Yolanda Smith thought buying a home was out of reach because of less-than-perfect credit.
The Kansas City native and her husband moved to North Texas in 2013 because of a job relocation. But Smith’s husband died two years ago after a long illness that burdened the family with medical debt. Since her husband’s passing, Smith has struggled to find an affordable home.
“When my husband died… I had to do this by myself,” Smith said. “I know I have family, but I’m an independent person. I just had to get out there and do it.”
In mid-April, Smith was driving and listening to the radio when she heard an ad for Pathway Homes. She stopped the car, wrote down the information and called the business the next day.
Smith worked with Pathway Homes, a real estate platform with a mission to create more homeowners, and Self Financial, a credit-building platform, to finally get approved for a home.
Pathway Homes customers who have been rejected from rent-to-own properties in the past due to low credit scores can use Self’s free rent reporting service. After joining Self and Pathway Homes, Smith got a house in less than two months.
Backed by a $250 million investment from Dallas-based Invitation Homes, Pathway launched in 2022 to focus on underserved families with steady incomes who still struggle to qualify for a conventional mortgage.
The rent-to-own market and credit-building tools like Self Financial are part of a larger trend in a squeezed housing market to open up housing opportunities for home seekers who were previously unable to meet the traditional requirements to get a conventional mortgage.
Alan Felch, a Dallas-based mortgage lender with Homeloanapproval.com, said a home seeker ideally should have a 700 credit score to get the best interest rates for a home.
But even people without the best credit can still get approved for a home loan with some time and effort, Felch said.
Felch said tools like Self Financial offers can be great for people who need to “get to the finish line” of their home-buying journey.
“This is about self-discipline,” Felch said. “I can tell one person what to do, and they’ll do it, and 12 months later, they buy a house. I can tell the exact same information to someone else, and they will do nothing. So I always say that time is going to pass. It’s what you do with it that matters.”
Credit is the biggest barrier to homeownership, said K.C. Cleary, the co-founder and chief strategy officer of Pathway Homes. The housing market today makes it increasingly difficult for folks like Smith to bridge the gap between renting and buying, Cleary said.
In the modern rent-to-own market, Dallas-based Pathway Homes has more than 500 active residents living in homes across North Texas, but also in Atlanta, Phoenix, Charlotte and central Florida.
The company launched more than two years ago to help people become homeowners like Smith. The real estate platform matches residents with homes owned by the company, moves them in and charts a path for buying the home.
Once a resident lives in the home, rent is predictable and stable, giving residents time to buy the home from the company, Cleary said.
The Pathway Homes platform works much like Zillow, where home seekers can browse available homes owned by the company and see transparency on rent and other requirements.
“What we do is provide options for folks,” Cleary said. “That option looks like a nice, new home with professional property management in a good location with good schools and good public safety and predictable payments.”
Even with the financial coaching at Pathway Homes, clients often need help with their credit, which made for a smart partnership with Self Financial, Cleary said.
Julie Szudarek, CEO of Self Financial, said barriers to credit limit everything people can do, like getting loans, a credit card, insurance – even employment. Homeownership is one of Americans’ greatest dreams, but too often poor credit can kill families’ prospects of owning a home.
Self Financial, which has been in business since 2015, has about a million active customers, Szudarek said. Any tenant paying rent can use the platform.
“We have both people who are paying big management companies, and then people who are paying Joe the landlord in Chicago,” Szudarek said.
Self’s rent product examines a customer’s rent payments and reports them as “positive payment events” to the three credit bureaus: Equifax, Experian and TransUnion.
Options like Self are out on the market. But Self is the only one Szudarek is aware of that is free for customers and reports rent payments to all three bureaus.
“They’re all important because when you’re getting a loan, you have no idea who the loan agency is going to look at when they’re determining whether to give you a loan or not to give you a loan,” Szudarek said.
In about three to five months, customers should see an impact on their credit report by using Self products, Szudarek said.
Pathway Homes’ partnership with Self Financial developed organically as clients came into the rent-to-own platform speaking highly of the app’s impact. Cleary said his staff began referring more people to the platform as they would come in seeking help to build up their credit.
“We’ve noticed our approval rates have a marked increase this year in a time when you wouldn’t expect an increase in your approval rates,” Cleary said. “And we think Self [Financial] is certainly part of that.”
Szudarek said people don’t have to be Pathway Homes clients to use the Self Financial platform. But home seekers working with Pathway Homes who need help with their credit before approval can get a boost from reporting through Self.
“We think that the product that we have that reports rent payments is super impactful to consumers,” Szudarek said. “Rent is the biggest expense that many consumers in the United States have, so why not get positive credit for paying that bill on time?”
At the beginning of May, Smith moved into her Fort Worth home. Smith says she’s overwhelmed thinking about living in her own home.
She loves the one-story, brick home and is starting to meet her neighbors. And she can’t stop telling people about the life-changing tools and education she found in Self and Pathway Homes.
Smith’s credit before finding the Self app was too low to be approved for a home, she said. But Self looked at her rental history and other bills she pays that could be reflected in her credit score.
“It didn’t take me but 10 minutes [to sign up],” Smith said. “Within a week, they had shot my score up 10 points more than what I needed. That app is still working for me today. I tell you, it’s a miracle.”
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