credit score range

620 Credit Score

Wondering if your credit score is up to snuff?

If you have a 620 credit score, you aren’t alone. Tens of thousands of borrowers in the United States are in the same boat, and usually for the same reasons.

While a 620 credit score could use some improvement, if you’re looking for a guaranteed approval with competitive rates, it does fall into the “fair” credit score range.

In the article below, we’ll break down the factors that could be responsible for your 620 credit score, walk through your personal finance lending options, and share some surefire strategies for boosting your lower credit score.

Table of Contents

  • Is 620 a Good Credit Score?
  • How To Improve a 620 Credit Score
  • Can You Get a Loan with a 620 Credit Score?

Is 620 a Good Credit Score?

A FICO credit score, as reported by the three major credit reporting bureaus (Equifax, Transunion, and Experian), of 620 is considered to be “fair,” whereas a score of 670 puts you in the “good” range.  Typically anything below 670 falls into the bad credit range or poor credit scores.

For reference, around 17% of individuals have a “fair” FICO score, which ranges from 580 to 669. Most lenders rely on the FICO scoring models versus VantageScore, amongst other things like credit card balances and debt-to-income ratios, when determining your creditworthiness.

If you’re not sure what your credit score is, you are entitled to a free credit score annually in the United States.

Here’s the outlook for a 620 credit score:

  • Credit range: Fair creditworthiness
  • Mortgage Loan Type: Limited options
  • Personal loan: Limited options
  • Auto loan: Limited options
  • Unsecured credit cards: Limited options
  • Apartment rental: Potential approval
  • Secured credit cards: High approval

Several credit issues can result in a score of 620. Individuals with “fair” credit scores usually have late monthly payments on their credit reports, some of which may have gone to collections.

Others are on the path to repairing their credit, as it takes time to recover from more severe credit occurrences like bankruptcy, foreclosures, or judgments.

Some of these issues can stay on your credit report and drastically hurt your score for several years if they aren’t removed.

A 620 is right on the border of the credit requirements for some loans, such as a conventional loan.

Though you may be approved for installment loans or revolving lines of credit with a 620, you won’t get very competitive interest rates.

To earn the most competitive rates and gain access to more sources of funding, it’s important to work to build your score.

We’ll provide you with some pointers below.

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How to Improve a 620 Credit Score

With a 620, you’re on your way to a good credit score. Here are a few tips that can help you take your credit score to the next level, with some nearly instant results and others paying off long term:

  • Get your payment history on track. 35% of your credit score is based on your payment history, so you should prioritize making all of your future payments on time, automating payments when you can. You should also catch up on missed payments as they hurt your score more the longer you leave them unsettled.
  • Pay off your debts. Credit utilization accounts for another 30% of your credit score, so you should focus on paying down your loan amounts or debts to see a major improvement to your score. If any of your accounts have gone to collections, contact them to get the collections account removed from your credit report as it can impact your score for 7 years otherwise.
  • Don’t submit too many applications. A credit score of 620 will limit your funding options, and every application you submit will likely result in a hard inquiry that can drop your score even further. Apply for new lines of credit wisely and research the lender’s credit requirements before applying. If you’re applying for a home or auto loan, try to submit all applications within 14 days to limit the damage done to your score.
  • Get a secured credit card: Secured credit cards are designed to help people with limited credit histories and low scores to improve their credit with responsible use. With a 620, you can absolutely get approved for a secured card. To yield the best results, try to only use 10% of your available balance, never using more than 30%.
  • Be an authorized user: If a loved one is willing to help out with your goal of building up your new credit score, they can add you to one of their credit card accounts as an authorized user. That way, your payment history, credit utilization, and credit mix could see a quick improvement when payments on the account are made on time.
  • Report your rent: If part of your problem is having a limited credit history and you’re looking to demonstrate timely payments, you can pay to have your rent reported to the three credit bureaus with RentReporters. Likewise, Experian Boost will report your utility payments.
  • Hire a credit repair company: Sometimes, credit repair is best left to the experts. If you’re having a hard time getting entries removed from your credit report or feel that you’re in over your head, a credit repair company can help get you on track and take the headache out of improving your score.
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Can You Get a Loan with a 620 Credit Score?

You’re right on the edge of being approved for several types of loans with a 620 credit score. For others, your approval odds are high.

In any case, you’ll likely face steeper APR, deposit requirements, and income requirements due to your “fair” credit score.

Here’s a closer look at your eligibility for loans and credit cards.

Mortgage Options with a 620 Credit Score

Your mortgage approval, whether a refinance, government-backed loan, a conventional loan like Fannie Mae, or Freddie Mac, odds with a 620 truly depend on what mortgage lender you apply with.

Take a look at the credit requirements as a future or current homeowner for each of the mortgage options below:

Mortgage Type Minimum Credit Score
VA loan No minimum set by VA; some lenders require a score of 580 or 620
FHA loan 500 with 10% downpayment, 580 with 3.5% downpayment
USDA loan No minimum set by USDA; most lenders require a 640
Traditional home loan 620-640

VA loans (government agency-backed loans) are incredibly advantageous for members of the military and veterans, and you can get approved with some lenders with a 620.

You’ll also have no trouble getting approved for an FHA (Federal Housing Administration) loan, which is targeted towards home buyers with “low” or “fair” credit scores.

If you’re looking for a traditional home loan, based on your score, your income and down payment will play a more significant role in the approval process and mortgage rates.

Keep in mind, borrowers with higher credit scores usually skate past private mortgage insurance as well.

Auto Loan Options with a 620 Credit Score

Lenders take on a big risk when they issue auto loans, so their rates can be quite high.

That’s especially true if you have a “fair” credit score. With any score lower than a 700, getting approved for an auto loan can be tricky.

A lot of credit issuers are willing to extend car loans to individuals with a 620 credit score, but your interest rates could amount to a few thousand dollars more interest than you would with a “good” credit score.

You should also note that your approval odds and rates will be better if you apply for a used car.

The good news is, you should be able to get an auto loan with your current credit score.

The better news is that you could easily get an even more competitive loan with a little work to improve your credit.

Personal Loan Options with a 620 Credit Score

Even more good news, you can be approved for a personal loan with a 620 credit score; however, it will come with higher rates.

You may want to start your search with a credit union. These financiers often offer a lower APR than banks and other local lenders.

At the same time, some online lenders are made with you in mind, with more competitive personal loans tailored towards people with “fair” or even “poor” credit scores.

You can also qualify for the loans below with a 620:

  • Emergency loan
  • Debt consolidation loan
  • Installment loan

What Is the Best Credit Card for a 620 Credit Score?

With a fair credit score, you could be eligible for both secured and unsecured credit cards.

Essentially, unsecured credit cards come with a credit limit based on your score and income.

Secured cards, on the other hand, usually limit your credit limit to the amount of money you deposit, with the potential to grow over time based on your payment history. They have very low credit score requirements.

The higher your score is, the more money will be available to you each month. Your score could also determine your eligibility for low rates, limited fees, and rewards.

Once again, you should check each card’s score requirements before applying and only apply for one of the best credit cards for fair credit and not higher credit scores.

If you are denied approval for an unsecured card, or it comes with higher interest rates and fees, a secured card can still help you, improving your credit variety, payment history, and credit use.

Don’t forget to limit your applications as submitting several can do more harm than good.

Boost Your 620 Credit Score Today

Whether you’re on your way to rebuilding your credit after liens or bankruptcy brought it down, or you’re a college grad with nothing but student loan repayments on your credit report, a 620 is a great stepping stone.

With some strategic steps, you can improve your score by dozens of points quickly and work your way up to an excellent credit score.

If you haven’t already, sign up for a credit monitoring service like Credit Karma so you can track your score, understand changes to your report, and find specialized offers and suggestions for boosting your score.

From there, start paying down debts and catching up on your missed payments, using credit lines wisely to improve your score.

If you need even more assistance, don’t hesitate to contact an expert, taking advantage of credit repair services to get your score where it needs to be.

credit score range

560 Credit Score

A good credit score is essential as a borrower if you’re looking to get approved for anything from a rewards credit card to a mortgage.

But what score do lenders/issuers consider to be in the good credit score range?

If you have a 560 credit score, your approval odds for loans are low, and your credit rating with the three credit bureaus, Equifax, Experian, and TransUnion, is pretty poor.

Fortunately, you can fix a FICO score in this range, getting access to more funding with better rates.

Table of Contents:

  • Is 560 a Good Credit Score?
  • How To Improve a 560 Credit Score
  • Can You Get a Loan Approval with a 560 Credit Score?

Is 560 a Good Credit Score?

Let’s start at the beginning. If you’re not sure what your credit score is, know you are entitled to an annual free credit score in the United States.

This resource is especially helpful if you do not currently pay for a credit monitoring service.

560 credit score is considered to be “very poor,” falling below the average consumer’s FICO score.

For reference, a score of 670 is considered to be “good,” which means you’re just over 100 points shy of having a good score.

There are a lot of factors affecting your credit score, with some carrying more weight than others.

Some of the most common contributors to a “very poor” score include:

  • Late payments
  • Liens
  • Judgments
  • Bankruptcy
  • Repossessions
  • Debt collections
  • Foreclosures

The issues above can hinder your access to both revolving lines of credit and installment loans.

With a 560 credit score, you’ll have very limited loan options and will have a hard time getting approved for unsecured credit cards.

If your score is 560 or below, you should work towards repairing your credit. We’ll provide you with some pointers below.

Get a Free Copy of Your Credit Report

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How to Improve a 560 Credit Score

If you’re tired of your credit score bringing you down, here are some tips to help improve your credit score.

While some aspects of repairing your credit take time, others will have quick results.

  • Focus on your payment history: Your monthly payment history constitutes 35% of your credit score, so making payments on time is key to gaining a higher credit score. Automating payments is ideal. The longer you leave your debts unpaid, the more damage they do to your score. Avoid letting loans become delinquent or defaulting at all costs.
  • Pay down debts: Credit utilization is the next biggest influence on your credit, making up 30% of your overall score. Paying off debts can yield quick and impressive results, demonstrating that your borrowing and payments are under control. If you have any collections accounts on your report, negotiate a pay-for-delete agreement.
  • Limit credit applications: With a 560 credit score, your chances of getting approved for many loan types and credit cards are slim, and applying for new lines of credit drops your score. Do your research, limit your new types of credit applications, and only apply if you feel confident that you’ll be approved.
  • Use a secured credit card: Secured credit cards are made for people with subpar credit scores or short credit histories, so you may be able to get approved with a 560 credit score. When used responsibly, these cards can help you to build your score quickly. To maximize results, try to only utilize 10% of the available amount of credit each month.
  • Become an authorized user: Ask a loved one with a solid credit score to add you as an authorized user on one of their credit cards so your score can benefit from their timely payments. This is especially beneficial when you have new credit and you need to show a good length of credit history.
  • Use a credit repair company: If repairing your credit seems like an overwhelming task, you may want to pay for a credit repair service. They can contact debt collectors, dispute claims, and more, boosting your score quickly.

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Can You Get a Loan with a 560 Credit Score?

The lower your credit score is, the harder it is to get approved for loans.

Some types of loans are more accessible than others in this credit range, but in general, loans for applicants with poor credit come with extremely high-interest rates.

Take a look at your options below for loans with a 560 credit score.

Mortgage Options with a 560 Credit Score

Getting a home loan or refinance with a 560 score is easier said than done, but you do have a few options.

Here are the minimum credit score requirements for each type of mortgage to give you an idea of whether you can qualify or not.

Mortgage Type Minimum Credit Score
VA loan No minimum from VA; lenders may require a 580 or 620
FHA loan 500 with 10% down, 580 with 3.5% down
USDA loan No minimum from USDA; lenders will likely require a 640
Traditional Home Loan 620 – 640

If you’re an active duty member of the military or a veteran, a VA loan is your best bet. Otherwise, your only option is likely an FHA loan.

These loans are ideal for low to moderate earners, allowing for both a low down payment and a low credit score.

Auto Loan Options with a 560 Credit Score

Cars are riskier to finance for lenders. To compensate for that risk, lenders charge high-interest rates.

If your credit score is lower than 700, you’ll have a harder time qualifying for a car loan.

Though you may be able to qualify with a score of 560, it will come with extremely high-interest rates.

You can also expect more scrutiny as lenders assess your application, particularly when it comes to your payment history.

While the average credit score for both new and used cars is at least 100 points higher than a 560, you should be able to get approved for a loan, depending on the vehicle and your income.

You should also note that you’re more likely to get approved for a used car loan than a new car loan with a 560.

Personal Loan Options with a 560 Credit Score

You could qualify for a personal loan with a 560 credit score, though you can expect higher rates here, too.

In some cases, working with a local credit union can help you to get approved with slightly better rates than a bank as federal credit unions have a lower maximum APR.

If applying with a credit union fails, you have access to several online lenders who actually specialize in offering personal loans to people with bad credit.

In addition to a personal loan, with a 560 you may be able to secure an emergency loan, debt consolidation loan, or an installment loan.

What Is the Best Credit Card for a 560 Credit Score?

Most people with fair or good credit opt for unsecured credit cards. With this type of card, your credit limit is a set amount based on your credit report and income.

The better your score is, the higher the spending limit you can expect. Because your credit score largely determines your credibility, these cards can be difficult to get approved for with poor credit.

However, there are some unsecured cards with low credit limits that are designed for individuals with low credit scores vs better credit scores.

An alternative you may want to consider with a 560 credit score is a secured credit card. With these cards, you put down a security deposit that acts as your credit limit.

Secured cards are ideal for building your credit score and can help with your credit mix, payment history, and credit utilization.

Whichever type of card you apply for, be aware of the APR and fees as some are higher than others.

Once again, we advise that you limit your applications as most will require a hard credit check that can lower your score more. You should be able to easily research your approval odds for most cards before applying.

Boost Your 560 Credit Score Today

While a 560 does fall into the poor range of credit scores, your score could be worse.

If you’re feeling defeated after applying and being denied for loans or credit cards due to your score, there’s no time like the present to start working to repair your credit score.

You may be surprised at how quickly you can take your score from poor to fair, giving you access to better lending options and putting you on the path to having a good score.

Take a look at the factors influencing your credit score, come up with a plan to improve it, and stick with it.

And don’t forget that you have access to tons of great online resources and credit repair professionals if you need assistance along the way.

What Affects Your Credit Score?

Credit scores affect almost every aspect of your personal finance life, but what affects them?

While some factors that impact your own credit score are obvious, like your monthly payment history, others might surprise you.

There’s no denying having bad credit can negatively influence your future interest rates.

You’ll never have to puzzle over your credit report again, wondering what could have changed your score or how to strategically work to repair it.

In the article below, we’ll walk you through the 5 factors that influence your credit score, as well as a few that don’t, providing you with tips to boost your score along the way.

5 Main Factors That Affect Your Credit Score

Here are the five main factors that affect your credit score:

  1. Payment History: 35% of your Credit Score
  2. Credit Utilization Ratio: 30 % of your Credit Score
  3. Length of Credit History: 15% of your Credit Score
  4. Credit Mix: 10% of your Credit Score
  5. New Inquiries: 10% of your Credit Score

We’ll break down exactly what each of these factors encompasses below.

1. Payment History: 35% of Credit Score

This one should come as no surprise. Your history of making on-time payments on debts is one of the most important factors affecting your credit score.

No matter what type of debt, whether installment loans and revolving credit, both are heavily impacted by timely payments.

In fact, it accounts for 35% of your overall score, on two different types of credit scoring models, the FICO credit and VantageScore credit reporting scales.

Every 30 days, creditors report to the major credit bureaus (Equifax, Experian, and Transunion), telling them whether you make your payment or not.

The bottom line, one late payment won’t make or break your credit score, but multiple missed payments can seriously hurt your score.

In fact, missed payments that lead to foreclosures, bankruptcy, repossessions, and tax liens can devastate your credit score and your creditworthiness.

The longer you wait to make a payment to the issuer, the harder it is to improve your score in the aftermath.

Payment history mostly pertains to debts from mortgages, car loans, personal loans, and credit cards.

However, after several missed payments on services like your phone, internet, and medical bills, those accounts can be turned over to a debt collection agency and placed on your credit report.

Pro Tip: Automate your payments wherever possible to ensure none of your payments slip through the cracks and prioritize catching up on late payments ASAP.

2. Credit Utilization Ratio: 30% of Credit Score

In basic terms, your credit utilization ratio is a calculation based on how much of your available credit you use. Second, only to payment history, it makes up 30% of your credit score.

This number is calculated by dividing the total amount of credit that has been extended to you by the amounts owed.

Both the FICO and VantageScore models place a heavy emphasis on your credit utilization.

So how much of your credit limit should you use each month?

Experts suggest keeping your credit utilization at 30% or less, at a maximum to maintain a good credit score. To see even better results, you can limit your credit use to closer to 10%.

Pro Tip: It’s all about risk. In addition to keeping your credit utilization low, to begin with, you can improve your credit score by paying down large credit card balances, which shows lenders that you aren’t a risky borrower.

3. Length of Credit History: 15% of Credit Score

Another factor lenders use to assess your risk is the age of your credit.

As you might suspect, the longer your borrowing history is, the better your chances of getting approved for loans or credit cards are.

Younger borrowers with limited credit histories can run into trouble here, which a secured credit card can help with.

While less significant than your payment history or credit utilization, your credit age still accounts for a substantial amount of your score, at 15%.

The length of your credit history is calculated using:

  1. The age of your oldest account
  2. The age of your new account
  3. The average age of all of your credit accounts

Pro Tip: Ask a trusted friend or family member to add you as an authorized user on an account with a long and successful payment history.

4. Credit Mix: 10% of Credit Score

Composing 10% of your FICO score is your credit mix, or the variety of types of credit accounts you have.

Credit accounts can basically be boiled down into two categories: installment debts and revolving debts.

Installment debts are those that have a fixed schedule for repayment, such as an auto loan, student loan, or a mortgage.

Revolving credit accounts are more flexible, allowing you to make additional charges to your account rather than just paying it down.

Examples of revolving credit include home equity lines of credit and credit cards, among others.

Your credit mix is based on both the types of credit accounts you have and the number of accounts.

Pro Tip: You don’t have to stress over taking out every type of loan under the sun, as credit mix only makes up 10% of your score, but taking out a variety of loan types (as long as you need them) can help your score.

5. New Inquiries: 10% of Credit Score

When you apply for a new line of credit, the prospective lender will run a credit check. These credit inquiries come in two forms: soft inquiries and hard inquiries.

Only hard inquiries appear on your credit report and have the ability to lower your credit score.

Hard inquiries constitute the final 10% of your credit score.

While a single hard credit pull might only drop your score by a point or two, applying for several lines of credit within a short period of time could have the potential to lower your score more drastically, suggesting to lenders that you may be living beyond your means.

Fortunately, the damage done by hard inquiries is only temporary, hence the title of “new inquiries.”

Hard credit checks only affect your credit score for a year, and they’re removed from your report altogether after two years.

Pro Tip: If you’re looking to comparison shop for a specific type of funding, like a mortgage, try submitting all your applications within 14 days to lessen the impact on your score.

Get a FREE Copy of Your Credit Report

Unexpected Factors that Affect Your Credit Score

The way you use credit has a major influence on your score, as you can see from the five components of your FICO score above.

But there are even more factors that can have an impact on your score.

While you’re probably aware that missing a student loan payment will lower your credit score, some of the factors below might surprise you.

Identity Theft

You may have a history of responsible credit use, but the identity thief that steals your financial information probably won’t be as trustworthy.

Fortunately, you can place a fraud alert on your credit report and work with specialists to repair your credit.

Learn More:

  • What is Identity Theft?
  • Best Identity Theft Protection

Faulty Reporting

Accidents happen.

Though you may have paid your credit card balance on time last month, your bank could have entered the data wrong, resulting in an inaccurate report to the credit bureaus.

Monitoring your credit with a free online service can help you to quickly catch these errors.

As a general disclaimer, you’re entitled by the United States government to an annual free credit report that can be found at

Learn More:

  • Best Credit Monitoring Services
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Missed payments on credit accounts aren’t the only ones that count. If you leave a bill unpaid, it could eventually make its way to the collections stage.

Collection agencies can be downright frustrating in their debt collection attempts, and they stay on your credit report for seven years unless you act to get the collections account removed.

Some of the unpaid debts that can result in a collections account entry on your credit report include:

  • Traffic tickets
  • Medical bills
  • Utility bills
  • Phone/internet bills
  • Rent
  • Gym membership
  • Child support

Likewise, if you fail to pay your taxes after an extended amount of time, a tax lien could be filed against you, which can have legal ramifications and tank your credit score.

Paying Off a Loan

Shouldn’t paying off a loan help your credit score, not hurt it?

It depends on your credit portfolio. Since credit mix accounts for 10% of your credit score, closing out an account could alter your credit mix.

While paying off your student loans might give you a sense of accomplishment and put you on the path to financial freedom, it can also lower your score slightly if it’s the only installment debt you had.

Closing a Credit Account

Much like paying off a loan, canceling a credit card account can result in a drop in your credit score.

In addition to hurting your credit mix, this action also affects your credit limit.

When your credit limit goes down, it changes your credit utilization ratio, which can have a more significant effect on your score.

In most cases, it’s wiser to keep a credit card account open, but if you do have to close it, make sure that your balance is $0.

Changing Your Credit Limit

Increasing your credit limit can both help and hurt your credit score.

When you request a change to your credit limit, the lender will do a hard pull to reassess your creditability.

That action will result in a hard inquiry. The good news is, increasing your credit limit can help to improve your credit utilization in the long term.


Loan and credit card applications affect your credit score, but so can applications for other products and services.

Depending on the provider, you could be subject to a hard credit inquiry when you apply for some of the following:

  • Phone Plan: It’s become common for popular service providers to run hard credit checks before leasing you a smartphone and selling you a data plan.
  • Bank Account: When you open a checking account, the bank or credit union may require a hard inquiry to gauge your likelihood of over-drafting your account and letting fees accumulate. Some CDs and other savings accounts require a hard pull as well.
  • Insurance Policy: While most insurance applications result in only a soft inquiry, some insurers may run a hard credit inquiry to assess your risk.

How to Improve Your Credit Score

Now that you know what affects your credit score and the level of impact they have, you can start working to improve it.

The 10 strategies below provide you with a great starting point for boosting your score and keeping it high:

  1. Monitor your credit: With a free online credit monitoring service like Credit Karma, you can stay up to date on your score, inquiries, and changes to your report. You’ll also get tailored advice for boosting your score and credit offers with high approval odds based on your score.
  2. Look out for inaccuracies: If a mistake is responsible for a drop in your credit score, it’s important to act quickly to dispute it so you can get the damaging entry removed from your report.
  3. Stay on top of payments: Set reminders, automate if you can, and make sure to factor payments into your budget each month to ensure they get paid fully and on time.
  4. Make up late payments: Late payments can kill your credit score and can stay on your credit report for several years. The later your payments are, the more harmful they can be.
  5. Pay off debt: If your credit utilization ratio is high, then one of the best (and fastest) ways you can improve your score is by paying down debts.
  6. Apply strategically for new credit: Don’t apply for too many lines of credit as hard inquiries will stay on your report for 2 years. If you shop for quotes from auto or mortgage providers, try to complete your applications in a couple of weeks’ time.
  7. Apply for a secured credit card: If you have a short-lived credit history with few accounts to stand on, or your credit is low, you may be approved for a secured card. They come with minimal fees and use your deposit as collateral.
  8. Become an authorized user: Once again, being added to the account of a dependable friend with a proven track record of timely payments can give your score the boost it needs. Just make sure that their lender reports authorized users to the credit bureaus to ensure this strategy has the intended effect.
  9. Report rent and utility payments: Paid services like Rent Reporters reward you by reporting your timely rent payments to the credit bureaus, like a mortgage. With Experian Boost, your utility and phone bills can work towards improving your credit score, too.
  10. Hire a credit repair company: Sometimes repairing your credit can be an overwhelming task. If you’re fighting collection agencies, bankruptcy, or liens, a trained team of experts might be just what you need to dispute claims, negotiate payments, and improve your score.

With the knowledge above in hand, you can confidently move forward and take your credit score to the next level.

What Credit Score is Needed for a Personal Loan?

Personal loans have become very popular in recent years. There are hundreds of personal loan lenders, some that operate entirely online.

Personal loans are unsecured loans that can be used for just about any purpose, and because interest rates can vary dramatically, what credit score is needed for a personal loan is one of the most important questions.

Because of the wide range of personal loan interest rates, you owe it to yourself to maximize your credit score before applying.

It can not only affect personal loan approval, but also determine whether the interest rate you’ll pay will make financial sense.

Table of Contents:

  • What Credit Score is Needed for a Personal Loan?
  • Minimum Credit Score for Personal Loans Varies By Lender
  • What Credit Score is Needed for a Personal Loan Can be Proprietary
  • Preparing Your Credit Score for Personal Loan Approval
  • Why Your Credit Score Is So Important For A Personal Loan

What Credit Score is Needed for a Personal Loan

As we’ll see in the next section, the credit score needed for a personal loan can vary substantially from one lender to another.

Some lenders work only with those with good or excellent credit. They have the lowest interest rates – generally much lower than what is available on credit cards – as well as the highest loan amounts. If you meet the credit score requirements, these lenders will certainly be your best choice.

But when it comes to personal loans, it’s important to match your credit profile with lenders that specialize in the corresponding credit score range. There are personal loan lenders that will also work with consumers who have average credit, fair credit, and even poor credit.

But even if you apply with personal loan lenders that match your credit score range, you won’t be guaranteed of either approval or a specific interest rate.

A large number of participating lenders means the specific criteria is often difficult to determine in advance. But the information on personal loan lenders in the next section should help to provide some guidance.

Minimum Credit Score for Personal Loans Varies by Lender

One of the advantages of personal loans is that the various sources often specialize in specific credit niches.

Excellent or Good Credit Score Personal Loans

For example, if you have good or excellent credit, you can make an application with a personal loan with SoFi:

  • SoFi Personal Loan – requires a minimum credit score of 680, and will lend up to $100,000 at rates ranging from 5.99% to 25.05% APR.

Get Rates with SoFi

Average Credit Score Personal Loans

For someone with an average credit score better, Prosper will be a good choice. They’ll lend up to $40,000 at interest rates ranging from 7.95% to 35.99% APR with a minimum credit score of 640.

For fair or average credit, Lending Club is a good choice:

  • Lending Club – requires a minimum credit score of 600, and will lend up to $40,000 at interest rates ranging from 10.68% to 35.89% APR.

Get Rates with Lending Club

Good or Poor Credit Score Personal Loans

The following lenders make loans available to borrowers with credit scores lower than 600.

However, it’s not always clear how far below 600 they’ll go.

  • Upstart – will accept a credit score as low as 580 and lend up to $50,000 at interest rates ranging from 8.41% to 35.99% APR.
  • Avant – will also go as low as 580, and lend up to $35,000, at interest rates ranging from 9.95% to 35.99% APR.
  • One Main Financial – is a direct lender that does not have a specific credit score minimum. However, their loan amounts are lower, at a maximum of $20,000, and interest rates range from 18.00% to 35.99% APR.

If you do have fair or poor credit, personal loan sources like Upgrade and Upstart may actually be your best choice.

That’s because each is an online personal loan marketplace, involving participation from multiple lenders.

That type of site may offer the best opportunity to at least get your application approved by one or more potential lenders.

What Credit Score is Needed for a Personal Loan Can be Proprietary

It’s important to understand that personal loans are something of a different animal where credit scores are concerned.

Part of that has to do with the unique structure of personal loans. Since they’re unsecured loans – often for large amounts – and carry fixed interest rates and terms, lenders may not rely entirely on your credit score to determine interest rates.

For example, Lending Club uses what they refer to as loan grades, rather than relying exclusively on credit scores. Prosper works in much the same way.

Lending Club creates a credit profile for each applicant, assigning a grade of A, B, C, or D to each, with five graduations within each grade level. Altogether, there are 20 total sub-grade levels, with an interest rate assigned to each:

Your FICO Score is the starting point for your interest rate determination, but they also factor in the amount of the loan and the term, which can be either 36 or 60 months.

Lending Club also factors in specific information from your credit report, including the length of your credit history, the number of open accounts, credit usage, and recent activity, including credit inquiries over the past six months.

This is just one example of how a personal loan lender may depart from strict reliance on credit scores. There are likely others using similar hybrid methods, particularly with online personal loan marketplaces.

Since those marketplaces involve participation by multiple lenders, each may have its own proprietary system for determining both loan approval and interest-rate setting.

Preparing Your Credit Score for Personal Loan Approval

Since most personal loans are taken for debt consolidation, paying off of high-interest credit cards, or a major purchase, you’ll usually have time to prepare your credit score for personal loan approval.

That time will be important, because it often takes several weeks or even months to produce a significant increase in your credit score.

If you do have that time, take advantage of it to take the steps necessary to raise your credit score. It will not only make a major difference in the interest rate you’ll pay on your personal loan, but also the number of potential lenders you can make an application with.

Monitor Your Credit

Begin monitoring your credit score and make sure it’s where it needs to be to get the personal loan you want. If it isn’t, you can begin taking steps toward credit repair to make improvements.

Dispute Negative Entries

For example, if there’s any negative information showing up on your credit report that shouldn’t be there, there are steps you can take to have it legally removed. Just having one or two negative credit errors dropped from your report can raise your credit score in short order.

Lower Credit Utilization

Another tactic to increase your credit score is to lower your credit utilization ratio. That’s the total amount you owe divided by your high credit limits.

A ratio of less than 30% can increase your credit score, but a higher ratio will hurt it. By working to lower the ratio, your credit score should show meaningful improvement.

Pay Your Past Due Balances

Finally, if you have any past due balances or collections showing up on your credit report, pay them off now.

That won’t make them disappear from your credit report, but a paid collection or past due balance is better for your credit score than an open one.

And often, by paying them off, you can get at least a small bump up in your credit score.

Why Your Credit Score Is So Important For A Personal Loan

You don’t need to build perfect credit to get a good personal loan. But the higher your credit score is, the more options you’ll have, and the lower your interest rate will be.

That last point is particularly important. As we saw earlier, with the credit score ranges from various lenders being anywhere from 5.99% to 35.99%, exactly where you’ll fall on that scale will determine whether getting a personal loan is even desirable.

For example, let’s say you have $20,000 in high-interest credit cards, with an average interest rate of 22%. A personal loan will be the perfect way to not only lower your interest rate, but also to get into a fixed rate, fixed-term loan that will completely extinguish your plastic in just a few years. In that way, a personal loan is one of the best ways to make a chronic credit card problem go away.

Now the whole strategy will work beautifully if you can get a personal loan rate of say, 8%. At that rate, a five-year loan of $20,000 will carry a monthly payment of $359. That’s lower than the $400+ you’re likely currently paying on your credit card balances. But the biggest advantage is that you’ll go from variable rates to fixed, and the debt will be completely gone in five years.

Getting that 8% rate will almost certainly require a credit score something well above 700. If you don’t have it, the interest rate you’ll be charged will make the personal loan debt consolidation less attractive.

For example, let’s say your credit score is 630. At that level, the interest rate on your personal loan may be 20% – which is close to what you’re paying on your credit cards right now. And even though you’ll have the debt paid off completely within the five-year term of the personal loan, your monthly payment will jump to $530. That would be a lot less manageable than what you’re currently paying on your total credit cards.

That’s why it’s so very important to do everything you can to improve your credit score for a personal loan.

Final Thoughts on What Credit Score is Needed for a Personal Loan

Personal loans have become so valuable precisely because of their flexibility. You can borrow a large amount of money for just about any purpose and get the benefit of a fixed interest rate and term.

But to get that type of financing – at a rate and monthly payment that makes sense – will require you to have at least an average credit score, and preferably a good one.

That makes a strong case for regularly monitoring your credit and making any necessary improvements before making an application.

FICO Loan Savings Calculator - New Auto

What Credit Score is Needed to Buy a Car?

What credit score is needed to buy a car? That question is relevant to anyone who is looking to buy a car, but especially those who fall into the average or below-average credit score ranges.

The better your credit score is, the more options you’ll have with interest rates.

But if you have a lower score, you’ll either need to improve it or use an alternative financing strategy that we’ll cover later in this article.

But let’s start by discussing the basics of a credit score needed to buy a car.

Table of Contents:

  • What Credit Score Is Needed To Buy a Car?
  • What is a GOOD Credit Score To Buy a Car?
  • What You Can Do to Improve Your Credit Score for a Car Loan
  • How to Get a Car Loan Approval with a Bad Credit Score

What Credit Score is Needed to Buy a Car?

One of the factors that make what credit score is needed to buy a car a bit complicated is that the auto financing industry is much more diverse than other types of loans, like mortgage lending.

In that industry, most loans are sold to enormous mortgage agencies, like Fannie Mae, Freddie Mac, and Ginnie Mae. Auto financing is completely different. There are hundreds of auto loan lenders, from banks and credit unions to financing companies. For that reason, the credit score needed to buy a car is difficult to pinpoint precisely.

Generally speaking, you should be able to get prime financing with a credit score in at least the 650 to 660 range. Many credit unions and some banks make prime financing available at scores that low. Naturally, the higher your credit score, the lower your interest rate will be.

The best financing arrangements will usually begin between 680 and 700. But for the very lowest interest rates possible, a credit score of at least 720 or 750 may be required. Again, it all depends on the lender.

If your credit score falls below the 650/660 range, you’ll fall into the subprime loan category. If you do, you may be charged double-digit interest rates. And if your score is well below that range, like 550 or below, you’ll be at the mercy of a lender selected by the dealer. Interest rates on that type of financing can quite literally be all over the map.

What is a Good Credit Score to Buy a Car?

The credit score needed to buy a car isn’t just about a loan approval. Just as important, it has a significant impact on the rate you’ll pay on your loan once it’s approved.

Since a low credit score is a significant predictor of loan delinquency and default, a lender will charge a higher rate to offset that risk. By contrast, the higher your score, the lower your interest rate will be, due to reduced risk.

To get an idea of how much difference credit scores can make with a car loan, we’ve turned to the source of FICO scores themselves,

The screenshots below are from their Loan Savings Calculator, that enables you to run various loan scenarios for both car loans and mortgages, based on different loan amounts, terms, and credit scores.

The first screenshot shows the impact of credit scores on a $30,000 loan for a brand new car. Using a term of 60 months, you can see the monthly payments and total interest paid for six different credit score brackets:

FICO Loan Savings Calculator - New Auto


Notice that the highest FICO Score bracket, 720 to 850, has the lowest APR at 3.956%. That results in a monthly payment of $552, with $3,114 in total interest paid over the life of the loan.

But drop down to the fourth FICO Score bracket, at 620 to 659, and the interest rate rises to 10.419%. That results in a monthly payment of $644, with $8,617 in total interest paid over the life of the loan.

Not only is the interest rate in this score bracket nearly 6.5 percentage points higher, but the monthly payment is also more by $92. That means the annual cost of financing the loan will be higher by $1,104, or $5,503 over the life of the loan.

Used Cars: Same Situation

The credit score/interest-rate/monthly payment connection is similar with used cars. In the example below, we ran a comparable scenario, except it involves a used car with a $15,000 loan amount and a 48-month term:

FICO Loan Savings Calculator - Used Auto


Once again, if you look at the top line for the highest FICO Score range, 720 to 850, the APR is 4.087% – which is only slightly higher than the rate for the highest credit score range for a new car loan. The monthly payment is $339, and total interest of $1,285 is paid over the life of the loan.

But when we drop down to the fourth credit score range, 620 to 659, the interest rate jumps to 8.501%, with a monthly payment of $370, and total interest paid at $2,747 over the life of the loan.

Notice, however, that even though interest rates are higher on lower credit scores on used cars – just as they are for new cars – the difference isn’t as dramatic. In the two examples above, the difference in monthly payment is just $31, or $372 per year. Over the four-year term of the loan, the total difference is $1,462.

That doesn’t come close to the $5,503 difference on new cars. But it still increases the total cost of owning the vehicle.

Based on the examples for both new and used car loans, it’s to your advantage to do whatever you can to improve your credit score before applying for an auto loan.

What You Can Do to Improve Your Credit Score for a Car Loan

One of the disadvantages of improving your credit score for a car loan is that you often don’t have the kind of time you might if you were applying for a mortgage. If you purchase a home or even refinance your current one, you often know months or even years in advance. That will give you plenty of time to do what’s needed to improve your credit score before applying for financing.

The situation is often very different from car loans. In many cases, the decision to purchase a new vehicle is sudden, often resulting from an auto accident with severe damage to your car, or a major repair that renders the vehicle not worth fixing. You may have only days to obtain financing, which will leave little time for advanced preparation.

If that describes your situation, you’ll need to work with the financing options immediately available. We’ll offer strategies for a sudden car loan situation in the next section.

Strategies to Raise Your Credit Score

If you’re not in the car market right now, this is the perfect time to begin preparing your credit score for a car loan. Because you have no immediate need for a car or a loan, you’ll have the luxury of time to prepare.

Even if you don’t plan to buy a car for at least another year, this is the time to begin monitoring your credit score on a regular basis. If your credit score doesn’t look like it’ll allow you to get advantageous financing, take steps now to improve the situation.

Help Improve Your Credit Score

  • Make ALL payments on time from this point forward.
  • Have any negative errors removed from your credit report.
  • Pay down or pay off credit cards or loans to lower your credit utilization ratio.
  • If you have any past due balances or collections, pay them off immediately.

The sooner you act on any or all of the above, the greater the improvement in your credit score will be. That’s because some credit improvement strategies need time to produce the biggest gains.

If you get started now, before you need financing, you’ll be ready when the time comes. And it’s probably something close to a 50% chance that when it does, it’ll be sudden.

No matter if it does play out that way – you’ll be prepared when it does.

How to Get a Loan Approval with a Bad Credit Score

What options do you have if you have an immediate need for financing for a car, and don’t have time to improve your credit score?

Fortunately, there are at least six strategies to choose from:

1. Get a preapproval from your regular bank

The bank where you have your checking and other accounts is likely to take a more favorable view of your car loan application than a totally new lender. Credit unions can be an even better option since they often make favorable rates available on credit scores as low as 650. However, if your score is below 650, even credit unions may not be an option.

But if you can get a preapproval from your regular bank or credit union, it serves two very important purposes:

  1. It enables you to have your financing in place before you buy a car, making you a stronger buyer.
  2. It can force the dealer to get you a better financing deal than the one offered by your bank or credit union.

This is why applying at your bank or credit union should be your first option.

2. Shop between lenders

If you rely on a single lender to get you the best deal, especially when you have average, fair, or poor credit, you’ll be setting yourself up for a bad deal. Shopping is always an advantage, but particularly when you don’t have good or excellent credit.

Even if you get a preapproval from your bank or credit union, shop at several more lenders and always be open to financing arrangements proposed by the car dealer. You owe it to yourself to get a better financing deal if one is available.

3. Buy a used car

In the two financing examples we performed earlier, the interest rate spread based on credit score ranges is lower on used cars than it is on new cars. If your credit score is average or less, you may get a better deal buying a used car.

This is in part because the loan amounts on used cars are usually much lower than what they are new cars. In addition, the depreciation of used cars is much lower than it is in new cars. Because of the reduced risk coming from two directions, lenders are often able to offer more advantageous rates on used cars than on new ones.

4. Make a larger down payment

One of the limitations that almost always results in higher interest rates on car loans is very low or nonexistent down payments. 100% financing is extremely popular, especially if your current vehicle doesn’t represent much in the way of trade-in value. But it will set you up for a higher interest rate.

It may be possible to lower your interest rate either by making a down payment or by making a larger down payment.

Instead of taking 100% financing, go with 90%. If it’s possible, put down 20%, with 80% financing. Not only can that result in a lower interest rate, but it can be the difference between loan approval and denial if your credit is fair or poor.

Making or increasing the down payment not only reduces the loan amount, but it also gives you “skin in the game.” That will make it less likely you’ll default on the loan and lose the vehicle. Lenders are aware of this, and are often more receptive to approving loans with a larger down payment.

5. Reduce the loan term

In the lending industry, the longer the loan term, the greater the risk the loan carries. That’s why interest rates on short-term loans are lower than those on longer ones. A good example is a difference in interest rates between 15-year mortgages and 30-year mortgages.

The same applies to car loans. If you can reduce the loan term from 60 months to 48 months, 42 months, or even 36 months, you’ll get a better interest rate.

6. Add a cosigner

If all the above strategies fail, the best option may be to add a qualified cosigner to the loan. The lender will make the loan based on the credit profile of your cosigner, which can give you access to much lower interest rates even if your own credit is fair or poor.

So, What Credit Score Do You Need to Buy a Car?

What credit score do you need to buy a car? That’s a question best asked and addressed before you need to get a loan to buy a car.

As you can see, your credit score plays a major role in the interest rate you’ll get on your car loan, which is a significant part of the overall cost of the vehicle. Anything you can do to improve your credit score before applying for financing has the potential to save you thousands of dollars.

But if you need a car right away, and there’s no time to improve your credit score, use one of the six strategies outlined above to get a better deal.

A car is one of the biggest expenses in the average household budget. You owe it to yourself to do whatever is necessary to lower that cost. Improving your credit score for a car loan, or making an end-run play around your credit score, are the best ways to make that happen.

interest rates for a home loan

What Credit Score is Needed to Buy a House?

Have you ever wondered why what credit score is needed to buy a house is such a popular topic among homebuyers?

It’s not just about whether or not you’ll be approved for a loan to buy the house of your choice. Just as important, it’s about how much you’ll pay for that home each and every month.

Your credit scores are a major part of the calculation that will determine what interest rate you’ll pay on your mortgage, in addition to your ability to even be approved.

But apart from the interest rate, your credit score can also affect another important part of your monthly payment, which is any mortgage insurance that may be required by the lender to make the loan.

Once you’ve read this article, you’ll have all the incentive needed to put in the time and effort to maximize your credit score to buy a house. Get it right, and you can save yourself thousands of dollars each year, and tens of thousands of dollars over the life of your mortgage.

Table of Contents:

  • What Credit Score Do You Need To Buy a House?
  • The Effect of Your Credit Score on the Interest Rate You’ll Pay
  • The Private Mortgage Insurance Factor
  • Improving Your Credit Score Before Applying For A Mortgage

What Credit Score Do You Need to Buy a House?

Credit scores can range between a low of 300 to a high of 850. If you’re applying for mortgage financing, you’ll need to meet a minimum credit score requirement based on the type of loan you’re applying for.

There are five primary general mortgage programs, each with their own credit score requirements.

Credit Score Needed According to Loan Type:

  • Conventional: With a conventional home loan, the minimum is usually 620, but it may be higher if you’re purchasing a vacation home or an investment property.
  • FHA: With a typical down payment of 3.5% the minimum score is generally 580. But if you make a down payment of 10% or more, FHA will permit a credit score as low as 500.
  • VA: The Veterans Administration doesn’t impose a minimum credit score. However, lenders will typically set a minimum credit score of 620, though some will go as low as 580.
  • Jumbo: These are for larger loan amounts on higher-priced properties. Since they’re issued by private sources, typically banks, credit scores will vary with each individual program. 620 is likely to be the absolute minimum, but many may set a higher threshold, like 660 or even 680.
  • USDA: Like VA mortgages, USDA mortgages don’t have a fixed minimum credit score. However, to get a standard approval – which is the easiest to qualify for – the minimum credit score is 640. Lower scores are permitted under certain circumstances, and with required documentation.

Second mortgages, home equity loans and home equity lines of credit (HELOCs) are issued by banks and credit unions. Each set their own credit score minimum.

While it’s possible you may get secondary financing with a score as low as 620, it’s more likely the minimum will be higher, like 660 or 680, because secondary financing is riskier to lenders than first mortgages.

The Effect of Your Credit Score on Interest Rates

In the previous section, we discussed minimum credit scores to qualify for a mortgage. Those score thresholds refer to the minimum score at which your loan is likely to be approved.

Assuming you at least meet the minimum score requirement, the exact level of your credit score can have a major impact on the interest rate you’ll pay on your loan.

This is especially true of conventional mortgages, jumbo mortgages, and secondary financing. Each involves what’s known as tiered pricing, which is to say your loan rate will be determined by a combination of factors.

Those will include your loan-to-value ratio (the amount of the loan divided by the property value), the type of loan (fixed or adjustable), and your credit score.

According to, interest rates and monthly payments on the same loan amount can vary substantially at different credit score levels (rates current as of 3.24.2020):

interest rates for a home loan

In looking at the screenshot above, you can see that an applicant with a fair credit score of 630 will pay more than 1.5 points higher on the rate than someone with a credit score of 800.

That will translate into a difference in the monthly payment of nearly $200, or $2,400 per year. Over 30 years, the difference will be a staggering $72,000.

As you can tell, getting a mortgage with a bad credit score can really impact the amount of money you owe on the overall life of the loan.

But where credit scores are concerned, interest rates aren’t the only cost they can affect.

The Private Mortgage Insurance Factor

Conventional and jumbo mortgages require that you pay private mortgage insurance (PMI) anytime you make a down payment of less than 20% of the purchase price of a home, or if you refinance your home in an amount that exceeds 80% of the property’s appraised value.

PMI is not to be confused with mortgage life insurance, which pays off the mortgage upon the death of the homeowner. Instead, PMI pays the mortgage lender if the homeowner defaults on the mortgage. Though it doesn’t pay the entire amount of the loan balance, it pays a percentage that lowers the effective loan-to-value on the property for lending purposes.

For example, a mortgage that equals 95% of the value of the securing property may have a PMI requirement of 30%, which reduces the effective loan-to-value down to about 68%. Should the borrower default, the lender will be highly likely to recover the full amount of the outstanding loan balance from a combination of the sale of the property and the insurance paid by the PMI provider.

PMI is essentially an insurance policy paid by the borrower that provides the lender an inducement to approve a loan that might otherwise be considered too risky.

PMI Example with Two Different Credit Scores

Like interest rates, PMI rates are heavily influenced by your credit score. The following rate screenshot from MGIC, one of the industry’s most prominent PMI providers, clearly shows the impact credit scores have on the premium you will pay for the coverage:

credit scores and rates

The screenshot shows the annual premium factors charged on a 30-year fixed rate mortgage based on eight different credit score ranges.

Taking the 95% – 90.01% LTV range at 30% coverage, notice that the annual premium factor for someone in the 740 to 759 credit score range (top row) will have an annual premium factor of .53%, while someone in the 660 to 679 score range will have a factor of 1.28%.

Here’s how much each will add to your monthly payment on a home, assuming a 30-year mortgage for $300,000:

  • 740 to 759 credit score range: $300,000 X 0.53/100 = $1,590 per year, or $132.50 per month.
  • 660 to 679 credit score range: $300,000 X 1.28/100 = $3,840 per year, or $320 per month.

The borrower with a lower credit score will have a higher monthly payment by $187.50, just from PMI. On an annual basis, that will add $2,250 to the cost of owning the home.

As you can see, a lower credit score can cost you twice when it comes to a mortgage. The first is in the form of a higher interest rate and monthly payment on the loan itself, while the second is from a higher premium for PMI.

In fact, a low credit score can add thousands of dollars per year to the cost of owning a home, so having a good credit score can save you thousands of dollars per year on your home loan.

Improving Your Credit Score Before Applying for a Mortgage

Once you realize the impact your credit score will have on your monthly mortgage payment, you should make every effort to improve your credit score before applying for a mortgage.

Monitor Your Credit

If you’re not already doing so, you should be monitoring your credit score regularly. You can usually do this for free through popular free credit score providers like Credit Karma and Credit Sesame. But it’s likely you already have access to your credit scores through banks and credit unions.

Many now provide them as a free service if you have a deposit account or a credit card with that institution. Find out where your score is right now, and begin tracking it between now and the time you apply for a mortgage.

If you don’t like the score you have, there’s plenty you can do to improve it.

Get a Copy of Your Credit Report

First, get a copy of your official credit reports from all three credit bureaus – Experian, Equifax, and TransUnion. You’ll need all three because mortgage lenders access your credit information from each, so you’ll want to be looking at the same credit reports your mortgage lender will.

Fortunately, you can get a free copy of your credit reports from Annual Credit It’s the only source officially authorized to provide you with a copy of each of your three credit reports (there’s one issued by each of the three bureaus).

Once you have it, do a thorough review of your credit report. Pay close attention to any derogatory information. That can include late payments, past-due balances or collections, or legal information, like bankruptcies or judgments.

Get Your Free Credit Report Today

Dispute Negative Information

There’s not much you can do about bankruptcies or judgments since they’re a matter of public record.

But if you see any negative information on your credit report that you believe to be in error, file a formal dispute with that creditor. If you can get the information removed or corrected, which you usually can if you provide a reasonable explanation supported by documentation proving your point, your credit score will improve with each negative entry that’s removed.

If you have any past-due balances or collection accounts, pay them off immediately. Even though they’ll remain on your credit report for several years, a paid account is always better than an open one. Just paying off the balance owed on such an account can raise your credit score several points.

Lower Credit Utilization

One of the biggest factors that may be weighing down your credit score is credit utilization. It’s the amount you owe on loans and credit cards compared to either the high credit limit or the original loan balance.

For example, let’s say you have total credit limits and original installment loan balances of $40,000 (on currently active loans), and you owe $12,000 collectively. Your credit utilization ratio is 30%, or $12,000 divided by $40,000.

30% is considered to be the ratio at which credit utilization begins to have a positive effect on your credit score. You should work to lower the amounts you owe to below 30%. The higher the ratio is, the lower your credit score will be.

At 80% or more, your credit utilization ratio is considered to be a major negative factor. Lowering it is one of the best credit improvement strategies you can employ.

So, What Credit Score Do You Need To Buy A House?

As you can see, one of the most important strategies you can use to improve the affordability of the next house you buy is to improve your credit score.

Though there are definitely certain minimum credit scores to buy a house, you don’t want to go into the application process with just the minimum.

In fact, you shouldn’t even go in with the average credit score to buy a house. If you really want to keep your monthly payment to an absolute minimum, do whatever is necessary to get the highest credit score you can.

If you’re a first-time homebuyer, you’re probably going to buy a house with a minimum down payment. And if you do, you’ll need to pay PMI. That being the case, a low credit score will result in a higher mortgage payment itself, as well as on the PMI premium.

Spending some time and effort to improve your credit score is one of the best long-term investments you can make. And if you’re already in your home and looking to refinance, you can use the same strategies spelled out in this article to improve your credit score for a new loan. The same rules applied – the higher your credit score is, the lower your interest rate, PMI, and monthly payment will be.

You owe it to yourself to make the extra effort.

How To Read Your Credit Report

Don’t feel bad if your credit report makes little to no sense. These complex records confuse a lot of people.

When you learn how to read your credit report you can find credit reporting errors quickly — before they hurt your borrowing power.

If one of your credit reports already includes errors — debts that don’t belong to you or past due balances that aren’t even late, for example — you’ll need to get them corrected to restore your good credit.

Table of Contents:

  • What Info Is On Your Credit Report?
  • Disputing Credit Errors
  • Who Issues Your Credit Report?
  • Monitor Your Credit Report Regularly

What Kind of Information Appears on Your Credit Report?

Interpreting your credit report gets confusing because the credit bureaus report more than just your account information. You may have to dig through several pages of other data to find an error in one of your accounts.

Inaccuracies can appear in other sections of your credit report such as your personal information and public records, too. Those errors could also cause problems in the future.

So let’s break down the kinds of data you can find — and correct — in your credit reports from the three major credit bureaus — Equifax, Experian, and TransUnion.

Information reported includes:

Personal Information

This section of your credit report tells potential lenders who you are. Who is the person attached to all this credit history?

It’s easy to blow (or scroll) right through these pages when you get a free copy of your credit report.

But you should review this section carefully for inaccuracies. Any unusual variations in your name, your address, your Social Security number, or your other personal information could mean your credit identity has been used without your knowledge.

  • Your Name: This isn’t just the name you commonly use. The report will likely list any variations of your name. It may show your maiden name, your name with or without your middle name/initial, or any other names you may have gone by in the past.
  • Address Information. You’ll not only see your current address, but any previous addresses, or any other addresses that might be associated with your name.
  • Your Social Security Number. It probably won’t be your full Social Security number, but the last four digits, preceded by Xs. This is to protect the number from unintended third parties.
  • Your Date of Birth. Make sure your birthday is accurate, particularly if you have a common name, like Jane Johnson or Steven Smith. An incorrect birth date could mean your report includes — or will include — credit accounts from a different person who shares your name.
  • Employer Information. Like your address, this will include not only your current employer but also previous employers. While it doesn’t usually affect your credit score, you may want to correct information with the credit bureau if an employer you’ve never worked for is listed.
  • Phone Numbers: You’ll see phone numbers associated with your credit accounts. If you see an old phone number, chances are it is still on file with the financial institution that issued the loan or credit card.

Credit Information

This is the core of your credit report, and you’ll spend most of your time studying this section.

The types of credit accounts you can expect to see in this section include:

  • Mortgages, home equity loans, and home equity lines of credit
  • Student Loans
  • Auto Loans
  • Personal Loans or Other Installment Loans
  • Credit Cards

Your creditors will report on your credit accounts regularly. Each time there’s activity on your account — such as a payment, a payoff, or a late payment — the creditor should update the credit bureaus.

Account information for each credit item will include the following:

  • Name and address of the creditor.
  • The account number of your loan or credit line.
  • The date the account was opened.
  • Account Status – open, closed, paid, transferred, in collection, or some other description.
  • Type of account (credit card, auto loan, etc.)
  • Account ownership, which can be individual, joint, or authorized user.
  • The original amount of the loan, or the maximum credit limit.
  • The current outstanding balance and monthly payment.
  • Payment history.

Pay close attention to all the information and make sure it is accurate. You can expect to see some timing differences, especially if you’ve just made a payment last week and it’s not recorded yet.

Focus most of your attention on your payment history because this is where many inaccuracies happen. If no late payments are indicated on the account, you’re in good standing.

But if you see something like “2X30” or “3X30, 2X60,” it means the creditor is reporting late payments — “30” denotes a payment that was more than 30 days late; “60” refers to a payment that’s more than 60 days late, while “90” means you are (or were) more than 90 days late; and so on.

If the status is “collection,” “charge off,” or similar term, the account has been terminated with an unpaid balance. This could also mean the same debt appears separately as a collection agency account.

If any of this information is incorrect, you should be prepared to dispute it. We’ll get to that process in a bit.

Credit Inquiries

A credit inquiry will appear on your credit report each time someone has pulled your credit report. This can happen when you apply for a loan or a credit card, but it can also happen when you apply for a job, an insurance policy, or for an apartment rental.

There are two reasons you should be concerned with hard inquiries:

  1. You’ll want to make sure the inquiry was one you authorized. If a hard inquiry appears on your credit report, and you don’t recognize it, it could indicate someone applied for credit, a job, insurance, or rental using your identity.
  2. Too many inquiries on your credit report could hurt your credit score. Two or three inquiries in a year won’t hurt you. But if you have a half dozen or more, it’ll lower your credit score.

The best way to avoid problems with hard inquiries is to make sure credit reports will be pulled only infrequently. This will not only limit the number of inquiries on your credit report, but it will help you remember whether you authorized the hard credit check.

If you’re monitoring your credit on a regular basis, you should be on constant alert for any hard inquiries you didn’t authorize. It’s one of the most significant warnings of identity theft, and one you should never ignore.

Credit inquiries can remain on your report for up to two years, though their impact on your credit score declines rapidly after just a few months. Generally speaking, the greatest impact of a credit inquiry is from those incurred within the past 3 to 6 months.

Soft inquiries do not harm your credit score, but they do appear on your credit report for reference. Soft inquiries occur when you check your own credit score or get a quote from a lender or a pre-approval for a loan.

Public Records

This section usually appears near the bottom of your credit report, but it’s important to monitor it regularly. The public records section will include any type of financial, legal action against you. That can include any of the following:

  • Bankruptcy
  • Foreclosure
  • Tax Liens
  • Liens attached to any real estate you own
  • Civil judgments
  • Garnishments

Your credit report will not include criminal records or motor vehicle violations. But if your public records section includes tax liens, civil judgments, bankruptcies, or property liens, your credit score will suffer.

Getting these types of credit items removed is next to impossible if they’re accurate.

Be aware that public records can remain on your credit report for anywhere from seven to 10 years, or even longer if a judgment or lien remains unpaid.

Disputing Credit Errors

Knowing how to read reports from the three credit reporting agencies arms you with information. But knowing about errors isn’t enough. You’ll need to take action if you want to fix inaccurate data.

Before we get started on this section, let me point out something important: If the derogatory credit information on your report is accurate, there’s no way to have it legally removed.

If you have a collection agency account, a charge-off, a judgment, or a lien, the best strategy is to pay it off. The entry will remain on your credit report for seven to 10 years, but a paid public record is always better than an open one.

If you have late payments on current or paid loans, they can remain on your credit report for up to seven years. But time is your friend in this case since your credit score will improve as derogatory information “ages out.”

For example, a late payment or paid collection that’s five years old has much less of an impact on your credit score than one that’s just a year old.

How To Dispute Errors in Your Credit History

If any information is reported in error, you can dispute it. Here’s how:

  • Send a letter or an email to each credit reporting agency that shows the error. Dispute the error, and the credit bureau will be required by law to investigate your dispute within 30 days. If the lender confirms the information to be an error, it will be corrected by the credit bureaus.
  • Contact the creditor directly. Inform them the information is an error, ask that they correct their records, and report the correct information to all three credit bureaus.

The Consumer Financial Protection Bureau keeps current contact information for all three credit bureaus here.

When it comes to disputing credit errors, there are two important steps you need to take:

  1. Provide documentation of the error. It’s possible neither the credit bureau nor the creditor will accept your claim at face value. You may need to provide evidence that a collection, lien, or judgment is paid or that a late payment was, in fact, paid on time.
  2. Get any acknowledgment of an error from the creditor in writing. You’ll need this in case they don’t report the corrected information to the credit bureaus. You can send a copy of your creditor letter or email to the credit bureaus, and they’ll correct the information on the reports.

If you’re disputing the error directly with the creditor, give them 30 days to report the corrected information to the credit bureaus. If they don’t correct the inaccuracies within 30 days, contact them and remind them to report the corrected information, or go directly to the credit bureaus.

If you continue to struggle, contact the Consumer Financial Protection Bureau for help.

IMPORTANT: Credit errors must be corrected with all three credit bureaus. If you get it corrected with one, the error will still appear on the other two.

Who Issues Your Credit Report and Where You Can Get Copies?

Your credit reports are issued by the three major credit bureaus:

  1. Experian
  2. TransUnion
  3. Equifax

You can get a copy of your credit report from each of the three bureaus separately, but you’ll have to pay a subscription fee if you want to get regular updates.

Now, thanks to the Fair Credit Reporting Act, you can get a free report from all three bureaus through This is the only official source where you get copies of reports from each of the three bureaus.

Federal law entitles you to one free copy of your credit report from each of the three bureaus each year. I recommend you take advantage of this right even if you aren’t concerned about errors on your report.

A good strategy would be to order a report from each bureau at staggered intervals. For example, if you request your report from Experian on January 1, you can then order your report from TransUnion on May 1, and your Equifax credit report on September 1.

Not All Credit Reports are Created Equally

Be sure to get your reports from each of the three credit bureaus.

A lot of consumers don’t know this: The information reported on each credit bureau’s report can be very different. That’s because a creditor might report to only one or two of the bureaus.

As a result, one of your three credit reports could be accurate while the other two could have credit reporting errors. If you see only the accurate credit report, you won’t know about the inaccuracies on the other bureaus’ reports.

Since most lenders use your FICO score, which is an amalgamation of your other three reports, you may not know about your “bad credit” until you apply for a mortgage or a car loan and get quoted an astronomical interest rate.

Only by getting all three reports can you know for sure.

Get a Free Copy of Your Credit Report

Monitor Your Credit on a Regular Basis

Credit has an out-of-sight-out-of-mind quality. That is, you don’t think a lot about your credit until you need to make changes in your personal finances.

These changes often include loan consolidation, refinancing your home, or buying a new car or home. This kind of credit utilization can reveal credit problems you never knew existed.

These problems can lead to higher interest rates, lower loan amounts, or outright denied credit applications.

By getting in the habit of monitoring your credit, you can prevent these sorts of surprises. You’ll see negative items when they hurt your credit score. You can investigate and dispute inaccuracies before they lower your score.

How to Monitor Your Credit

Monitoring your credit is easier than ever. In addition to the free credit report you’re entitled to annually at, you can also use free credit monitoring services to keep your credit in focus.

Two prominent monitors are Credit Sesame and Credit Karma. While neither will provide you with a full copy of your actual credit report from any of the three bureaus, they both will alert you of big changes in your credit score and hard inquiries.

These services report this data via email, text message, or smartphone alert. In exchange for this service you’ll see ads for credit cards when you log into one of these services to investigate new information.

Limits of Free Credit Monitoring Services

You should be aware that free credit monitoring services won’t provide you with either an official copy of your credit report or even your actual credit score. Credit report subscriptions cost money and are never offered free.

The credit scores and the credit information reported by free credit monitoring services come from parallel information which can clue you in to real problems.

For example, you won’t get your actual FICO score – the one used by lenders – but typically a Vantage score, which is an informational score only. It will roughly approximate your FICO score, but it won’t be exact. In fact, you may just see a score range which can vary by 20, 30, or 40 points.

Some credit card issuers or mortgage lenders are building a FICO score check into their apps. Discover has been doing this lately, for example. This offers another convenient way to keep an eye on your credit history so you’ll notice problems early.

What to Do When Your Credit Score Changes

It’s not always enough to monitor your credit score. If a free service reveals a big change in your credit score or a loan application you didn’t submit, you’ll need to take more action.

You’ll need to find out exactly what negative items are causing your score to change. If credit reporting errors have caused the change, use the steps above for disputing the inaccuracies.

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Understanding Your Credit Report

As you can see, learning how to read a credit report is just Step One. Yes, you need to be able to read and interpret what’s on your credit reports from all three credit bureaus.

But you also need to know what to do if you identify any negative information on your report.

If you find unpaid debt or late payments that are reported in error, dispute them as quickly as possible.

Rapid Rescoring Can Boost Your Credit Score!

Mortgage lenders check borrowers’ credit reports for a good and simple reason — to ensure they can afford a home loan. But sometimes credit problems are on the reports, which can lead to the loan being denied.

Sometimes borrowers know about these problems before applying for a home loan, and have the time to try to resolve them. If they learn about them in the middle of the home loan approval process, clearing negative information from credit reports can take a month or more, which may be too long for lenders and the mortgage application may be denied.

Help is available, but you have to act fast. It’s a process called rapid rescoring, and it can help boost your credit score by up to 100 points in just a few days.

Table of Contents:

  • What is Rapid Rescoring?
  • How Does Rapid Rescoring Work?
  • When Can A Rapid Rescore Help?
  • Disadvantages of Rapid Rescoring

What is Rapid Rescoring?

Some lenders offer Rapid Rescoring to help speed up the process of clearing negative information from your credit report.

Individuals who contact credit reporting agencies to fix errors on their reports can expect to wait 30-45 days for a response. Rapid rescoring can fix them in as little as three days, giving your lender a more accurate look at your credit history.

How Does Rapid Rescoring Work?

Here’s an example of how rapid rescoring can help a home buyer:

Suppose you’ve just found out you’re on the cusp of qualifying for a lower interest rate on a loan if you can improve your 715 credit score by only five points.

Paying down the outstanding balances on your credit cards will reduce your credit utilization ratio — the percentage of credit you’re using compared to your credit limits. Dropping that ratio below 30% could be enough to increase your credit score by 10 points or more.

Why Get A Rapid Rescore?

Lowering a credit utilization ratio is the main reason to use rapid rescoring. Another is to simply solve errors on credit reports that shouldn’t be there at all.

For example, bankruptcies are sometimes listed on credit reports for longer than the 10 years they’re allowed to be. Or a late payment was reported, but you have proof that you paid that credit card bill on time and fixing the error through rapid rescoring is worthwhile.

A rapid rescore doesn’t dispute information on a credit report. It only seeks to report accurate information. There may be a fine line between the two, and your loan provider who is providing the rapid rescoring service should be able to help you determine which errors to focus on.

Rapid rescoring isn’t an attempt at manipulating a credit score. The point is to fix errors quickly and see a credit score rise so a home loan or other large loan can be approved quickly. Unresolved credit disputes can still lead to a mortgage being denied.

When Can Rapid Rescoring Help?

Here are some credit problems that could make getting a mortgage loan difficult:

  • Credit score a little too low to qualify for the best interest rate on a mortgage.
  • High credit utilization ratio.
  • Late credit card payment.
  • Inaccurate credit bureau information, such as old balances, incorrectly reported delinquencies, and collections placed in error.

If you get copies of your credit reports months before applying for a home loan and can fix the problems early, then getting the best mortgage rate shouldn’t be a problem.

If not, rapid rescoring can help by allowing a lender or mortgage broker to quickly correct inaccurate credit bureau information, usually in three to five business days. Your credit score is then recalculated after the errors are fixed.

If you’re in the middle of buying a house, rapid rescoring can be the difference between getting a loan and not being approved.

Again, it only works if you’re trying to quickly fix errors on credit reports, or if you can do what’s needed to fix them within five days — such as paying off credit card bills and lowering your credit utilization rate.

Disadvantages of Rapid Rescoring

Only mortgage brokers and lenders can provide rescoring to their mortgage loan clients. They’re forbidden from charging the borrower any part of the $30 to $45 per account, per credit bureau being updated. That may make them reluctant to offer the program.

If you’re using rapid rescore, don’t use a credit repair company to try to fix your credit first. These companies charge to dispute credit information, whether the information is correct or not.

They often use a loophole in the Fair Credit Reporting Act. Creditors have 30 days to respond to a request for information. If it isn’t, then the disputed information must be removed from the credit report.

To get creditors to take more than 30 days to respond, credit repair companies will bombard them with multiple requests, knowing that a response won’t likely come within a month.

However, that type of manipulation, if it results in a credit score going up, could come back to haunt someone who uses rapid rescoring and later has their home loan sold to another lender, or the debt they disputed sold to a collection agency.

If a home loan is sold, a second credit report is pulled and the banks could request the first report to see if the borrower tried to manipulate their credit. If an unpaid credit card bill was removed from a credit report, only to return when a collection agency gets involved, it could cause the second lender to not take on the loan.

Final Thoughts on Rapid Rescoring

The best thing to do when considering rapid rescoring is to listen to your lender and resolve any credit report problems in the ways they recommend.

Or better yet, check your credit score months before applying for a home loan, and fix the problems long before you talk to lenders.

How Debt Affects Your Credit Score

The average indebted household that doesn’t pay credit cards in full each month carries $8,683 in credit card debt.

Eventually, that debt affects the card members’ credit scores.

A credit score impacts the ability to borrow money, leading to higher interest rates, bigger down payment requirements, and possibly longer loan terms to make the higher payments affordable.

Low credit scores can also affect insurance rates, car and home loans, the ability to get a job and rent an apartment.

By cutting back on debt, consumers can improve their credit scores and make their financial lives a lot easier.

Ways Debt Can Affect Your Credit Score

Here are some of the biggest ways debt impacts credit scores:

Credit Utilization Ratio

Your credit utilization rate, also called a credit utilization ratio, is how much of your available credit you’re using when your credit score is calculated. The more credit you’re using, the more it can drop your credit score.

Figuring out the ratio is simple math. Divide an account’s outstanding balance by its credit limit and you’ve got the credit utilization rate.

For example, the equation on a $10,000 balance on a credit card with a $20,000 limit is $10,000 divided by $20,000 to equal 0.50, or a credit utilization rate of 50 percent.

That’s high, and a rule of thumb is to keep it below 30 percent to help improve a credit score. Keeping a credit card balance low by paying off the debt will keep the credit utilization rate low.

If it’s higher than 20 percent, credit score companies consider it an indicator of future repayment risk and that you’re close to maxing out your credit cards. Having a credit card balance that’s over the card’s limit is the worst way to affect credit utilization.

The higher the utilization rate, the greater the risk is that you’ll default on a credit account within the next two years, according to FICO, one of the major credit scores used by credit reporting agencies.

This is part of the “amounts owed” part of a credit score, making up 30 percent of a credit score.

Along with the ratio, there’s the total amount of credit utilization to worry about. This is the total credit balance from all of your credit card balances add up together. A low balance shouldn’t affect this, and could have a more positive impact on a credit score than not using any of your available credit at all.

Credit Payment History

How you pay your credit card debt is the most important part of a credit score, with payment history accounting for 35 percent of a FICO score. In other words, paying your credit payments on time.

A few late payments are OK, but more than twice can hurt a score — and on more than just credit cards.

Credit payment history can include retail accounts such as department store credit cards, installment loans such as car loans, finance company accounts, and mortgages.

Credit scoring companies may consider how late the payments were, amount owed, how recently they occurred, and how many late payments you have. Having a good track record on paying most of your credit accounts on time will increase your credit scores.

Along with getting information from creditors on late payments, credit scoring agencies will also consider bankruptcies that will remain on credit reports for seven to 10 years, lawsuits and wage attachments.

Length of Credit History

Having debt can seem like it does nothing but hurt a credit score. But it can help it too. A longer credit history will increase credit scores, even for people who haven’t been using credit too long.

Depending on the rest of their credit report, a longer credit history will generally affect 15 percent of a credit score. This includes how long specific credit accounts have been established and how long it has been since you used certain accounts.

Credit Mix in Use

As mentioned above in credit payment history, the types of credit you have can affect a credit score. So can having a mix of types of credit, which accounts for 10 percent of a credit score.

This mix includes credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. Varied types of credit show you can handle different types of loans, provided you pay them on time.

You don’t have to have each of the above debt types, but a mix will help a credit score. And don’t open accounts just to have them and add to your mix. Only open credit accounts you need and will use.

New Credit

Opening several credit accounts in a short period of time is considered a big risk by lenders, and thus credit scoring agencies, and can hurt a credit score. This is especially true for people who don’t have a long credit history.

New credit determines 10 percent of a FICO score. It considers how many new accounts you have by type of account.

New accounts will lower your average account age, such as the length of credit history, as detailed above. If you don’t have a lot of other credit information, opening a lot of new accounts at once can have a larger impact on your credit score. Even for people with a long credit history, opening a new account can lower a credit score.

If you’re working with a debt consolidation company to help manage your debt and pay it off, your credit score could drop because it’s considered opening a new account. A new account will also affect your average credit age.

How To Shop For New Credit

If you’re shopping around for credit but aren’t opening new accounts, then it shouldn’t affect your credit score too much, if at all — less than five points off a credit score for one credit inquiry.

Inquiries are where a lender makes a request for your credit report or score. Inquiries can have a greater impact if you have few accounts or a short credit history. People with six or more inquiries on their credit reports can be up to eight times more likely to declare bankruptcy, according to FICO.

Inquiries remain on a credit report for two years, though FICO scores only consider them for the past 12 months. Many types of inquiries are ignored completely and “rate shopping” is allowed in determining a credit score.

Suppose you apply for several new credit cards in a short period of time. These inquiries will appear on your report and can be seen as the applicant being a higher risk. 

However, multiple inquiries from auto, student loans or mortgage lenders in a short period are allowed and won’t affect most credit scores. These inquiries within 30 days of each other are usually treated as a single inquiry and will have little impact on a credit score.

If you’re shopping for a home, auto or student loan and find a loan within 45 days, the inquiries won’t affect your credit scores. Some scoring formulas drop that to 30 days.

Improving Your Credit

There are many ways to improve a credit score, but the main ones are:

  • Pay bills on time.
  • Keep credit card balances low, under 20 percent is best.
  • Apply for and open new credit accounts only as needed.
  • Keep a mix of debt accounts.
  • Get rid of all debt collections accounts either by paying them off directly or a debt settlement offer.

Your debt directly affects your credit score. Managing it responsibly through the ways listed above should help you improve your score and ultimately make credit work to your advantage with better credit terms.

What Happens To Your Credit When You Get Married?

Marriage is a union in many ways.

One partner’s credit problems can become part of the union, creating new personal finance challenges for the married couple.

But your spouse’s past credit problems won’t affect your score directly.

Marriage and Your Credit Score

Here are some things to know about your partner’s debt before getting married:

Your Credit Reports Won’t Merge

If your partner has a poor credit score or credit report, this credit history won’t be transferred or combined with yours when you get married.

That’s because a credit score or report is tied to each person’s Social Security number.

You don’t merge your Social Security numbers upon marriage so your credit histories don’t merge either.

Each person will still have his or her own credit score, and both partners should continue checking their credit reports each year.

Get a Free Copy of Your Credit Report

Changing Names Won’t Change Scores

Changing your last name to match your spouse’s won’t affect your credit score. Some married couples change or combine both their last names. This doesn’t affect your credit profile either.

Reporting the name change to creditors is important. Even if you don’t report the name change, it’ll make its way onto your credit report sooner or later.

But a name change won’t mean starting a new credit history from scratch.

Your old name will be listed as an alias, and your new name will be added to your report. This is why it’s important to report the change yourself. You want to make sure the credit bureaus get it right so you don’t have extraneous aliases.

But name change or no, you’ll still have your same old credit score upon marriage, for better or worse.

Even in a joint or community property state, if your name isn’t on an account, then activity on that account won’t be reported on your credit report.

Spouse’s Poor Credit Won’t Hurt Your Score

Getting married won’t lower your credit score. A spouse’s poor credit history won’t impact the other partner’s past credit history.

Even if you have joint accounts together, you’ll each still have separate credit scores.

That being said, your financial decisions as a couple will likely affect each other’s credit scores going forward.

Marriage can create an opportunity to build credit together — or one spouse’s financial decisions could adversely affect both spouses’ credit scores.

Effects of Joint Accounts

Married couples often combine bank accounts, creating a joint account that can make paying bills and saving money together a lot easier.

Information about this joint account will go onto both partner’s separate credit reports which means one partner’s financial decisions could affect the other spouse’s credit score.

For example, if you have a joint line of credit and your partner makes several late payments without your knowledge, the negative payment history will become part of your credit report as well as your spouse’s credit report.

The same is true for joint credit cards. Even though each cardholder has a different credit card number, any activity on the account impacts the credit of both account holders.

The credit card lender doesn’t report late payments or high credit utilization ratios based on which partner spent the money; the credit card debt and payment history appears on both partners’ credit reports.

Not All Accounts Are Joint Accounts

Getting married doesn’t automatically connect you to your spouse’s accounts or vice versa. You won’t automatically be an authorized user or a co-signer either. Your name won’t automatically appear on your spouse’s checking account.

Spouses have to add each other to their pre-marriage financial accounts. Adding your spouse to your checking account makes sense; adding your spouse to your car loan may not be necessary unless you’re actively trying to build credit.

We’ll get into this concept more below.

Buying a Home Together Can Be Tricky

Since credit histories for married couples aren’t combined, each partner will have to show his or her credit history when applying for a loan, such as a home mortgage.

This can get dicey if one person has a low credit score, since two incomes and two good credit scores are often needed to qualify for a mortgage loan. Underwriters will also want to know about both partners’ incomes to calculate debt-to-income ratios.

If you or your spouse has a bad credit score, you could pay higher interest rates and fees for a home loan.

Improving a partner’s credit score before applying for a home loan could increase your chances of approval.

Keep Separate Credit Cards

A joint credit card account is a good idea, but couples may also want to have one separate credit card in each person’s name for a few reasons.

First, it will help each spouse build credit individually.

Second, if they ever get divorced, a separate credit card account can be useful to have if their joint accounts are closed.

A divorce won’t affect credit scores directly, but joint accounts could be negatively affected if one person overdraws an account and doesn’t pay the bill on time.

That could lower the credit scores of both ex-partners.

So, Does Getting Married Affect Your Credit Score?

Overall, marriage won’t affect your credit profile as much as you might think.

Still, it’s a good idea to have a few conversations about your credit histories as a couple before getting married.

A person’s credit history tends to reflect the person’s financial decisions, and these decisions can affect both partners going forward.

Marriage: Working Together to Rebuild Bad Credit

If you have bad credit, or if your spouse has bad credit, you can work together to increase these lower scores which will make you stronger borrowers together.

The same holds true if either partner has no credit record.

Here are a few ways you can build credit together:

  • Authorized User: If you have a credit card in good standing, you could add your spouse as an authorized user. Your positive payment history could help your spouse’s credit file some. Not all credit card issuers report data to an authorized user’s credit so you may want to ask first.
  • Co-Signing: Next time the spouse with weak credit needs a car, the spouse with better credit could co-sign on the car loan. A co-signer helps underwriters approve the loan. Getting a loan creates an opportunity for the credit-challenged spouse to make regular, on-time payments which will jump start a credit repair project.
  • Co-Borrowers: Co-borrowing puts both spouse’s names on a joint loan and makes each spouse equally responsible. If you’re serious about credit repair, you could refinance an existing loan with both spouses’ names on the loan.

How to Talk About Credit Reports Together

It’s normal to enter marriage with individual student loans, auto loans, and possibly even a mortgage loan.

Your new marital status won’t affect these existing accounts or your FICO score, even if your spouse’s credit score is a lot lower than yours.

However, your financial decisions and spending habits going forward as a couple could affect each other’s credit scores. So it’s healthy to talk through these issues as a couple.

You could start by getting your free credit reports at Each year you’re entitled to a free credit report from all three credit bureaus, Equifax, Experian, and TransUnion.

Looking over each other’s credit files is a good idea for several reasons:

  • You get a reliable picture of the debt you’ll face together so you can make more informed financial decisions.
  • You can see whether inaccuracies are pulling down your or your spouse’s credit score.
  • You can make sure your names and addresses appear correctly which can clear up confusion and help avoid identity theft.

Your credit affects your financial decisions, and finances are a big part of any marriage.

Monitoring Your Credit Score

Monitoring your credit reports has gotten a lot easier lately.

Free services such as Credit Sesame and Credit Karma will send you updates about your score via text or app.

In ordinary times the federal government allows everyone to get a free credit report from each credit bureau once a year.

Now, because of the coronavirus pandemic, you can get a free credit report once a week at

This special provision is set to expire in April of 2021.

You don’t want to be surprised by your spouse’s credit or your own poor credit when you apply for something as important as a mortgage.

By monitoring your credit every month you’ll know about inaccuracies and mistakes before they cause problems.

Elements of a Healthy Credit Score

Lenders check your FICO score which combines data from the three credit bureaus.

If you’d like to establish better credit scores, focus on these areas first:

  • Payment History: This comprises 35% of your FICO score. Making late payments or missing payments will hurt your credit.
  • Credit Use: Maxed out credit cards show lenders you’re using all of your available credit. This will lower your credit score because it accounts for 30% of the FICO scoring model. You can help yourself by keeping some paid-off credit card accounts open but not using them.
  • Other Factors: Keeping a variety of credit accounts open, keeping the same accounts open year after year, and limiting new credit inquiries will help buoy your credit scores.

Deleting Inaccurate Credit Data

Married couples who monitor their credit histories together will likely notice inaccuracies in their credit reports.

Inaccurately reported late payments and account balances can wreak havoc on a credit score. You can dispute inaccurate data yourself.

Married couples who don’t have lots of time to spend on the phone or writing letters may prefer hiring a professional credit repair company.

Credit repair companies can do the legwork for you. We recommend Credit Saint. This company can send dispute letters and follow up on them for you.