One personal decision can create a mess of financial challenges for transgender Americans—'it takes a lot of courage'

Changing their name may be an important step a transgender or nonbinary person takes to embrace their identity.

But doing so is seldom easy and can create even more problems — particularly for your finances — after the fact, according to a recent white paper published by J.P. Morgan Wealth Management. Even if you get through the lengthy and complicated process to legally change your name, there are often more hurdles ahead.

"You have a new name that doesn't match your driver's license, or the name on your lease for your apartment, or the name on your credit cards, so it becomes an issue where these [financial] institutions think that we're fraudulent," Leo Aquino, a personal finance journalist and educator who founded Queer and Trans Wealth, tells CNBC Make It. "You're automatically sort of looked at as…a person who's trying to get one over on us, which is simply not true."

Trans and nonbinary people may face additional challenges than those changing their name for other reasons.

"There are clear processes for updating the change of last name because of marriage and divorce — our legal system is built to support those changes," Shelby Anderson, executive director of wealth planning and advice at J.P. Morgan Wealth Management, tells CNBC Make It. "But the U.S. has been slow to develop [policies] to address other changes, like [gender] identity and first names."

Trans Americans are already more likely than their cisgender peers to face financial problems like unemployment and homelessness. But even those who are otherwise doing OK financially can run into major issues just by changing their name.

The effects of changing your name

Anyone who tries to open a new bank account or apply for a credit card with a name that doesn't match the one on their government-issued ID will run into difficulty. But for trans people, getting both government-issued documents and financial documents like a credit report to match their chosen names can be an overwhelming, if not impossible, process.

"Because of procedural complexity and expense, hundreds of thousands of transgender persons in the U.S. do not have a single piece of official identification…that correctly identifies their gender identity or chosen name," according to the J.P. Morgan white paper. Those documents can include a birth certificate, passport, driver's license or Social Security card.

Inaccurate credit reports are part of the reason finances can be complicated for trans people after a name change. Credit reports using deadnames — former names that individuals no longer use — are common and can result in credit discrimination against trans people, J.P. Morgan says.

When anyone changes their name, first or last, they need to contact all three credit reporting bureaus — Equifax, TransUnion and Experian — to report the change and go through each agency's individual process. Because the agencies have more experience and established policies for name changes related to marriage, those tend to go more smoothly.

But changing your name due to a gender transition can wind up giving you a whole new credit history, according to Experian. 

'The solution...is not really a solution'

Aquino, who has been through the name change process himself, says the burden falls on the trans or nonbinary person to make sure their credit history accurately follows them. He ran into issues when he was applying for an apartment lease shortly after his legal name change went through because his credit history hadn't fully transferred over, he says.

"[Off] the bat, they're like, 'We don't know you, you don't have a credit history,' and 'How can we prove that you are someone who has been able to make rent payments consistently on time, if it's under a different name?'" he says. "The solution [for] most of us is you have to be extra organized, extra on top of it, which is not really a solution."

Getting approved to rent an apartment is just one of the issues that can arise out of inaccuracies on your credit report. Potential employers, utilities and phone companies and more may pull your credit report as part of a background check to hire you or establish services at your home.

"Having to disclose your deadname to obtain those can feel like an invasion of privacy," Anderson says. "It can feel like sharing information that can be traumatic to the individual that is forced to share that is the broader issue."

"It takes a lot of courage to go through the process of changing your name, and it's such a victory when it does go through in the courthouse," Aquino says. "To have all these institutions every step of the way doubting who you are, it [can be] really disheartening, and really heartbreaking, depending on where you're at in your process."

3 tips to navigate a name change

In lieu of standard procedures and guidelines for financial institutions and government agencies to support first name changes, trans and nonbinary individuals who update their name can take a few steps to make the process as smooth as possible. 

1. Stay organized

As Aquino points out, it's a necessity for trans and nonbinary people to keep careful track of their financial accounts both before and after they go through a legal name change. Ensuring each account you've opened or closed is accurately reflected in your updated credit report is key to avoiding issues with lenders in the future.

Aquino also recommends taking notes on all your calls with creditors to keep tabs on where you are in the process of updating your records and keep your emotions in check.

"When you're on these kinds of phone calls, things can get really heated and emotional really quickly to the point that you forget a lot of the important details of what you're supposed to do next," he says. "What's been really helpful for both myself and my clients is just separating the facts from the emotions."

2. Use your passport

Even if you're able to legally change your name, a gender marker on your government-issued ID could still be incorrect, and in some cases, difficult or impossible to change.

"Many states require a complete invasion of personal privacy (mandating public disclosure of proof of surgery or other medical interventions) to correct identity documents — interventions that are frequently financially unfeasible to obtain or not even desired by the transgender individual," J.P. Morgan reports.

The U.S. State Department, however, allows individuals to change the gender marker on their passport without medical certification. This allows trans and nonbinary Americans to get an accurate government-issued ID after they've changed their name relatively simply.

3. Find support

Unfortunately, trans and nonbinary individuals still face insurmountable discrimination from potential employers, landlords, financial institutions and more.

It's critical to find peers who have been through the name change process to help guide and support you through your journey. Additionally, it's a good idea to do research reviews of organizations you want to work with — such as employers and property managers — to ensure they have a record of treating trans and LGBTQ individuals with fairness and respect.

"Once a trans person gets financial security, you better believe we spread it," Aquino says. "We take care of each other, we borrow from each other's businesses, we support each other when things are tough. [There are] a variety of reasons why we should be allowed to thrive, but mostly, we deserve it. We give it back to our communities."

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