The Lumpy Blue Sweater
How A Simple Decision Like Rent Reporting Leads to Financial Freedom
There’s a great scene in The Devil Wears Prada1. It’s the moment when Miranda Priestly responds after her new assistant, Andy, scoffs at the importance of a fashion decision Miranda and her team were making - while wearing a “lumpy blue sweater” the color of which she simply took for granted2. As Miranda explains, the color choice of that sweater was not a random or inconsequential decision, but rather the result of one decision made by a handful of people that would go on to affect multiple industries and impact the jobs of millions of people around the world.
Miranda’s reply is a master class in revealing the tremendous potential for value that lie hidden within the seemingly small things that most of us don’t spend much time thinking about. Simple decisions can pack a powerful punch.
And it is a concept that applies to more than just fashion. It also applies to how we help more people strengthen their financial identity.
A Strong Financial Identity Begins With a Good Credit Score
A person’s financial identity is largely defined by their credit score. While income, savings, and debt all matter, the credit score is the key that unlocks—or blocks—access to the financial mainstream. It’s how banks, landlords, insurers, and even some employers assess trustworthiness and risk.
A strong credit score signals stability and opens the door to affordable loans, better housing options, and long-term wealth-building opportunities. Without it, people are often forced into high-cost, high-risk predatory alternatives that keep them stuck or make matters worse. In short, building a good credit score isn’t just a financial goal—it’s the starting point for financial freedom.
Most renters in America don’t think about their credit score when they pay rent. They just try to make the payment on time. And for those don’t, the negative consequences are very clear: Collection agencies will be called, eviction proceedings may be recorded, and the financial identity of those renters will continue to get worse.
But, here’s the thing. Most people do pay rent on time. Even during the midst of the Covid-19 Pandemic, more than 90% of all renters in multifamily properties made on time rent payments.
And up until recently, none of those payments got reported to credit agencies. A person could pay rent on time every month for twenty years and not even have a credit score.
Thankfully all of that is beginning to change, thanks to one simple decision made several years ago by a handful of people who decided to it was time to change the system.
How One Idea Can Change an Industry
The decision to not include a person’s on time rent payment towards their credit score was not a conscious decision. I think it is fair to say that no one really gave it much thought at all. So when rental payment systems were built, they were not designed to work together with reporting systems of our credit agencies. And, if a property owner wanted to report on-time rents to the credit reporting agencies, it was nearly impossible to do.
But the good thing about systems is that they are designed by people. And that means they can be fixed by people.
Less than ten years ago, a handful of entrepreneurs tried to do just that. They formed companies and built technology platforms to connect the payment systems used by property owners with the reporting systems used by major credit agencies and make it easier for property owners to help renters get credit for paying rent on time.
One of the most successful of these early pioneers was Esusu. Today, their platform reaches over 5 million renters in all 50 states and their success has inspired other companies and policy makers to follow suit. California, Colorado, and Delaware have all passed legislation to increase on-time rent reporting, and this month the White House directed the Federal Housing Finance Agency to allow on-time rent payments to be included in single-family mortgage underwriting—meaning renters with a history of paying rent on time can finally use that data to qualify for home loans.
It’s a familiar story: One simple decision made by a handful of people that is affecting an entire industry and strengthening the financial health of millions of renters across the United States. It’s a lot like choosing the color blue - only it’s a whole lot more impactful for low and moderate income families.
The Hidden Benefit of Better Credit: Fewer Payday Loans.
A funny thing happens when more renters build good credit scores: Fewer renters need predatory lenders.
This is no small thing. Payday loans and other forms of predatory credit trap people in a cycle of borrowing that never ends. Interest rates can soar above 300%. A $400 emergency loan becomes a compounding $800 octopus that sucks hard earned wealth from hard working people3.
Rent reporting helps change that. When people are able to build credit by making on-time rent payments, the doors to a more responsible and well regulated financial system open.
It’s a simple thing, really. When renters aren’t forking over money for predatory interest rates, they have more cash at the end of every month to buy groceries. To fix their car, or save for a rainy day.
They also find it easier to pay rent. According to a TransUnion study on the behavior of renters who participated in rent reporting programs, 73% of renters said that having their rent payment count towards their credit score makes it more likely to pay rent on time.
A Path to Financial Freedom for Everyone
For most of us, our financial identity is a lot like the clothes that we wear. We don’t know who made them or who chose their particular color, and we don’t think twice about the sign outside the bank that says “No Shirt, No Shoes, No Service.” And we definitely don’t see the sign that says “No Credit Score, No Financial Identity, No Service.”
So the next time you get dressed for work, think of Miranda Priestly and the story of the blue sweater. And think of how a simple decision - like building a technology platform that allows rent payment systems to talk to credit agency systems - can change the lives of millions of renters.
And then think of the tens of million renters who are still waiting for that change and how much more economic potential we have yet to unlock4. Think of all of the work that our industry has yet to do. Because everyone who pays rent deserves the chance to build their own financial identity.
And that is all.
The Devil Wears Prada is one of the top 5 movies ever made. I’m sorry, but this is a hill I will die on.
It was not just blue. It was cerulean blue.
If you can’t tell, I am not a huge fan of predatory lenders.
According to Entrata, only 15% of the more than 70 million renters in the United States are getting credit for their on-time rent payments today.