capturing of what they called alternative data, and rent was the largest expense within that bucket. So since that time, the credit rating agencies have been looking for ways to capture this data at scale. And when Esusu came into the scene in 2018, we took on the responsibility of building the system that captures the data from the property manager or the landlord, transform it in accordance to roughly 4,400 rules and regulation in the United States into lines of code, and then report it in a language the credit rating agencies understand. So we did all that work for them and they rely on us for their furnishing of that data. It took a long time, but there's an African American saying that, “If you hang around the barbershop, sooner or later you're gonna get a haircut.”
Carla Harris: That's a great saying. And it happens to be true. So let me ask you, by how many points do Esusu customers increase their credit?
Samir Goel: So the good news is that, on average, we see a credit score improvement of around 52 points.
Carla Harris: Wow!
Samir Goel: But to take a step back and dissect that a little bit – for people who are credit invisible, Esusu can establish their credit score 100% of the time. And it's usually a prime credit score, so something above 650, so that way someone can participate in the financial system. And then for folks who have a credit score, the improvement can range anywhere from 20 points to 100 points based on their other financial activity, the length of time they've been in their apartment. But the impact is quite profound and fairly life changing and moving people out of poor and fair credit into good and excellent credit.
Carla Harris: Outstanding. So in January of 2022, it was announced that Esusu raised $130 million Series B at a billion dollar valuation, making Esusu one of the few Black-owned startups to reach unicorn status, both in the United States and globally. What do you think reaching unicorn status says about your business?
Samir Goel: Carla, it's still a little surreal to even think about it. You know, when we first tried to go fundraise, over 300 investors told us no. And that's for a multitude of reasons, right? Abbey and I don't look like your typical Silicon Valley founders. But more than that, what we realized is that the people we were seeking funding from didn't have proximity to the issues we were solving. So we'd be asked, “Who cares about 52 points on a credit score? Am I gonna use this to refinance my Lamborghini?” You think I'm kidding, but those are the sort of questions that we would get. And I think what was always shocking to Abbey and I is this isn't a business serving the minority. We're serving the majority. There are more people in America that struggle with credit, struggle with financial access and inclusion than those who don't. And this recent round of funding and this valuation really goes to show that the industry has recognized the power of a business that actually serves low to moderate income consumers and that we fundamentally can do good and do well at the same time.
Carla Harris: Wow. And that's a powerful statement and that's a playbook point that I want to underscore that there are more people who are experiencing either lack of financial identity or financial instability than there are that are not. So you are in fact serving the majority not the minority. And focusing on immigrants is certainly the American way since this is the country that was built by immigrants. So, you know, I hear you. The story lines up. But it's not, unfortunately, surprising to hear that you all had the challenges that you had in terms of raising the capital.
Carla Harris: So how can Esusu's credit building services in your mind change the landscape of the American credit system?
Samir Goel: That's the big question, but that's the reason we really set out to do what it is that we do. The way that we think about it is: today, there's about 45 million Americans who are credit invisible. There's over a hundred million others that are renters, right? And all of those people are essentially losing something on the table. By incorporating rental payment data, we can make sure every one of those people has a fighting chance to participate in that credit system. This is going back to the financial marginalization topic that we started talking about and really make sure that people have the ability to access the credit system to participate. And ultimately our goal does not stop with credit building. That's just the first step of our journey. The way we think about the kind of wealth building pyramid is we start with financial identity and then we help our renters move towards financial stability and ultimately wealth creation. And so credit building is just that foundational step, making sure each and every person in our ecosystem has their credit identity. And then from there, anything is possible and we wanna be a part of that journey. But this data has the potential to transform the way people can access and engage with our credit system.
Carla Harris: And I love that. That's a major playbook point. You help people get financial identity. That takes this marginalization away. They can be seen in the system. And the information that Esusu provides helps you get to financial stability, which then can lead you to wealth building, because now you have the identity, you're in the system, you got credit, you have gotten to a point where you have consistent stability, and now you can start to acquire the assets, like homes, that can help you to ultimately build your wealth.
Samir Goel: You nailed it. That's our vision.
Carla Harris: Excellent. Well I gotta tell you I'm hopeful because people like you all have figured it out in the last five years, how to close that gap in some way. And this credit piece is huge. And so I am very hopeful that that innovation will happen over the next five years. So my last question is what would be the first piece of financial advice that you both would give to somebody who has just stepped foot on American soil for the first time to start a life here? And Samir, I'll start with you.
Samir Goel: Wow. Carla, that's a hard one but I think the guidance would be to understand the credit system. To really understand the credit system and figure out how to be a part of it, because otherwise you'll suffer the consequences for a long time to come.
Carla Harris: Mm-hmm. Okay, and Abbey?
Wemimo Abbey: My advice is simple. America was built on cheap debt. Understand the fundamentals of getting access to cheap debt and pay yourself first.
Carla Harris: That's a great place to end. Abbey and Samir, thank you so much for taking the time to speak with us today.
Wemimo Abbey: Thank you so much for having us, Carla.
Samir Goel: Thank you, Carla.
Carla Harris: I want to thank Wemimo Abbey and Samir Goel for joining me on this episode of Access and Opportunity. What did you think of today's episode? Send us your thoughts at carlapod@morganstanley.com. And to continue learning about individuals working to drive systematic change within their communities, subscribe to Access and Opportunity on Apple Podcasts or wherever you listen. Thanks for coming along.
