What Is the Range for Credit Scores? - NerdWallet

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What Is the Range for Credit Scores?

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What Is the Range for Credit Scores?

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What Is the Range for Credit Scores?

When you check your credit score, you’ll probably want to find out how you compare. What is a good credit score?


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The most commonly used credit scoring models have a range of 300 to 850. Each lender sets its own standards for what constitutes a “good” score. But, in general, scores fall along the following lines:

  • 300-629: Bad credit
  • 630-689: Fair credit, also called “average credit”
  • 690-719: Good credit
  • 720 and up: Excellent credit

Fair Isaac Corp. produces the credit scoring algorithm used for the majority of lending decisions in the United States. Most FICO scores range from 300 to 850, and the higher the score, the better. (Some versions of the FICO score, such as those for the auto and credit card industries, are on a 250 to 900 scale.)

The average FICO score was 695, according to the latest data, from April 2015. About 22% of scores fall below 600; 23.3% are between 600 and 699; and 54.7% are 700 or above.

Here’s how those scores break down within each range, by percentage of scores:

FICO score ranges

Range%Range%
Source: FICO Score 8 data as of April 2015, courtesy of Fair Isaac Corp.
300 - 499
4.9%650 - 69913.0%
500 - 5497.6%700 - 74916.6%
550 - 5999.4%750 - 79918.2%
600 - 64910.3%800 to 85019.9%

The increasingly used VantageScore also employs a 300-850 scoring range. The average VantageScore in 2016 was 673, according to credit reporting agency Experian. (Because FICO and VantageScore consider the same factors, the scores generally move in tandem; a good score with one is predictive of a good score with the other.)

VantageScore ranges

Range%Range%
Source: VantageScore data as of March 2016, courtesy of Experian
300 - 499
4.6%650 - 69918.3%
500 - 54912.1%700 - 74912.6%
550 - 59911.8%750 - 79914.6%
600 - 64910.2%800 to 85015.7%

How does your credit score affect your life?

Even if your score is in the low 500s, you may still be able to get credit, but it will come with very high interest rates or with specific conditions, such as depositing money to get a secured credit card. You may have to pay more for car insurance or put down deposits on utilities.

But as you add points to your score, you’ll have access to more credit products — and pay less to use them.

At the other end of the scale, borrowers with scores above 750 or so have many options, including the ability to qualify for 0% financing on cars and 0% interest credit cards.

Find the starting point

It’s important to know where you stand, so it pays to monitor your score over time. You can get a free credit score from a number of personal finance websites, including NerdWallet.

The important thing is to use the same score every time you check. Doing otherwise is like trying to monitor your weight on different scales — or possibly switching between pounds and kilograms. Some sources may be using a different scale entirely; Citi, for example, gives some of its credit card customers access to NextGen FICO credit card scores, which are on a 250-900 scale.

So, pick a score and stick with it to monitor your progress. Advancements you make measured by one score will be reflected in the others. (Here’s how to improve your credit; the advice applies to whatever score you decide to track.)

And be aware that, like weight, scores fluctuate. A score is a snapshot, and the number can vary each time you check it. As long as you keep it in a healthy range, those variations won’t have an impact on your financial well-being.

Lenders look at more than credit scores

When you go to borrow money, a good credit score does not guarantee a good interest rate — or even approval.

Credit scores look at your reported credit history to gauge the likelihood that you will repay borrowed money; you can be deep in debt and still have great credit scores if you have paid all your bills on time.

But your credit reports don’t reflect whether you can afford to repay the credit you are applying for. That’s why your income and other debts play a key factor in some lending decisions, as lenders consider what you owe alongside what you earn and assets you have accumulated.

Bev O’Shea is a staff writer at NerdWallet, a personal finance website. Email: boshea@nerdwallet.com. Twitter: @BeverlyOShea.

Updated Oct. 28, 2016.

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How to Get Your Free Credit Reports

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How to Get Your Free Credit Reports

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How to Get Your Free Credit Reports

Your credit report is your credit data footprint.

It’s a just-the-facts record of your past use of credit — not an evaluation of creditworthiness like your credit score is.

» MORE: Get your free credit score with NerdWallet and track your credit report

Credit scores are based on information in your credit reports, so an error on your credit report could result in a nasty surprise — like being turned down for a mortgage. And if your identity has been stolen, fraudulent accounts and negative marks may be piling up.

Here’s how to get a free credit report so you can watch for signs of trouble.

How to get free credit report info online

You can get free credit report information through several personal finance websites that offer a free credit score, such as NerdWallet. To get the most out of an online service, look for:

  • A free score and free credit report summary that really are free — that means no requirement to purchase an ongoing service such as credit monitoring.
  • Information on the site’s security practices and assurances your personal information will not be shared or sold.
  • Which credit bureau provides the data. Not all creditors report your activity to all three credit bureaus, so your report and score may vary slightly depending on the data source.
  • How often the information is updated. Weekly updates are more helpful than monthly when you’re tracking your effort to build or rebuild credit, for instance.

When you have picked an online service you like, check it regularly. Navigate to the credit report information and make sure you recognize all the accounts listed. Check that details are right, such as balance, date of last payment and whether any payments have been reported late.

If you see an error or an account you don’t recognize, it’s time to get your once-a-year free credit reports from all three credit bureaus. That lets you check whether negative or mistaken info is showing on all three, and may provide additional details.

How to get a free credit report from the credit bureaus

The Fair Credit Reporting Act entitles you to one free credit report every 12 months from each of the three credit reporting agencies, Equifax, Experian and TransUnion. There are three ways to get them:

  1. Request them online at AnnualCreditReport.com.
  2. Request them by phone at 877-322-8228.
  3. Request them by filling out a form from the Federal Trade Commission and sending it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

The quickest route is via AnnualCreditReport.com. You’ll have to provide your name, Social Security number and other personal information likely to be known only to you (such as when you refinanced your home, or the amount of your car payment) to verify your identity.

Once you’ve done that, you can choose to see one credit report, two or all three.

It is crucial to type in the correct URL or click on the correct website. Similar sites abound, with many impostor sites based on an easily made typo. The government-sanctioned site does not ask for credit card information. This is what the correct site looks like:

annualcreditreport.com

The URL at the top of the page should look like this, with a lock symbol on the left:

annualcreditreport.com2

If you prefer to make your request in writing or by phone, you’ll wait longer to see your reports; they can be sent up to 15 days after your request is received. The Consumer Financial Protection Bureau says you should allow two to three weeks if you used the mail-in form.

No matter how you request your reports, it takes additional time if the credit reporting agency needs more information to verify your identity.

A credit report isn’t a credit score (and checking it doesn’t hurt your score)

A credit report is not a credit score, but credit scores are derived from the information in your credit reports. Mistakes in your credit reports can cost you money.

The information in your credit reports has a lot to do with whether you can get a mortgage or credit card and what terms you’ll get. The reports will show how long you’ve had credit, any late payments, any charge-offs and how much of your available credit you are using. Because employers, landlords and insurance companies also check the information on your credit reports, incorrect information could result in your being denied a job or an apartment or paying more for car insurance.

Checking your credit reports does not affect your credit score.

What to look for on your credit report

Here’s a guide to reading a credit report.

You’re looking for inaccuracies or information you don’t recognize. The Federal Trade Commission in 2013 said about 1 in 5 Americans had erroneous information on at least one of the three credit reports.

Among the surprises people have found on credit reports:

  • Collections accounts or judgments they didn’t know about.
  • Paid accounts showing as still open.
  • Incorrect name or Social Security number.
  • Open accounts they knew nothing about.
  • Incorrect debt amounts.

It’s important to dispute any errors you find.

Most experts say you should pull your reports from the credit bureaus at least once a year, staggering the requests so you get one report every four months. But there are times when it’s better to pull all three reports at once:

  • If you have lost a wallet, your mail has been stolen or you suspect your information has been compromised.
  • If you pull one credit report and see signs of potential fraud or identity theft.
  • If you see a large, unexplained drop in your credit scores.
  • If you are planning to apply for a mortgage.

More free credit reports? Maybe

You may be eligible for additional free credit reports from the bureaus. Federal law entitles you to a second one within the 12-month period if you are:

  • Unemployed and planning to look for a job in the next 60 days.
  • Receiving public assistance.
  • Turned down for employment, insurance or credit because of information in your credit report. (This is called “adverse action,” and you’ll receive a letter with instructions on getting your credit report.)
  • A victim of fraud, including identity theft.

In addition, seven states — Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey and Vermont — and Puerto Rico make free credit reports available to residents. To request those additional reports, contact the credit reporting agencies directly. Here’s how:

  • Equifax, P.O. Box 740241 Atlanta, GA 30374-0241, 800-685-1111
  • Experian, P.O. Box 2104, Allen, TX 75013-0949, 888-397-3742
  • TransUnion, P.O. Box 1000, Chester, PA 19022, 800-916-8800

Bev O’Shea is a staff writer at NerdWallet, a personal finance website. Email: boshea@nerdwallet.com. Twitter: @BeverlyOShea.

Updated Sept. 12, 2016. 

  • Also remember that if you request your credit report through annual credit report, the credit bureaus have more time to respond to incorrect information.

  • Also remember that if you request your credit report through annual credit report, the credit bureaus have more time to respond to incorrect information.

  • Also remember that if you request your credit report through annual credit report, the credit bureaus have more time to respond to incorrect information.

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How Long Until a Late Payment Hits My Credit Report?

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How Long Until a Late Payment Hits My Credit Report?

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How Long Until a Late Payment Hits My Credit Report?

Lots of people worry that an overlooked bill means a late payment will be reported to a credit bureau and ruin their credit score.


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But simple forgetfulness is unlikely to tank your score — even when you’re a little late.

Late fees versus overdue payments

Just because your wallet got hit with a late fee doesn’t mean your credit report got hit with a negative mark.

Theoretically, you can incur a late fee for being even 30 minutes late with a payment. Many creditors automatically impose a fee when your due date passes without a payment posted to your account. But if you’ve never or rarely been late before, your chances of getting a credit card issuer to reverse a late fee are pretty good.

You don’t have to worry about a creditor reporting a payment that was a few days late, however. Credit bureaus don’t consider a payment late until it is 30 days past due. So while your mortgage holder or credit card issuer may charge you extra for paying three weeks after the due date, your credit score should be none the worse for it.

When does a late payment get reported?

The gold standard for reporting late payments to credit bureaus comes from the Credit Reporting Resource Guide, a standardized way for creditors to comply with federal law. Your payment can’t be reported late until it’s at least 30 days past due. You may be getting letters and phone calls about that overdue payment, but as far as the credit bureaus and your credit scores are concerned, the account is “current and in good standing.”

Knowingly and intentionally reporting you late when the bill is not at least 30 days past its due date violates federal law.

That said, late is not an all-or-nothing issue. Thirty days late is bad, but it’s not as bad as 60, which is not as bad as 90. The sooner you can catch up, the less damage to your credit and the sooner your score can start to recover.

How not to be late in the first place

Being a few hours or days late is not a crime. But if it happens a lot, those late fees will add up. Some strategies to help you avoid them:

  • Select payment due dates that are either at the same time, if that works for you, or staggered, such as on the first and 15th of the month. Many credit card issuers allow you to select your due date.
  • Set up text alerts that remind you about bills due in a few days. If you need more than one, set up multiple electronic nudges.
  • Consider using automatic payments, but be sure to have enough money in your account so you don’t get hit with overdraft fees. Auto-pay works well with bills that are the same every month, like your car payment. It may not work so well with ones that can vary tremendously, like your credit card bill the month the refrigerator died and your car needed a new transmission days after you returned home from vacation.  

Next steps

Paying on time is a worthy goal, but obsessing over a bill you overlooked and paid a little late isn’t. To maintain a good credit score, your best bet is to establish good habits:

  • Pay your bills on time, and in full if you can.
  • Keep your credit card balances low — below 30% of your credit limit, and lower is better.
  • Monitor your credit reports to watch for mistakes. You can get free credit report information two ways: Some personal finance websites, such as NerdWallet, offer report information on demand, and once a year you can get a report directly from each of the three credit reporting bureaus. 

Do those things and your credit score will take care of itself.

Bev O’Shea is a staff writer at NerdWallet, a personal finance website. Email: boshea@nerdwallet.com. Twitter: @BeverlyOShea.

Updated Sept. 7, 2016.

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How Is My Credit Utilization Ratio Calculated?

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How Is My Credit Utilization Ratio Calculated?

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How Is My Credit Utilization Ratio Calculated?

Your credit utilization ratio is a measure of how much you owe on your credit cards compared with the cards’ limits.

This number matters a lot. Both FICO (the credit score used in most lending decisions) and VantageScore (its main competitor) heavily weight credit utilization while calculating scores.


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Keeping your credit utilization ratio as low as you can is smart.

Charging too much on your cards (especially if you max them out) is associated with being a higher credit risk. That’s why running up your cards will lower your score. A low credit score will make it harder for you to qualify for the best rates on loans, insurance policies and other financial products.

Calculate your credit utilization ratio

Credit scores look at credit utilization in two ways:

Per-card utilization (also called line-item utilization): This measures how much of each card’s credit limit you’re using.

Overall utilization (also called aggregate utilization): This takes all your cards and their limits into account.

Enter the balance and credit limit for up to three cards in this calculator to see your per-card and overall utilization figures:

Per-card vs. overall — which is more important?

So which is more important: your per-card or overall utilization ratio? Trick question: Both are important. Credit scores can take the ratio into account in both ways — for each card and overall.

Why that’s important to know: If you try to counteract the negative effects of a maxed-out credit card by opening a new card and keeping its balance at $0, the high utilization ratio on the maxed-out card still may hurt your score.

Most experts say you shouldn’t use more than 30% of your credit limit on any one card. That way, the overall usage takes care of itself.

Tips for taming your credit utilization

Here are tips to keep your credit utilization under control:

  • Log in to your credit card accounts online and check your balances at least once a week.
  • Set up balance alerts to get a text or email when your balance creeps up near the 30% threshold (or set a lower bar if you like).
  • Make several small payments during the month rather than letting charges build up and sending one big payment on the due date. If you get paid more than once a month, use each paycheck as a reminder to make those smaller payments.
  • Consider asking your card issuer to raise your credit limit, but only if it won’t tempt you to overspend and you think that your credit score is good enough to qualify. Jumping to a higher limit will instantly lower your utilization ratio.

Updated Oct. 24, 2016. 

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What’s the Difference Between a Soft Inquiry and a Hard Inquiry on My Credit Report?

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What’s the Difference Between a Soft Inquiry and a Hard Inquiry on My Credit Report?

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What's the Difference Between a Soft Inquiry and a Hard Inquiry on My Credit Report?

When a potential creditor checks into your credit, it’s called “pulling your credit.” But two different types of credit checks can be performed: a “soft inquiry” or a “hard inquiry.” The Fair Credit Reporting Act places restrictions on exactly when and why credit reports may be pulled.

The primary hallmark of a soft inquiry or soft pull is that it does not adversely affect your credit score; a hard inquiry will.

» MORE: See your credit score for free with NerdWallet

Soft pulls

Soft inquiries often occur without you even knowing about them. If you’ve ever received a credit card offer in the mail, it’s likely that the credit card company did a soft inquiry to see if you would even qualify for the card. After all, it doesn’t want to waste the postage on someone who doesn’t qualify. The same goes for other types of loan offers, or when a mortgage broker or lender does a pre-approval.

Employers also may do a background check on you. Employers often feel more comfortable hiring someone with good credit, as they think it indicates a responsible individual.

Most importantly, checking your own credit is a soft inquiry, so never be afraid to check your credit for fear your own inquiry will hurt your score. (You are entitled to a free annual credit report from each of the three major credit-reporting agencies.)

Hard pulls

Hard inquiries do affect your credit score. You will likely know about them — or rather, you had better know about them — because your consent is required. A hard inquiry is triggered when you actually apply for credit, including a mortgage, credit card, auto loan, student loan, personal loan or a business loan.

This inquiry becomes part of your credit report, meaning anyone else who does a hard or soft pull will see the inquiry. A hard inquiry may shave up to 5 points off your FICO score. However, when you are “rate shopping” (such as for mortgage, student and auto loans), all inquiries within a 45-day period are considered one inquiry. VantageScore, FICO’s competitor, also has shopping windows that count as a single inquiry, though they are generally shorter. A spokesman said a hard inquiry can shave 10 to 20 points off a VantageScore.

You want to be careful not to hit your credit report with too many hard inquiries. Consider whether those bonuses you are hoping to receive by getting that credit card are worth the ding to your credit score. If you have outstanding credit, a few points may not be a big deal. However, if you have borderline credit quality, think twice.

Hard or soft?

Some inquiries could be either soft or hard. If you rent a car, apply to rent an apartment, sign up for cable TV or Internet service, open an account at a financial institution, or someone just needs to verify your identity, you may get hit with either a hard inquiry or a soft inquiry. The only way to know is to ask the potential creditor, and maybe even check in with one of the credit bureaus.

This post updated June 24, 2016.  It originally published March 27, 2014.

  • A hard pull counts as a credit inquiry and will cause your score to drop by about 5 points, a soft pull can only be seen by you and the lender that initiated it.

  • A hard pull counts as a credit inquiry and will cause your score to drop by about 5 points, a soft pull can only be seen by you and the lender that initiated it.

  • A hard pull counts as a credit inquiry and will cause your score to drop by about 5 points, a soft pull can only be seen by you and the lender that initiated it.

  • LAE2014

    Anyone know the difference between the two pulls in regards to what the business (who is pulling credit) can see? For example, does a soft pull only show basic things like credit score and number of lines of credit or debt/income ration while a hard pull will show specifics like details of inquiries, details of liens/judgments, details of open lines, etc? And also, when a credit card company does a soft pull to tell you you are “preapproved” for credit, do they then have to do a hard pull when you actually apply for access? Thanks!

  • LAE2014

    Anyone know the difference between the two pulls in regards to what the business (who is pulling credit) can see? For example, does a soft pull only show basic things like credit score and number of lines of credit or debt/income ration while a hard pull will show specifics like details of inquiries, details of liens/judgments, details of open lines, etc? And also, when a credit card company does a soft pull to tell you you are “preapproved” for credit, do they then have to do a hard pull when you actually apply for access? Thanks!

  • LAE2014

    Anyone know the difference between the two pulls in regards to what the business (who is pulling credit) can see? For example, does a soft pull only show basic things like credit score and number of lines of credit or debt/income ration while a hard pull will show specifics like details of inquiries, details of liens/judgments, details of open lines, etc? And also, when a credit card company does a soft pull to tell you you are “preapproved” for credit, do they then have to do a hard pull when you actually apply for access? Thanks!

  • tffitzp

    How do the CRA’s distinguish between hard and soft inquiries that are made?

  • tffitzp

    How do the CRA’s distinguish between hard and soft inquiries that are made?

  • tffitzp

    How do the CRA’s distinguish between hard and soft inquiries that are made?

  • Mark Toman

    damn it! I was looking to get a collector to do 850 hard pulls in one second for the minus points. Looks like that wont work.

  • Mark Toman

    damn it! I was looking to get a collector to do 850 hard pulls in one second for the minus points. Looks like that wont work.

  • Mark Toman

    damn it! I was looking to get a collector to do 850 hard pulls in one second for the minus points. Looks like that wont work.

  • Mark Toman

    by collector, I mean one local in town, just for the heck of it.

  • Mark Toman

    by collector, I mean one local in town, just for the heck of it.

  • Mark Toman

    by collector, I mean one local in town, just for the heck of it.

  • Mark Toman

    looking for a fico score of 300 that nobody yet has for the record to perma-freeze.

  • Mark Toman

    looking for a fico score of 300 that nobody yet has for the record to perma-freeze.

  • Mark Toman

    looking for a fico score of 300 that nobody yet has for the record to perma-freeze.

  • MT

    I want to know who gives these companies authority to do a ‘soft pull’ I don’t want all my private information out there because some company decided they’d snoop on my value as a potential customer.

  • MT

    I want to know who gives these companies authority to do a ‘soft pull’ I don’t want all my private information out there because some company decided they’d snoop on my value as a potential customer.

  • MT

    I want to know who gives these companies authority to do a ‘soft pull’ I don’t want all my private information out there because some company decided they’d snoop on my value as a potential customer.

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How Do Secured Credit Cards Work?

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How Do Secured Credit Cards Work?

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How Do Secured Credit Cards Work?

If you have bad credit, a secured credit card can be a great way to improve your credit score. Secured cards work the way regular credit cards do: You charge purchases to your account, make monthly payments and pay interest on balances you carry from one month to the next.

» MORE: See your credit score for free with NerdWallet

But there’s one major difference. You have to make a deposit to receive a secured card. This deposit protects the card issuer in case you don’t make your payments — and makes it easier for people with poor credit or a short credit history to get approved.

How the security deposit works

When you rent an apartment, you give the landlord a security deposit, which he or she can use to pay for repairs of any damage you might leave behind. Deposits on secured credit cards are similar: You provide a certain amount of money as collateral, and the credit card issuer usually gives you a credit limit equal to your deposit. For example, if you make a $500 deposit, your credit limit will also be $500.

When your lease is up, if your apartment is still in good shape, your landlord will refund your security deposit. Likewise, if you make on-time payments on your secured credit card, you’ll get your deposit back when you close or upgrade your account.

Find the right card

If you’re getting a credit card to fix your bad credit, choose one that reports to all three credit bureaus. Not all cards do. If your card issuer doesn’t report, you won’t improve your credit, no matter how faithfully you make your payments.

» MORE: NerdWallet’s best secured credit cards

The application process

Even though you’ll put down a security deposit, you won’t automatically be approved for a secured card. You still have to apply, and most of the time, the issuer will check your credit. Each credit check resulting from a credit application lowers your credit score a bit, so it’s not a good idea to apply for too many cards. If you’ve been rejected by a few issuers, explore other options. If you have a very low score, you may want to look for a card that doesn’t require a credit check at all — and there are a few.

» MORE: I was denied a secured credit card. What do I do?

Use your card the smart way

To improve bad credit, always make payments to your secured card on time and use only a small percentage of the credit extended to you. Don’t assume that your credit card company will use your deposit to cover any of your payments — secured cards aren’t the same thing as prepaid debit cards. Skip a payment, and you’ll end up with late fees and a negative on your credit report.

Level up

After your credit score has improved, you may want to close your secured credit card and switch to an unsecured card — one with a higher limit that doesn’t require a deposit. If you’re thinking of doing this, call your credit card company and ask if it will upgrade you to an unsecured card. If you have a good payment history, the answer may well be “yes.”

If you choose to close your secured card, call your credit card issuer to request that it close your account and refund your security deposit.

This article has been updated. It was originally published Dec. 12, 2014.

Lindsay Konsko and Virginia C. McGuire are staff writers at NerdWallet, a personal finance website. Email: lindsay@nerdwallet.com and virginia@nerdwallet.com. Twitter: @lkonsko and @vcmcguire


Image via iStock.

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What Is a Credit-Builder Loan?

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What Is a Credit-builder Loan?

Credit-builder loans can help you build your credit score, and they don’t require good credit to start with.


NerdWallet is a free tool to find you the best credit cards, cd rates, savings, checking accounts, scholarships, healthcare and airlines. Start here to maximize your rewards or minimize your interest rates. Bev O'Shea

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  • Get your free score every week.
  • Set goals and see your progress.
  • Signing up won't affect your score.

They’re not widely advertised and are generally offered by smaller financial institutions, such as credit unions and community banks. The purpose, as their name suggests, is to help people achieve credit respectability.

Financial institutions would like to see you succeed. After all, if you become a customer, you’re more likely to make money for them in the future. To make sure it doesn’t get burned on the loan, the lender will set strict limitations. Think of it as training wheels for credit.

Credit-builder loans go by many names, such as the catchy “Fresh Start Loans” or “Starting Over Loans.” If you’re looking to restore your credit with an installment loan, ask your bank or credit union about secured personal loans designed to help people who need to help build credit.

Secured credit cards have long been suggested as a means of credit building — and they can be very effective — but you first have to have enough money to pay the security deposit.

If you have an income but can’t pay a deposit for a secured credit card, credit-builder loans offer a way around that hurdle.

How credit-builder loans work

You apply for the loan, whether you have bad credit or no credit, and you are approved, but there’s a safety net for the lender. The money you borrow is deposited in a savings account — one that you cannot access until you have fully repaid the loan.

If you pay the loan as agreed, the financial institution promises to send a good report to the credit bureaus. A 2013 study showed an average improvement of 35 points with six months of on-time payments for loans as small as $100.

At the end of the loan term, you get the money — and likely a better credit score.

But be sure to pay on time. If you miss payments, that negative information would also be reported. The financial institution doesn’t take a big risk when it lends to you, because it can reclaim the money if you don’t hold up your end of the bargain.

If you’re looking for a credit builder loan and your credit union or community bank doesn’t offer them (or even know what they are), you might try a Community Development Financial Institution. These organizations exist to help lower-income communities, and there are about 1,000 of them in the United States. Government grants and other incentives make these small-dollar loans more attractive to financial institutions.

Online lenders include Self Lender, which offers $1,100 loans repaid over a year at $100 a month. At the end, you get $1,100 and a credit score with a year of on-time payments.

How secured installment loans work

You don’t have to be low-income to have crummy credit or a need to improve. If you have money in the bank, you may have another option for an installment loan: a share- or certificate-backed loan.

In that case, a deposit you already have at the financial institution is the collateral, and that money is frozen until the loan is repaid (or it may be incrementally thawed, as the loan is repaid). So if you have funds on deposit at a small bank or credit union, it may be worth asking if you can borrow against them to help re-establish your standing. Other lenders may allow you to borrow against the value of your car.

You may have other options for building credit

Secured loans such as credit-builder loans tend to be a good deal because the collateral reduces risk for the lender and greatly reduces the interest rate, which is typically well under 10%. The catch, of course, is that you don’t get the money until the loan is repaid.

If you are trying to build credit and need the proceeds of a loan immediately (for debt consolidation, for example), you will probably need to take an unsecured personal loan. That means the lender has no collateral, just the strength of your credit history, to rely on. If your credit is damaged or thin, you’ll pay higher interest rates, sometimes as much as 36%, which tends to be the ceiling with most lenders.

Some lenders who will grant you unsecured personal loans without checking your credit at all, but those installment loans are much more like payday loans. The lenders don’t check your credit, but they also don’t report to credit bureaus unless you default. And the loans carry interest rates that can easily reach 300% or higher.

Bev O’Shea is a staff writer at NerdWallet, a personal finance website. Email:boshea@nerdwallet.com. Twitter: @BeverlyOShea.


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How Paying Rent Can Affect Your Credit

Credit Score, Personal Finance
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How Paying Rent Can Affect Your Credit

Credit Score, Personal Finance
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How Paying Rent Can Affect Your Credit

A lot of people who don’t have much in the way of a credit history do have a history of paying rent on time. If that information showed up on their credit reports, it might help their credit scores.

You can’t report rent payments yourself. But rent-reporting services can get your credit reports to reflect your rent payments fairly easily, at a cost that ranges from free to more than $100 a year.

» MORE: See your credit score for free with NerdWallet

But here’s the catch: There are many different credit scores calculated from the information on your credit reports, and most credit card issuers and lenders don’t use the scores that consider rent payments. When you apply for credit, you don’t generally know which score the lender is going to pull when it checks your credit, or which credit bureau’s report it will use.

To use a rent-reporting service effectively, you’ll need to know which credit bureaus it will report your payments to — and which credit scores take those payments into account.

Which credit scores consider rent payments?

Rent payments remain rarely reported. A FICO spokesperson estimated that less than 1% of credit files contain rental entries, or “tradelines.”

All three major credit bureaus — Experian, Equifax and TransUnion — include rent payment information in credit reports if they receive it.

Although rent is reported as a tradeline — much like a mortgage or car loan would be — it’s not treated the same for scoring purposes, says consumer credit expert Barry Paperno, who blogs at Speaking of Credit. “Unless a prospective lender includes that information outside a credit score, it may not help,” he says.

Only a few credit score algorithms consider the information in calculating a score. The most commonly used versions of the FICO score don’t use rental payment information, but FICO 9 and FICO XD do, as does VantageScore.

Some renters use the reporting services to get credit through lenders that are known to use those scores. At least one rental reporting company tells its customers which credit cards to apply for — and all credit scoring formulas include credit card payments.

How does rent reporting compare with other types of credit building?

Other credit-building strategies rely on more traditional tradelines. You can get a secured credit card, for example, or a credit-builder loan. Revolving debt, such as credit cards, and installment loans are considered in virtually every credit score.

“Rent information will help lenders that are prospecting for possibly creditworthy people who have been overlooked,” NerdWallet columnist Liz Weston says. “But most lenders are still focused on attracting people with good traditional credit scores. If you want the best rates and terms, you have to build credit the old-fashioned way — with credit accounts.”

Still, it is possible for you to be approved for a loan without a FICO score — even a loan as large as a mortgage — but you will likely be working with a small lender.

And having rental payment information in your credit report can be useful if you rent again. Landlords prefer tenants who can show a history of paying on time. A study by the nonprofit Credit Builders Alliance showed that rent reporting both increased on-time rent payments and credit scores (Vantage 3.0) for participants.

Which services will report your rent payments to lenders?

There are several ways to get records of your payments in front of lenders. Among them:

Rent Reporters: Setup is free, and the service is free for 15 days. After that, if you pay by e-check, there is a processing fee of $3.95, and if you use a credit or debit card, it’s 2.95%. (Note: If you are paying Rent Reporters by credit card, you already have a tradeline on your credit report.) Rent payments may be reported retroactively, and it sends rent payment information to the three major credit bureaus.

Rental Kharma: Initial setup is $40, and then the service is $9.95 per month. During enrollment, you can report payments made in the previous 24 months. It reports to TransUnion.

RentTrack: The service costs $1.95 a month (unless paid by the landlord and offered free to tenants) and reports to all three credit bureaus. A 24-month look back at previous payments may not be available if multiple leases are involved.

ClearNow: This service debits your rent from your checking or savings account. There’s no cost to tenants, and, if you opt in, payments are reported to Experian.

PayYourRent: Variable fees, depending on how rent is paid; in some cases the fees are paid by management. It reports to TransUnion and Experian.

Next steps

If you’re shopping for a way to have rent reported on your credit report, here are questions you should ask of service providers. Also, check to see if your property manager already works with one.

  • What would my total costs be for a year of service, including any setup fees or fees for reporting previous rental history? (Some services can go back as far as 24 months.)
  • How do you protect my personal data?
  • Which of the major credit bureaus do you report to? (All three is ideal.)
  • Do you provide free access to credit scores, and if so, which score(s)?
  • How soon should I expect the information to appear on my credit report?
  • How can I cancel the service?
  • What happens if I have a dispute with my landlord? In some states, renters have a right to withhold payment if the landlord fails to keep the unit repaired and habitable. Critics have expressed concern that consumers might be afraid to exercise tenant rights for fear of being reported late to the credit bureaus.

Bev O’Shea is a staff writer at NerdWallet, a personal finance website. Email: boshea@nerdwallet.com. Twitter: @BeverlyOShea.

This article was updated. It originally published Aug. 14, 2014.

  • RMR

    I set up a rent payment with a reporting service and 6 months later, my credit score jumped almost 70 points!

  • RMR

    I set up a rent payment with a reporting service and 6 months later, my credit score jumped almost 70 points!

  • RMR

    I set up a rent payment with a reporting service and 6 months later, my credit score jumped almost 70 points!

  • BigPickture

    PayLease finally reported my rental account to TransUnion (2 months after registration). Waiting for this to show up on Experian.

    Bad part, they only show details from the date you enroll in this service, not from the day you made your first payment with them. So effectively, it reduced my credit’s average age of the accounts ( and score fell by 10 points)

  • Robert at SitBackPain

    great info but I think the pricing needs updating ; )

  • Carrie Simmons

    I’m trying to get the n a me of the one I signed up with. Individual landlord. They report your past r e nt no program for you to have to pay your rent through a service. They just verify the rent. I even was set up for a 3 payments . I erased all my email and can’t rember their name. The payments start next week.

  • Carrie Simmons

    These companies don’t get all the dates reported of your payments

  • Shirley Chang

    I used RentReporters and my score went from a 640 to 800+. It helped me save $130 a month for my mortgage payment when I refinanced. RentReporters also has a coupon code for signing up $20 off using code TMUK.