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Your income doesn’t have a direct impact on your credit score, but it can have indirect effects. A loss of income, a gap in cash flow, or a sudden layoff can have you feeling a financial pinch. These circumstances could hinder your ability to pay your bills, which can ding your credit. Additionally, your income can impact your ability to open a credit card or take out a loan.

Here, take a closer look at how your income and salary could affect your credit, as well as what other factors directly determine your credit score.

Does Income Affect Credit Score?

Your income does not directly affect your credit. That’s because the financial information that’s found on your credit report is primarily related to debt. As such, information like savings or checking account balances, investments, and income do not appear on your credit report.

Beyond that, there is quite a bit of information that a credit report explicitly cannot include. These exclusions are made in an effort to prevent lenders from potentially being biased or discriminating based on race, religious affiliation, and other personal details. The following information — including income — is not included on credit reports:

•   Income

•   Employment status

•   Marital status

•   Religious affiliation

•   Race or ethnicity

Recommended: How Having a Savings Account Affects Your Credit Score

What Then Impacts Your Credit Score?

While income doesn’t affect your credit score, what does impact your score has to do with your ability to be responsible with credit. Different credit scoring models vary slightly in the way they calculate credit scores. However, they generally look for signs of creditworthiness, which is your reliability in paying back money based on past behavior and financial habits.

Here’s a closer look at what affects your credit score.

Payment History

Payment history makes up the lion’s share of your FICO® Score, accounting for 35% of your credit score. Making timely payments on your bills and debt, such as your credit card balances, car loan, or personal loan, is crucial to establishing credit.

For this reason, understanding when credit card payments are due and meeting those deadlines is an important financial habit.

Credit Utilization

Your credit usage, or credit utilization ratio, can impact your credit score significantly as well. Specifically, this makes up 30% of your FICO Score.

Your credit usage is your total outstanding balance among all your credit cards against your total credit limit. This is expressed as a percentage. For instance, if you have a $500 credit card balance, and the total limit on all of your cards is $5,000, then your credit usage is 10%.

You’ll want to aim to keep your credit utilization ratio under 30%, preferably closer to 10%. Credit usage over 30% can negatively impact your credit, as it indicates to lenders that you might be stretched too thin financially.

Age of Accounts

How long you’ve had and managed debt also impacts your credit score. This makes up 15% of your FICO Score. Keeping your old lines of credit open can help build your score by extending the age of your credit accounts.

Credit Mix

Having a healthy mix of different types of credit — think installment loans like a car or personal loan, a mortgage, credit cards, and other accounts — can also help with building credit. Your credit mix makes up a smaller portion of our FICO Score at 10%.

New Credit

If you’ve recently opened several new lines of credits or had a bunch of different hard vs. soft credit pulls from applying for credit, this could negatively impact your credit. This is because it can suggest to lenders you’re in need of funds and thus a potentially higher risk. New credit accounts for 10% of your FICO Score.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

How Your Income Can Indirectly Affect Your Credit Score

While income doesn’t have a direct impact on your credit score, it can still affect your score in a couple of ways.

•  First, if you’re tight on money due to a recent job loss, reduced hours at your work, or a gap in cash flow, your reduced income could impact your ability to stay on top of your debt payments. As payment history makes up 35% of your FICO score, falling behind or missing payments altogether could result in your credit score taking a hit. In turn, a regular paycheck can help build your credit score because it can help you to more easily make on-time payments.

•  Your income can also impact your credit score because income is something that lenders typically look at when you apply for a line of credit. Because your income can affect your odds of getting approved for a loan or credit card, it can indirectly impact your credit mix and length of credit, which both play into your credit score.

Recommended: Difference Between Income and Net Worth

How Your Income and Debt Impact Credit Approval

When lenders evaluate your application, one factor they may consider is your debt-to-income ratio, which is the percentage of your monthly income that goes toward paying down debts. The lower your income, the more easily you can have a higher debt-to-income ratio, which could affect your odds of approval.

Additionally, when you apply for a loan or credit card, lenders will typically request proof of income, such as a paystub or a tax return. Having a low income could affect your odds of approval, as well as the amount of the loan or credit limit you’re approved for.

Recommended: Understanding Different Types of Credit Cards

The Takeaway

While the size of your paycheck doesn’t directly affect your credit score, it can impact your ability to stay on top of your debt payments. This in turn can influence your score. Understanding exactly what financial factors do impact your credit can help you to be mindful of financial behaviors and patterns that will keep your score in tip-top shape.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

How much does your debt-to-income ratio affect your credit score?

While your debt-to-income ratio doesn’t directly impact your credit score, it can affect your odds of getting approved for credit. If your debt-to-income ratio is too high, it’s a sign that you might be stretched thin moneywise. In turn, lenders might be less likely to extend credit to you.

Why do credit cards ask for income on applications?

Credit card issuers request your income on applications to gauge whether to extend you credit and to determine how much of a credit limit to offer you.

How much annual income do you need to be approved for a credit card?

While there’s no set number and credit card companies rarely post whether they have a minimum annual income requirement, they do take into account your income when looking over your application. Note that your annual income isn’t the only factor that credit card issuers look at when determining whether to approve your application though. Other factors like your debt load and credit score are also taken into account.

Will my income show up on my credit card?

Your income will not show up on your credit card, nor will it show up on your credit report. Personal information such as income isn’t permitted on your credit report to avoid the possibility for discrimination or bias.

How does my income affect my credit limit?

If you have a higher income, you could get approved for a higher line of credit. This is because you’ll have more available funds to pay off any debt you incur.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOCC-Q424-002

If you have a credit card with purchase protection, you may be able to replace an item you paid for with your card should it get damaged, lost, or stolen. Among the sea of valuable credit card perks, purchase protection is one that often gets overlooked but can be a real perk.

However, there are restrictions on what is and isn’t covered under credit card purchase protection, which is why it’s important to understand how it works. You’ll also want to know the pros and cons of credit card purchase protection to determine if it’s the right path for you.

What Is Credit Card Purchase Protection?

Also known as purchase insurance or damage protection, credit card purchase protection is a type of credit card protection. If you have a purchase protection credit card, the credit card issuer might help you replace a stolen, lost, or damaged item that you bought using the card.

Purchase protection doesn’t last forever though — there are generally limits on the duration of the protection period and the coverage amounts. Also note that purchase protection serves as secondary coverage. This means that you must first file a claim with your primary insurance, and then purchase protection may kick in to cover any remaining amount.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

How Does Credit Card Purchase Protection Work?

As mentioned, purchase protection only applies to items that you paid for with your credit card. Not all instances of theft or damage are covered.

The protection period offered by cards with purchase protection can last anywhere from 90 to 120 days after the purchase is made. Coverage limits and terms also can vary. For instance, a credit card might have $500 cap per claim, with a maximum benefit of $50,000 per account.

Some card issuers extend this credit card advantage to recipients of gifts that you purchased using the card. For instance, if you bought a computer for your son for his birthday, he may be able to file a claim to get it replaced if it’s covered by purchase protection.

Understanding How to Use Credit Card Purchase Protection

If, for example, the screen on the cell phone you purchased with your credit card shatters, and the incident occurs within your credit card’s purchase protection time frame, you may be able to take advantage of purchase protection. As noted above, purchase protection is typically secondary, which means that if you have primary insurance to cover the item, you must apply there first.

That said, to get coverage, you’d need to file a claim with the credit card. The claim form is usually found on a credit card’s website or listed under “forms” after you log in to your account. If your claim is approved, it typically takes anywhere from 5 to 30 days for you to receive reimbursement for your claim.

What Does a Credit Card’s Purchase Protection Not Cover?

Here’s what credit card purchase protection typically doesn’t cover:

•   Items that are excluded under the policy. Each card issuer has varying items that are excluded from coverage. For example, credit card purchase protection may exclude motorized vehicles, perishable items, antique or collectible items, computer software, and items purchased commercially for resale. There are also usually exclusions on the reasons for why you lost or damaged an item — for instance, items that were lost or damaged due to acts of war or fraudulent or illegal activity aren’t usually covered.

•   Items that mysteriously disappeared. If an object ends up missing with no apparent cause and without evidence of a wrongful act, then that item generally will not be covered by purchase protection.

•   Items damaged, lost, or stolen after the protection period. If an item you bought with your credit card was lost, damaged, or stolen after the coverage time window ended — usually past 90 to 120 days — then it won’t be covered.

•   Items that are used or pre-owned. Many credit card issuers exclude used or pre-owned items from purchase protection coverage.

What Does a Credit Card’s Purchase Protection Cover?

As discussed, the terms, items included, and coverage amounts provided vary by credit card issuer. For the most part, a credit card’s purchase protection covers items that were unintentionally lost, stolen, or damaged within a specified protection period.

You’ll also want to mind the cap per claim and per account. Your coverage limits may apply by account or by year. For example, you might have a cap of $500 or $1,000 per claim, and be limited to making $50,000 in claims per account you own.

Read your credit card’s terms and conditions to see what exactly is included under purchase protection and what coverage limits apply. This can also provide other valuable information to credit card holders, such as how credit card payments work.

Recommended: When Are Credit Card Payments Due?

Pros and Cons of Credit Card Purchase Protection

Here’s an overview of the advantages and disadvantages of credit card purchase protection:

Pros

Here’s a closer look at the upsides of credit card purchase insurance:

•   Built-in protection with your card. Probably the most significant advantage of credit card purchase protection is that it is essentially free insurance that comes with your card. As long as an item is covered under your card’s purchase policy, and you file a claim without the protection period, you typically can get some help replacing a lost, damaged, or stolen item, rather than driving up your credit card balance covering the cost.

•   No deductible. Unlike primary insurance, you might not need to pay a deductible to get your eligible claim reimbursed.

Cons

Here are the downsides of purchase protection to be aware of:

•   Limits. As insurance usually goes, there are coverage caps per claim and per account or year. You’ll need to check with your credit card issuer to determine the limits for your purchase protection policy.

•   May take longer than primary insurance. The time to file a claim and get reimbursed could take longer compared to the turnaround for primary insurance. That’s because purchase protection is secondary coverage, meaning you’ll usually have to go through your primary insurance first, whether that’s homeowners, auto, or rental insurance.

Recommended: What Is the Average Credit Card Limit?

Filing a Credit Card Purchase Protection Claim

Here are the steps you’ll need to take to file a claim for purchase protection:

1.    Review your card’s policies to see if the item is covered. Before moving forward with filing a credit card purchase protection claim, it’s smart to take a moment to make sure the item qualifies. Also remember that you’ll need to make at least your credit card minimum payment, even while waiting for a response.

2.    Fill out a claim form. This is usually found on the credit card issuer’s website or through your account after you log in. It’s recommended to file a claim as soon as you can. Keep in mind that credit cards typically have a time frame in which you can file a claim after the incident, usually within 30 to 90 days.

3.    Provide requested documents. When you file your claim, you’ll generally need to provide the following documents:

◦   A copy of the credit card statement that includes proof of purchase

◦   An itemized original receipt showing the purchase

◦   A copy of your insurance claim and insurance declaration page (if you have primary insurance)

◦   A police report (if the item was stolen)

Recommended: Tips for Using a Credit Card Responsibly

Other Types of Credit Card Protection

Beyond purchase protection, there are other types of protection commonly offered through credit cards. These include:

•   Return protection: This perk allows you to return an item, even when the retailer has a no-return policy. While some cards do offer return protection, other cards have phased it out in recent years.

•   Price protection: Should you buy something and the item then drops in price within a specific period, price protection will kick in and match the lower, advertised price. Depending on the card, the time frame during which this applies might range from 30 to 60 days. You might get refunded up to a certain amount for specific types of purchases, though price protection usually has limits per item and per year.

•   Extended warranty protection: Instead of hopping on a retailer’s pricey service plan or opting for extended warranty at the checkout register, you might be able to take advantage of a credit card’s extended warranty protection. This protection matches the terms of your manufacturer’s warranty. However, it usually extends protection for up to a year, and some cards will even double the manufacturer warranty.

Beyond these protections, credit cards can offer an array of other perks, such as credit card travel insurance and credit card rental insurance, among others.

Recommended: Can You Buy Crypto With a Credit Card?

The Takeaway

Credit card purchase protection can be a valuable perk if a card offers it. The built-in insurance offered by purchase protection can save you should an item you bought with your card get lost, stolen, or damaged, provided the situation meets the eligibility criteria.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Do all credit cards offer purchase protection?

Not all credit cards offer purchase protection. In fact, cards offering this perk have become less common in recent years.

How do you get your money back from a credit card purchase?

You’ll need to file a claim and provide requested documents, such as a receipt, a copy of your credit card statement, and in some instances, a police report or proof of primary insurance. Once your claim has been approved, you can expect reimbursement within 5 to 30 days.

Is there a time limit on credit card purchase protection?

Yes, there’s a time window after you’ve made the purchase during which purchase protection applies. This is usually 90 to 120 days. There’s also a time limit as to when you can file a claim after the incident, which can be anywhere from 30 to 90 days. It’s best to file a claim as soon as possible.

Photo credit: iStock/filadendron

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

SOCC-Q424-024

What’s your number? That’s not a pickup line; it’s the digits a mortgage lender will want to know. Credit scores range from 300 to 850, and for most types of mortgage loans, it takes a score of at least 620 to open the door to homeownership. The lowest interest rates usually go to borrowers with scores of 740 and above whose finances are in good order, while a score as low as 500 may qualify some buyers for a home loan, but this is less common.

Why Does a Credit Score Matter?

Just as you need a résumé listing your work history to interview for a job, lenders want to see your borrowing history, through credit reports, and a snapshot of it, expressed as a score on the credit rating scale, to help predict your ability to repay a debt.

A great credit score vs. a bad credit score can translate to money in your pocket: Even a small reduction in interest rate can save a borrower thousands of dollars over time.

Do I Have One Credit Score?

You have many different credit scores based on information collected by Experian, Transunion, and Equifax, the three main credit bureaus, and calculated using scoring models usually designed by FICO® or a competitor, VantageScore®.

To complicate things, there are often multiple versions of each scoring model available from its developer at any given time, but most credit scores fall within the 300 to 850 range.

Mortgage lenders predominantly consider FICO scores. Here are the categories:

•   Exceptional: 800-850

•   Very good: 740-799

•   Good: 670-739

•   Fair: 580-669

•   Poor: 300-579

Here’s how FICO weighs the information:

•   Payment history: 35%

•   Amounts owed: 30%

•   Length of credit history: 15%

•   New credit: 10%

•   Credit mix: 10%

Mortgage lenders will pull an applicant’s credit score from all three credit bureaus. If the scores differ, they will use the middle number when making a decision.

If you’re buying a home with a non-spouse or a marriage partner, each borrower’s credit scores will be pulled. The lender will home in on the middle score for both and use the lower of the final two scores (except for a Fannie Mae loan, when a lender will average the middle credit scores of the applicants).

Recommended: 8 Reasons Why Good Credit Is So Important

A Look at the Numbers

What credit score do you need to buy a house? If you are trying to acquire a conventional mortgage loan (a loan not insured by a government agency) you’ll likely need a credit score of at least 620.

With an FHA loan (backed by the Federal Housing Administration), 580 is the minimum credit score to qualify for the 3.5% down payment advantage. Applicants with a score as low as 500 will have to put down 10%.

Lenders like to see a minimum credit score of 620 for a VA loan.

A score of at least 640 is usually required for a USDA loan.

A first-time homebuyer with good credit will likely qualify for an FHA loan, but a conventional mortgage will probably save them money over time. One reason is that an FHA loan requires upfront and ongoing mortgage insurance that lasts for the life of the loan if the down payment is less than 10%.

Credit Scores Are Just Part of the Pie

Credit scores aren’t the only factor that lenders consider when reviewing a mortgage application. They will also require information on your employment, income, and bank accounts.

A lender facing someone with a lower credit score may increase expectations in other areas like down payment size or income requirements.

Other typical conventional loan requirements a lender will consider include:

Your down payment. Putting 20% down is desirable since it often means you can avoid paying PMI, private mortgage insurance that covers the lender in case of loan default.

Debt-to-income ratio. Your debt-to-income ratio is a percentage that compares your ongoing monthly debts to your monthly gross income.

Most lenders require a DTI of 43% or lower to qualify for a conforming loan. Jumbo Loans may have more strict requirements.

How to Care for Your Credit Scores Before Buying a House

Working to build credit over time before applying for a home loan could save a borrower a lot of money in interest. A lower rate will keep monthly payments lower or even provide the ability to pay back the loan faster.

Working on your credit scores may take weeks or longer, but it can be done. Here are some ideas to try:

1. Pay all of your bills on time. If you haven’t been doing so, it could take up to six months of on-time payments to see a significant change.

2. Check your credit reports. Be sure that your credit history doesn’t show a missed payment in error or include a debt that’s not yours. You can get free credit reports from the three main reporting agencies.

To dispute a credit report, start by contacting the credit bureau whose report shows the error. The bureau has 30 days to investigate and respond.

3. Pay down debt. Installment loans (student loans and auto loans, for instance) affect your DTI ratio, and revolving debt (think: credit cards and lines of credit) plays a starring role in your credit utilization ratio. Credit utilization falls under FICO’s heavily weighted “amounts owed” category. A general rule of thumb is to keep your credit utilization below 30%.

4. Ask to increase the credit limit on one or all of your credit cards. This may improve your credit utilization ratio by showing that you have lots of available credit that you don’t use.

5. Don’t close credit cards once you’ve paid them off. You might want to keep them open by charging a few items to the cards every month (and paying the balance). If you have two credit cards, each has a credit limit of $5,000, and you have a $2,000 balance on each, you currently have a 40% credit utilization ratio. If you were to pay one of the two cards off and keep it open, your credit utilization would drop to 20%.

6. Add to your credit mix. An additional account may help your credit, especially if it is a kind of credit you don’t currently have. If you have only credit cards, you might consider applying for a personal loan.

Recommended: 31 Ways to Save for a House

The Takeaway

What credit score is needed to buy a house? The number depends on the lender and type of loan, but most homebuyers will want to aim for a score of 620 or better. An awesome credit score is not always necessary to buy a house, but it helps in securing a lower interest rate.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

SOHL-Q424-112

Your credit score affects your financial future, so it’s important to know where your score comes from and the different ways it can be calculated. Most important, you should know that the score you’re seeing may not be the score your lender is seeing. Why is this, and what can you do about it?

Two major companies are responsible for billions of credit scores (this is no hyperbole) provided to lenders and consumers: FICO® and VantageScore® Solutions. The difference between VantageScore vs. FICO credit scores is subtle, reflecting each company’s special calculation.

We’ll explain what goes into score calculations. We’ll also tell you where to find your score, how to use it, and which score lenders use in their decisions.

Why Credit Scores Are Important

Before we get into score calculation, let’s review why credit scores are so important. When you need to borrow money, you want to do it as cheaply as possible. This means you want a great interest rate and terms that help you repay your debt as efficiently as possible.

Generally speaking, the higher your credit score, the more likely you are to get the best interest rate and loan terms. Over the course of your life, a good credit score can save you a significant amount of money.

Knowing how to read a credit report and how your credit score is calculated can help you make moves to improve it. Take a look at how the two major players come up with your credit score.

Recommended: What Is a Fair Credit Score?

What FICO Takes Into Account

The Fair Isaac Corporation, more commonly known as FICO, developed the FICO Score in 1989. Scores range from 300 to 850. The higher the number, the better your score.

FICO scores are calculated based on how a consumer handles debt and weighted according to the following categories:

•   Payment history: 35%

•   Amounts owed: 30%

•   Length of credit history: 15%

•   Credit mix: 10%

•   New credit: 10%

As you can see, FICO scores give the most weight to your payment history and amounts owed. FICO also considers your length of credit history, credit mix, and new credit.

FICO has multiple versions of their credit scoring models, much like software has multiple updates. FICO provides different scoring models to lenders that serve different needs. Credit card issuers, auto loan lenders, and mortgage originators may use different FICO scores to make lending decisions.

What’s calculated in a FICO vs. a VantageScore is subtly different.

Recommended: What Credit Score Is Needed to Buy a Car?

What VantageScore Takes Into Account

VantageScore was developed in 2006 by the three main credit bureaus: Experian, Equifax, and TransUnion. Scores range from 300 to 850, just like FICO scores. However, even though the scores are calculated on the same scale, a VantageScore will be different from a FICO Score. That’s because the factors, and how they’re weighted, are a little different. VantageScore is based on:

•   Payment history: 40%

•   Depth of credit: 21%

•   Credit utilization: 20%

•   Balances: 11%

•   Recent credit: 5%

•   Available credit: 3%

Naturally, this results in a different score. Since many lenders use FICO Score and consumers often see VantageScores, some lending decisions can take consumers by surprise.

The most common VantageScore versions are VantageScore 3.0 and 4.0. (A new model, VantageScore 4plus™, was announced in May 2024.) While most lenders use your FICO Score when making lending decisions, some lenders — particularly credit card issuers — use VantageScore.

VantageScore vs FICO: The Differences

The major differences between VantageScore and FICO Score are outlined in the table below. These include the amount of time you have to shop for a loan, the number of categories factored into a score calculation, differences in weighted categories, and length of credit history.

Who Tends to Use VantageScore?

Some banks and credit card issuers supply VantageScores to their customers for free. Scores are provided largely for consumer education, meaning to help people understand what factors affect their credit score, rather than for lending decisions.

Consumers who want to purchase a credit score will find Equifax and TransUnion both advertise a credit monitoring service that uses VantageScore 3.0 as their model. If you’re comparing Transunion VantageScore vs. FICO, you’ll see that Experian sells a FICO score 8 model.

Who Tends to Use FICO?

FICO claims that FICO Scores are used in 90% of lending decisions. Consumers who visit the Experian website will see that the credit score monitoring service it offers uses the FICO Score 8 model. You can also purchase your FICO Score directly from FICO.

FICO and VantageScore credit scores are used by a variety of sources to consider your credit history and credit score. These can include lenders, landlords, employers, and insurance companies. (Read more about how credit checks for employment work.)

It’s also possible to get a tri-merge credit report, which combines data from the three credit bureaus in one report.

Which Credit Score Costs the Least to Check?

Many people don’t know how to find out their credit score for free. While you are entitled to a free credit report each year from AnnualCreditReport.com, that report won’t include a credit score.

Here are some ways you can find your credit score without having to pay for it:

1.    Bank or credit union. Many financial institutions provide credit scores to their members. The score is often found by accessing online accounts.

2.    Credit card issuer. Many credit card issuers provide credit scores to their customers.

3.    Finance apps. A money tracker app or a similar business provides credit scores to their users.

By the way, pulling your credit report and checking your own score don’t negatively affect your credit score. Learn more about soft credit inquiries vs. hard credit inquiries.

The Takeaway

The two main credit score companies are FICO Score and VantageScore. Each company calculates your score in a slightly different way. Checking your credit is a great way to stay on top of your financial health. Although you may not know exactly which credit score your lender uses to make decisions, you can get a pretty good idea of your range.

A number of businesses can provide your credit score free of charge, including banks and credit unions, credit card issuers, and finance apps. Obtaining a credit score from either FICO or VantageScore can help you identify your strengths and the areas where you need to improve.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

Does TransUnion use FICO or Vantage?

TransUnion uses the VantageScore 3.0 model.

Which is more accurate: VantageScore or FICO?

Both VantageScore and FICO Score are used to make lending decisions, so the score that is most accurate is the one your lender is planning to use. According to FICO, 90% of top lending institutions use their score to make lending decisions.

Which credit score is better: FICO or TransUnion?

TransUnion provides credit scores from the VantageScore 3.0 model. Both FICO and VantageScore can provide insights into a consumer’s behavior with credit.

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SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Automatic payments from your bank account can be a convenient way to pay your bills and subscription charges on time. But the day may come when you need to know how to stop automatic payments on a debit card. This could involve changing your account settings, revoking authorization, or contacting your bank.

Canceling your automatic payments with certain vendors and financial institutions can occasionally be a hassle. And sometimes, if you’re not paying attention, months can go by without you realizing that recurring fees are still being deducted from your account.

Here, you’ll learn four effective ways to stop automatic payments when the time comes to do so.

4 Ways to Stop Automatic Payments

If you’re someone who tends to forget to pay bills in a timely manner, automatic payments attached to your debit card can be a financial lifesaver.

Automatic transfers or ACHs (automatic clearing house) can transfer money from your checking account on a specific date to a business, without any checks being written or credit card interest charges being incurred. This method can be used to cover a myriad of life’s expenses, including the cost of a gym membership, cell phone bills, and your favorite streaming services.

But there are some downsides to automatic payments being applied via your debit card. Maybe you accidentally signed up for recurring payments? Perhaps that monthly shipment of protein shakes was initially exciting, but now you’re sick of drinking strawberry-flavored liquids for lunch. Nobody wants to get stuck paying for something they don’t want.

If you want to keep autopay withdrawals from happening, you’ll need to know how to stop recurring debit card payments. Failure to do so can result in a drain on your bank account, and your sanity.

Federal law grants you the right to cancel an automatic debit card payment, or stop ACH payments, even if you previously permitted them. There are generally no fees or penalties for canceling an automatic payment preference.

Here are 4 tips on how to cancel an automatic payment.

1. Turning Off Automatic Payments in Your Account

These days, most utility companies and vendors invite you to automate your finances. When you create an online account, they will encourage you to sign up for automatic payments. This makes it more likely that they will receive your money in a timely fashion and it may allow them to cut down on monthly billing efforts. It also can make it easier for you to stop an automatic payment.

Your automatic payments can usually be set up and terminated simply by switching an option in your settings. Sign in with your username and password and select “opt out of automatic payments” in your personal account. This action is typically performed in the “billing and payment” section in the site menu. If you need help, a customer service representative can often guide you via online chat or over the phone.

Once you’ve turned off your automatic payment feature, it might be wise to document the event. Take a picture of a confirmation message and note the date.

2. Revoking Authorization from Companies

If you can’t turn off your autopay option through an online account, you may have to contact the company directly and revoke the automatic payment authorization. Some vendors will email or mail you what’s known as a “Revoke Authorization” form.

Once you’ve received the Revocation of Authorization form, fill it out, and keep a copy for yourself before emailing or mailing it back. That way, if the automatic payment charges continue, you’ll have evidence of cancellation to show to your banking institution.

3. Calling Your Bank or Credit Union

Another way to stop automatic payments from your debit card is to contact your bank directly. They may ask you to pen a letter to formally revoke authorization, stating that the company and dollar amount is no longer allowed to be electronically debited from your checking account.

Your bank may also have a Revoking Authorization form you can fill out online or in person. Once the form has been processed, any further attempt by the company to withdraw funds can be dealt with by your bank.

4. Issuing a Stop Payment Order

Instead of filing a form to revoke authorization, you could issue a stop payment order. A stop payment order gives your bank or credit union permission to block a company or vendor from taking money from your account. This process could be done over the phone, in an email, or in person. Some banks may charge a fee for this service.

Keeping an Eye On Your Bank Account

It is possible, even after taking actions to cancel your automatic payments, that you may still see funds being withdrawn from your bank account. While this is frustrating, you may have to contact the vendor or your bank a second time. It’s a good idea to frequently check your bank account to be sure the automatic payments have stopped. Regular check-ins can be part of managing your checking account in a big-picture way too.

Dealing with Unauthorized Automatic Payments

Paying attention to your bank account can also help keep your online accounts safe. Your bank may even alert you to fraudulent charges — automatic payments being made without your consent for things you never signed up for.

Should You Consider Closing a Bank Account?

It’s good to know how to cancel all automatic payments that seem suspicious. One surefire way to avoid recurring fraudulent charges is to close your bank account completely. But this is a drastic measure that could cost you more time and fees.

Instead, contact your bank or credit union. In many cases, they will credit you for the false debit, block the vendor from making future attempts, and suggest further security measures.

Recommended: How to Switch Banks

Should You Cancel Your Debit Card?

If a company keeps making erroneous or unauthorized automatic payments, one way to put a stop to it is to cancel your debit card and receive a new one. In the cases of fraudulent charges by an unknown vendor, your bank will strongly suggest this in order to protect you.

Knowing When to Give Bank Authorization

In order to effectively stop an automatic payment before it happens, be sure and issue the Revoke Authorization form or stop payment order at least three business days before the automatic payment is due, to give your bank time to process the request.

Remember, stopping an automatic payment doesn’t mean you don’t owe money for products received or services rendered. You’ll have to cancel the service agreement completely, or be on top of paying what you owe by the due date through online payments, mailing a check, or other arrangements.]

The Takeaway

Automatic payments from your checking account are a simple and popular way to pay what you owe on time. They can help you avoid late fees and a trip to the mailbox. If you have an online account, you can discontinue an auto payment with only a few clicks. In most cases contacting the company or vendor directly can also get the job done, or you can ask your bank for help. No one can force you to continue automatic payments against your will, and the control of your bank account is in your hands.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

How much does it cost to stop an automatic payment?

There are typically no fees when you stop an automatic payment option in your online account or if you do so by contacting a vendor directly. However, a bank might charge a processing fee for issuing a stop payment request.

What happens if you close a bank account with automatic payments?

If you close a bank account, companies and vendors will no longer be able to automatically deduct monthly payments tied to that account. You will have to make other arrangements to pay what you owe or discontinue any service agreements.

Will getting a new debit card stop recurring payments?

Yes. A new debit card comes with a new number. You will have to contact companies with your new card information to continue automatic payments.

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SoFi members with direct deposit activity can earn 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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