How LGBTQ+ Americans Can Overcome Barriers to Building Credit | Smart Change: Personal Finances

Caitlin Mims

Andrew Pledger came out publicly as gay during an interview on Instagram Live in January 2022, just before starting his final semester at Bob Jones University, an evangelical institution in South Carolina. Less than two weeks later, he was expelled.

During Pledger’s time in college, he attended a church that affirmed his identity as a gay man for the first time. When he was evicted, a family he met at church offered to let him move into their house. With their help, he was able to get back on his feet and complete his studies.

Other LGBTQ+ people in similar situations are not so lucky. In addition to potential familial and social rejection, the LGBTQ+ community is at heightened risk of financial insecurity due to widespread discrimination in education, employment, and housing.

Access to credit and a strong credit score are the cornerstones of financial security. It’s not just about borrowing money: a credit score can affect your ability to find a job, a vehicle or a place to live. Here’s an overview of why LGBTQ+ people may face economic hardship and what steps they can take to build their credit and financial security.

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Additional challenges to bolster the credibility of the LGBTQ+ community

The Federal Reserve’s 2019 Survey of the Economy and Household Decision-Making found that LGBTQ+ adults were nearly twice as likely as the general population to report having poor credit scores. In fact, people who identify as LGBTQ+ had no explicit protection against credit discrimination until 2021, when the Consumer Finance Protection Bureau issued an interpretative rule stating that gender identity and l Orientation should be considered a protected class under the Equal Credit Opportunity Act.

“The laws don’t go that far,” says Carmel Valentine, executive director of the Massachusetts Transgender Political Coalition, or MTPC. “The work is really kind of a culture change.”

Finding a safe place to live, stable employment, reliable transportation and the ability to pay for emergencies are essential to survival. And it becomes infinitely more difficult for people with bad credit. Meanwhile, cities that are more accepting and have better local protections often tend to be more expensive. LGBTQ+ people earn an average of 89 cents for every dollar earned by straight cisgender people, according to a 2021 survey from the UCLA Law-based Williams Institute.

The amount of money you earn or spend has no direct impact on your credit, but it could influence it indirectly. Your use of credit, or the percentage of your credit limit that you use, represents 30% of your FICO credit scores. If you have to spend most of your credit limit each month, your credit could take a big hit.

“I think people have this misconception that credit is only good if you want to buy a car or a house. And people don’t necessarily realize that some of the more intermediate actions, like renting an apartment , also come with a credit check,” says Michelle Waymire, a certified financial planner in Atlanta, Georgia who specializes in working with the LGBTQ+ community.

Ways to build and strengthen credit

Despite additional challenges, there are still steps LGBTQ+ people can take to help build their credit.

Check your credit report

First, pull out your credit reports so you know where you stand. You are entitled to a free credit report each year from each of the three major credit bureaus via But be aware that this can be a stressful and potentially emotionally draining process, especially if you’ve changed your name.

In theory, changing your name shouldn’t affect your credit. But according to a 2022 joint letter from the National Consumer Law Center and several other LGBTQ+ advocacy organizations, trans and non-binary consumers reported significant issues, including sharp drops in credit scores, split credit reports multiple dead files and names never deleted reports. .

Luke Lennon, who uses he/they pronouns, founded Namesake, a platform that helps streamline the name change process. He legally changed his name several years ago, but didn’t realize his updated information wasn’t correct until they tried to buy a truck. The lender could not see all of Lennon’s credit history and was only able to offer him a loan for the truck with a high interest rate.

“I’m a cross-mask white person [who is] employees and financially stable. In that sense, I was in a very privileged position,” says Lennon. “But for some it can be a much more dangerous, risky and really damaging situation.”

If information on your credit report is missing or inaccurate, or if it still shows your dead name, contact credit bureaus as soon as possible.

Open a credit card

Opening a credit card (and using it responsibly) is one of the quickest and easiest ways to start building up credit, as long as you find one that you will be approved for. If you have bad credit or no credit at all, consider these options:

  • Secured credit cards work like regular credit cards, but require a cash deposit. Since it reduces issuer risk, it’s easier to get approved, and some don’t even require a credit check.
  • Student Credit Cards can help establish credit without a security deposit. These cards act like regular unsecured cards, but generally have lower qualification requirements.
  • Alternative credit cards use additional factors besides your credit history to make approval decisions. Depending on the card, this could be income, employment, or banking information.

Some issuers who use Mastercard as their payment processor will allow you to use a preferred name on your credit card, even if it’s not your legal name. But without strong credit, your options will be extremely limited. Also, if a merchant asks to see your ID, they may need to call your issuer to verify your identity.

Make payments on time

Paying your bills on time is an important part of your credit scores. Try to make at least the minimum payment each month, if you can’t pay off your entire balance. If you’re having trouble making your minimum payment, be proactive and contact your issuer before you miss a payment. The issuer may give you the option of participating in a hardship program, which may lower your minimum payout while keeping your account current.

Turn to chosen family for help

Pledger was able to start building credit early because his father got him a credit card when he was 18 and then helped him pay it off. But even if you face rejection from loved ones, you may still be able to find support from a chosen family.

“Find your network and you can find the kinds of social support systems that might typically be provided by family. [It] doesn’t have to be organic,” says Waymire.

Ways loved ones can help you take steps to build your credit include:

  • Co-signing: Those just starting out, especially those under 21, can increase their chances of being approved for a card by enrolling a co-signer who agrees to pay the debt if you don’t.
  • Authorized user accounts: Becoming an authorized user allows you to benefit from the good credit behavior of the primary cardholder without having to apply for a whole new account.
  • Provide card-secured deposit funds: Most secured credit cards require a deposit of at least $200.
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