Naborly is now offering unlimited free credit reports and background checks to tenants, landlords, and property managers in the US and Canada.
The company, which offers a platform providing residential tenant screening for landlords and administrative task automation, said in a blog post that it decided to offer free tenant screening services after finding that it was still competing on price against industry incumbents reselling credit data. “There was an industry ceiling on how much a landlord or tenant would pay for any tenant screening service or credit report, whether we liked it or not,” Dylan Lenz, CEO of Naborly, wrote in the post.
“Both my co-founders and I know how expensive it is to be poor in America and Canada.”
The company ran an experiment in October 2017 when they had 15,000 new enterprise rental units; by the end of November, the company signed on over 75,000 new enterprise rental units. Landlords could screen more tenants thanks to the platform, while prospective tenants can show up with applications completed and avoid credit check and background check charges.
“Both my co-founders and I know how expensive it is to be poor in America and Canada,” Lenz told BetaKit. He said that he and one of his co-founders spent their childhoods on welfare living in low-income neighbourhoods.
“When your bank balance is below $1,000 you get charged. You pay higher interest rates. You have fewer credit options. Then, to top it off, many property managers and brokers charging $100 to $250 as a non-refundable application fee to offset the cost of screening the tenant.”
Lenz said that landlords are still relying on the FICO score to screen tenants, which he claims is just as accurate as identifying tenants through gut instincts. “The other issue with their traditional tenant selection process was that it was “fundamentally biased to the landlord’s own beliefs about finance, poverty, and social class.”
As the company decided to offer its service for free, it’s now seeking profitability through insurance for tenants. The company offers a Renter’s Insurance Policy guaranteeing that its scores are accurate, and offering to pay rents if they are wrong.
“Where you live is incredible important. It determines who you’re friends with, what school you go to, what kind of values you build,” Lenz said. He gives the example of a single mother growing up in a low-income, high-risk neighbourhood that avoids traditional banking, meaning that she has little to no credit. Naborly can still assess her situation despite the lack of typical financial data, and Naborly would essentially act as a co-signer to her lease.
“With the rent guarantee insurance product, Naborly would enable the group that falls in the grey area to have more housing flexibility and more mobility when it comes to access quality housing.”
The company is currently in Y Combinator and just opened an office in the Oakland/Berkeley California area and will be expanding to a larger office in Toronto. The company plans to go from 20 staff to 50 by the end of 2018.
“All of us at Naborly strongly believe that startups need to move beyond the recent trend of simply enabling the laziness of yuppie millennials, or just providing another cloud based software to the enterprise to expand their existing profit margins,” Lenz said.
