Although rent constitutes a continuous and significant financial burden, it has historically been detached from the formal financial framework. Unlike credit card payments or Equated Monthly Instalments (EMIs), rent payments have not been incorporated into assessments of an individual’s creditworthiness. This represents not just a market gap, but a major shortfall. As a result, renters are unable to utilize their consistent rent payment history to unlock superior financial opportunities—be it negotiating better rents, acquiring loans for rental expenses, or qualifying for home loans on more favorable terms.
Landlords also lack dependable data to evaluate the reliability of prospective tenants. This is where a transformative idea comes into play: transforming rent payments into a recognized measure of financial dependability. Unlike conventional credit scoring models that mainly concentrate on loans and credit cards, this innovative approach employs sophisticated algorithms to analyze financial behavior—taking timely rent payments into account along with other qualitative and quantitative data points.
A Tech-Enabled Solution for Tenants and Landlords
This technology-driven framework allows tenants to establish financial credibility through consistent on-time rent payments. It empowers them to negotiate improved rental terms, obtain loans for rent or security deposits, and even gain pre-approval for home loans. For landlords, it serves as a tool for more reliable tenant screening and facilitates early rent payments during financial emergencies.
Born From Personal Insight
This idea emerged from a personal experience that revealed a significant flaw in India’s credit landscape. While managing a luxury car dealership and renting a home in Mumbai, I maintained a solid income and paid my EMIs promptly, yet I was rejected for a home loan due to “overexposure to credit”—despite consistently paying my rent on time. This situation underscored the irony: one of the largest monthly expenses for urban renters holds no relevance in credit evaluations.
Driven by this realization, I collaborated with Ernst & Young – Parthenon to carry out an in-depth study. Over a year, we engaged with various ecosystem stakeholders—including banks, financial organizations, brokers, landlords, and tenants—culminating in a comprehensive 160-page report. The results were enlightening: banks showed interest in utilizing structured rent data for credit decisions, landlords recognized the value in understanding tenant rent behavior, and tenants widely felt it was unjust that rent wasn’t considered in credit assessments.
The Market Landscape
The findings also indicated that approximately 60% of Bengaluru’s inhabitants reside in rental properties, along with 48% in Hyderabad and 27% in Mumbai. Nationwide, the rental demographic is estimated at 35%. The majority of India’s rental housing market is concentrated in seven cities—Mumbai, Pune, Bengaluru, Hyderabad, Chennai, Delhi NCR, and Kolkata.
This provided a strong foundation for developing a rent-based credit scoring system—a timely solution that aligns with India’s Model Tenancy Act of 2021, emphasizing the formalization of rental practices. It also reflects global movements, such as a 2024 statement by former Canadian Prime Minister Justin Trudeau, advocating for the inclusion of rent payments in credit scoring.
Strengths of the Rent Score
To achieve a high rent score, tenants must ensure prompt, consistent payments. A solid rent score enhances their chances of securing favorable rental agreements, accessing loans for rent-related costs, and becoming eligible for pre-approved home loans.
Landlords gain greater transparency into tenant profiles, including Know Your Customer (KYC) information and payment habits. They can also take advantage of early rent services, which assist with cash flow management.
Real estate brokers and developers can utilize rent scores to refine tenant screening and speed up lease finalization—especially crucial in fast-paced urban markets. Financial institutions can incorporate rent scores into their underwriting models to offer products such as loans for security deposits, rent-now-pay-later schemes, and zero-deposit bonds—enhancing financial inclusion in a predominantly informal rental landscape.
A Game-Changer in Credit and Rental Ecosystems
Ultimately, the rent-based credit score signifies a revolutionary change—rewarding tenants for financial discipline and providing them with a concrete path toward improved credit access. By integrating rental payment history into financial assessments, it empowers renters to build strong financial profiles and move closer to their aspirations of stability, opportunity, and homeownership.
– The author, Sarika Shetty, is Co-founder & CEO at RentenPe, a startup dedicated to formalizing a rent-based credit score repository. The views expressed are personal.
