How Gen Z Builds Credit in 2026

James Chemplavil, Founder/CEO, Salus

Gen Z credit union members increasingly find themselves in a common situation. They are a few years into the workforce, earning entry-level incomes that will one day increase with their experience and skills, but for now leave them on a tight budget. 

They are managing their expenses, which may include a student debt payment. And while they are 2-3x more likely than older generations to want an auto loan or mortgage loan in the next five years, they don’t really have a credit score that measures up yet. 

The bottom line: they’re looking to build credit, which presents an opportunity for the institutions set up to help them. But does a credit union offer them the best path forward? Let’s consider two options for this Gen Z member.

The young member looks into a credit-builder loan. This traditional credit union product offers them the ability to build their credit score through a closed-end, installment loan that they can get without a hard credit pull. It sounds great.

The loan they see is for $1,000, repaid over a 12-month term at a 10% interest rate. The idea of getting a $1,000 buffer sounds great, especially when 63% of Gen Z hasn’t been able to set aside an emergency savings fund yet. 

The problem is they don’t get the $1,000 they borrow. That money is held in a place that they can’t access until the loan is paid off. And now, they’ve added $88 to their monthly expenses. 

That doesn’t sound like much, but when budgets are stretched so tight that 55% of Gen Zs struggle to handle an unexpected $400 expense, that extra payment becomes more of a burden than it originally seemed. And if this young member tries to pay off the loan early to ease the burden, it might temporarily lower their credit score due to changing their credit mix. Suddenly, the credit-builder loan isn’t as good an idea in practice as it was in theory.

But what if these members had a different option?

49% of Gen Zs rent their homes, a rate 2-3x higher than Gen X or Baby Boomers; that likely makes their monthly rent payment their biggest expense. They already have this payment in their budget, and they’re making it on time. Credit bureaus accept reporting of on-time rent payments to help flesh out thin-file credit reports and rebuild damaged credit. 

So, our Gen Z member tries signing up for rent reporting.

They use a third-party paid service that they sign up for on a website. There’s no credit pull; they just provide information about their lease agreement and monthly payment. 

To build credit here, they’re not adding a monthly payment to their budget – they’re just getting credit for every month they pay their rent on time. Not only that, but the service can give them credit for on-time rent payments they’ve made over the last two years. 

After a few minutes of onboarding, they’re signed up for rent reporting. Instead of a new $88 monthly payment, they’re paying $5 a month for this reporting service. Their budget isn’t strained by a new payment; they’re getting credit for a larger monthly payment they’re making, and it feels seamless because they’re just doing what they’ve already been doing. And they feel confident that this can help their credit, because 79% of the time, rent reporting has been shown to increase credit scores.

Now this young member is building credit with no complicated loan structure, no burdensome monthly payment – it was seamless, easy and fits their lifestyle.

Rent reporting to the bureaus may seem like a new idea, but it’s been gaining traction among younger consumers for some time. Gen Z is signing up for rent reporting at a higher rate than any other generation, and it’s a great opportunity for credit unions. 

1. It’s a great way to meet members where they are with a modernized solution they want to use. 
2. The credit union as the opportunity to become the primary financial hub for the member, which leads to deeper member engagement and product use. 
3. It gives you insight into members who are looking to “graduate” to higher levels of credit, as well as the products and services you might offer them when they’re ready. 

So the only question left is: would credit unions rather let other companies reap the benefits of a program like this, or would they rather offer it directly to members themselves?

If you’d like to learn more about how your credit union could offer a service like this to members, check out the Salus platform, helping credit unions bring Gen Z solutions like this to members.