Rising inventory is helping push rent prices down. For young adults, building credit is a smart step to take as they prepare to enter the rental housing market.

The median U.S. asking rent price in December was $1,964, a 0.8% decline from a year ago, according to real estate firm Redfin, which analyzed price data on single-family homes, multifamily units, condos/co-ops and townhouses across the U.S., except metro areas. It was the third consecutive decline after a 2.1% annual drop in November and a 0.3% decrease in October.

“It is good news for Gen Z that there are more rental options at more affordable prices,” said Daryl Fairweather, chief economist at Redfin.

While prices are moderately cooling in the rental sector, there is still a long way to go before the real estate market sees consistent and significant price decreases, according to Jacob Channel, a senior economist at LendingTree.

“It’s probably still going to be hard to rent in a lot of instances, unfortunately,” he said.

While some older Gen Zers were able to become homeowners during the Covid-19 pandemic, most did not. They either became renters or never moved out of their parents’ house.

Gen Z includes those born between 1996 and 2012, according to Pew Research Center’s definition, and the youngest members of that cohort are still teens and tweens.

Nearly a third, 31%, of adult Gen Zers live at home with parents or a family member because they can’t afford to buy or rent their own place, a recent report by Intuit Credit Karma found.

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Some of those who did rent are now struggling. Of the Gen Z adults who currently rent, 27% say they can no longer afford the cost, the firm found. It polled 1,249 U.S. adults in November.

“The high cost of housing, even as it comes down in some areas, is going to remain a problem for both buyers and renters for quite some time,” said Channel.

In the meantime, there are ways Gen Z adults can prepare, especially those at home saving on expenses.

Landlords may look at prospective tenants’ credit to assess their ability to make payments on time. Having a good track record with credit can boost your chances that your application is accepted, and with favorable terms.

In short: A strong credit history can make you a competitive candidate.

“Practice healthy habits overall with any line of credit that you may have,” said Melissa Lambarena, credit card expert at NerdWallet. “Whatever you’re charging to your credit card, you should only charge what you can afford to pay back.”

Whether you are on the rental market sidelines or have your eyes set on the ideal apartment in your area, here are three ways to strengthen your credit score:

1. Leverage bills you routinely pay

Traditionally, recurring household bills such as utilities and internet service do not show up on your credit report — and so they are not factored into your credit score.

However, programs such as Experian Boost, StellarFi and UltraFICO allow users to build credit based on alternative metrics such as banking activity and payments for streaming services, electric bills and mobile phone plans. Once you are renting a place, some programs also report those payments as a way to build credit.

However, remember that building your score this way still requires time and consistently good payment habits, said Channel.

“It’s not magical [where] you make three utility payments on time and you suddenly have an 800 credit score. That’s not how it works,” he said.

2. Become an authorized user

You can build good credit based on another person’s credit history when you become an authorized user on their credit card. Under this status, you can use the card, but unlike a cosigner, you’re not on the hook for the balance. This is usually an ideal option for parents who want to help their children build credit.

However, make sure the person whose account you’re piggybacking has a strong credit score. If you become an authorized user with someone who is not as responsible with their debt, it won’t help your credit — and might make things worse for everyone involved, said Channel.

Additionally, the card issuer must report your payment history to the major credit bureaus. Otherwise, it won’t do much good to be an authorized user. Check the credit card company’s terms and conditions to see how it handles that relationship.

Once you cover these steps, set up a plan with the other person: how much you will pay, what your limit will be or if it’s a matter of not using the card at all, said Lambarena.

3. Consider a secured credit card

One of the most straightforward ways to start building credit, especially for a young person, is to look into a secured credit card, said Channel.

A secured credit card can be easier to qualify for because it requires a security deposit, said Lambarena. That’s typically tied to your credit line. In other words, you are setting up your own credit limit by how much you pay up front. “A really low deposit would mean maybe you do not have that much to spend,” she said.

The ideal secure credit card for someone starting to build credit won’t carry an annual fee, reports payments to all major credit bureaus and has a built-in path toward an unsecured credit card in the future with the same issuer once you build up a good credit, said Lambarena.

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