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Unsecured credit cards, which don’t require a form of collateral to use them, tend to be the most popular kind of credit card. In addition to helping you build credit, these cards often come with perks and benefits, like cash back rewards or free travel insurance.

To decide if an unsecured credit card is right for your financial situation, read on. You’ll learn what an unsecured credit card is, how it works, and the pros and cons of using one.

What Is an Unsecured Credit Card?

When you think of what a credit card is, you’re most likely thinking of an unsecured credit card. An unsecured credit card is a line of credit that gives cardholders the ability to use credit at their whim. In other words, as a cardholder, you can use your credit up to its limit and pay it off continuously, with no end date. Unsecured credit cards get their name since they don’t require a deposit or collateral, unlike secured credit cards.

Depending on the credit card you qualify for, you might be able to receive some additional benefits and perks with an unsecured credit card like cash back rewards.

How Does an Unsecured Credit Card Work?

You’ll receive a credit limit when you open an unsecured credit card. Your credit limit is the maximum credit you can use on this account. You must pay at least the credit card minimum payment each billing cycle if you’ve used the card. Here are some points to know:

•  Your monthly payment will vary depending on how much credit you used during that billing cycle (in fact, some months, you may even have a negative balance on your credit card).

•  If you miss a monthly payment, you’ll likely have to pay a penalty or fee for the infraction.

•  If you make only the minimum monthly payment, your remaining balance (plus accrued interest based on the APR on a credit card) will carry over until the next month.

So, to avoid penalties, fees, and accrued interest, it’s best to pay your balance in full every month.

But, if this isn’t feasible with your budget, aim to pay more than the minimum every month so you can quickly chip away at your total outstanding balance. Just be sure to keep in mind how credit cards work when deciding how much to pay in a given month.

Pros and Cons of Unsecured Credit Cards

Some of the benefits and drawbacks of unsecured credit cards may be obvious. But, to help you determine the risks and rewards of using this type of credit card, here are some pros and cons to get familiar with.

Pros

Upsides of unsecured credit cards include:

•   Higher credit limits: Applicants usually must have a competitive credit score to qualify for an unsecured credit card. For this reason, credit card companies may apply a higher credit card limit since you’ve proved your creditworthiness.

Also, having a higher credit limit can impact your credit utilization ratio, the amount of credit you use compared to the amount of credit you have available. Your credit utilization ratio is used to assess your credit score, and a higher ratio may negatively impact your score. With a higher amount of credit available, it’s easier to maintain a lower ratio.

•   Potential to earn rewards: Many unsecured credit cards offer incentives like cash back or airline miles to encourage cardholders to use their credit. They may also offer additional benefits, such as complimentary airport lounge access or hotel credits. So, when comparing your unsecured credit card options, be sure to look at all perks and rewards that may be offered.

•   Frequently reports credit history to credit bureaus. Since card issuers take on more risk by lending credit to cardholders, they usually report your credit activity to the credit bureaus on a monthly basis.

Your credit usage is another factor used to determine your credit score, so these regular reports can help you assess how well you’re managing your credit. If you’re managing it well, these frequent reports can help your score.

•   An abundance of options: Unsecured credit cards are the most popular type of credit card. Therefore, there’s a vast array of credit card options at your disposal. Because there are so many options, you’ll likely be able to find one suitable to fit your needs.

Cons

While there are many advantages of using an unsecured card, some may come with some downsides, including:

•   Varying approval requirements: Every credit card company usually has different credit card approval requirements, and you’ll generally need a higher score to qualify for an unsecured versus a secured credit card.

For example, some secured credit card requirements are a credit score of at least 580; others may require a score of at least 680. Researching requirements beforehand can help you identify the best cards available that you can qualify for with your credit score.

•   Extra fees: Some unsecured cards may come with extra fees, such as convenience fees, cash advance fees, or foreign transaction fees. Keep in mind that not all cards charge these fees, though, so it’s worth it to compare your options based on your needs. For example, if you travel abroad often, you may want to choose a card that doesn’t have foreign transaction fees.

Unsecured vs Secured Credit Cards: What Are the Differences?

The most significant difference between unsecured versus secured credit cards is that secured cards require a deposit while unsecured cards don’t. Your deposit on a secured credit card usually dictates your credit limit. Depending on the credit card company and your credit score, your deposit may vary between $200 and $3,000, which is far lower than the average credit card limit.

Requiring a security deposit eliminates some of the creditors’ risks; thus, it can be easier to qualify for a secured credit card than an unsecured credit card. Keep in mind, no matter what type of card you have, you’ll find the most favorable terms if you have good credit, such as a good APR for a credit card. Also, you may have to forgo any rewards while you build your credit with a secured card, as they don’t often offer them.

If you fall behind on your payments, your creditor could cancel your card and send your remaining outstanding balance to a third-party collector with either an unsecured or a secured credit card. However, if you have a secured credit card and your payment is past due, your creditor may keep your security deposit to pay off some of the remaining balance.

Beyond these few items, there is no other real difference between the inner workings of a secured credit card and an unsecured credit card.

•  Each card allows you to make purchases at locations that accept credit card payments.

•  During the billing cycle, you must make at least a credit card minimum payment.

•  Otherwise, you may have to pay fees or penalties with your secured or unsecured credit card.

Who Should Consider an Unsecured Credit Card?

Since there are plenty of unsecured credit card options available, they can suit the needs of many different types of consumers. If you’re in the market for a new credit card, here’s how to decide if an unsecured card is right for you.

The Budgeter

If you’re big on budgeting, you can use an unsecured credit card as a tool to help you as you make a budget and stick to it. Many credit issuers offer online statements or apps that can make it easy to track all of your spending right on your phone.

But, if you’re going to use your credit card for all of your spending, make sure to keep the interest in mind. While unsecured credit cards can help you budget, they can also hinder you if you get into the habit of overspending.

The Frequent Flyer

Do you love spending your time on the move? Many unsecured credit cards provide travel rewards that help you earn free travel experiences. For example, some cards can come with reward points or miles that you can use toward booking airfare or accommodations.

You may also receive additional perks like annual hotel credits, access to airport lounges, or discounts on flights when using miles.

The Business Owner

Unsecured credit cards are also useful for business owners. Business owners can capitalize on the perks of unsecured credit cards like rewards, sign-up bonuses, and other benefits. Also, an unsecured card can provide short-term funding for business growth. Plus, it can help businesses build credit for future financing endeavors.

Of course, benefits and terms will vary depending on the type of card you choose.

Typical Requirements to Apply for an Unsecured Credit Card

When you apply for an unsecured credit card, you must meet certain criteria to qualify. Some common requirements when applying for a credit card include:

•   Be at least 21 years of age. While this is generally the age required to get a credit card, if you’re over 18 and can prove you have an income, you may qualify.

•   Provide proof of income to demonstrate you can make the minimum payments.

•   Be a U.S. citizen or have the authority to work in the U.S.

•   Have an acceptable credit score range per the lender’s requirements.

•   Provide personal information such as your name, age, address, Social Security number, and more.

Keep in mind that all credit issuers have different criteria for approval. Some credit issuers may give you the option to pre-qualify. This way, you can see if you may qualify without submitting a hard inquiry on your credit, which can impact your credit score.

The Takeaway

Unsecured credit cards can come with many perks, such as earning cash back rewards and helping you build credit. But, before you apply for just any old card, make sure to compare your options, keeping the average credit card interest rate in mind, and understand the criteria for approval. Identifying an unsecured credit card that’s suitable for your needs might take a little time, but it’s worth it.

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

Is it good to have an unsecured credit card?

If you can handle an unsecured credit card responsibly, it can help you build credit. Also, it can be a good way to receive additional benefits, such as cash back or other rewards, for completing your daily transactions.

What credit score do I need for an unsecured credit card?

Typically, if you have a credit score of 579 or less, credit issuers may be reluctant to approve your application. To qualify for the most competitive rates and offers, you typically want to have a credit score of 670 or higher.

How long before I can get an unsecured credit card?

If you’re working on building credit and don’t qualify for an unsecured credit card, you may have to start with a secured card. But, the amount of time you must use your secured credit card before you graduate to an unsecured time can vary from a few months to several years. Ultimately, it will depend on factors like your current credit score and the criteria of the unsecured credit card you’re applying for.

Photo credit: iStock/Zhonghui Bao

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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While there’s no universally required credit score needed to rent an apartment, having a solid credit score can certainly help your chances of a landlord handing you a set of keys. In general, a landlord will look for a credit score that is at least “good,” which is generally in the range of 670 to 739. However, that can vary by landlord or property manager, as well as the location in which you’re renting.

Read on to learn more about how your credit score can affect renting an apartment — and how you can approach renting if you have a lower credit score.

What Credit Score Do I Need to Rent an Apartment?

Truth is, the answer to what credit score you need to rent an apartment is a bit squishy. In general, you’ll have a better chance of approval if your credit score is at least deemed “good.”

What’s considered good? Credit scores are generally classified as follows per FICO® (keep in mind that different scoring models may vary):

•   Exceptional: 800-850

•   Very good: 740-799

•   Good: 670-739

•   Fair: 580-669

•   Very poor: 300-579

There also are variables that can affect whether your credit score qualifies you to rent an apartment. For example, if you live in a city where there is huge demand for apartments, landlords may give preference to those with higher credit scores.


💡 Quick Tip: What is credit monitoring good for? For one, maintaining a high credit score can translate to lower interest rates on loans and credit card offers with more perks.

Can You Get an Apartment if One Person Has Bad Credit?

If one person has bad credit, know that it will likely make it tougher for you to get an apartment. Landlords have a lot of leeway and can follow criteria of their choosing.

Still, it’s not impossible even if it is trickier. One smart strategy in this situation is to put the lease in the name of the person whose credit and income is best. You could also offer to show your income or provide a reference.

What Landlords Look at on Your Credit Report

When your landlord reads your credit report, they will be looking for clues about your financial health and habits.

Of much importance is your debt-to-income ratio. In a nutshell, this is the amount of your monthly pre-tax income that gets spent on debt payments. It’s certainly not news to you that filing for bankruptcy can have a negative impact on one’s credit. A landlord also may be spooked if you have hefty credit card balances.

Your credit history disclosed on your credit report also may include your rental history, since some landlords and rental property managers share your data with the credit bureaus. This can be a plus if you’ve been doing the right thing; if not, this can work against you.

Too many hard inquiries also can raise red flags for a landlord. This is because frequently applying for different types of credit could suggest financial instability, which increases risk in the eyes of lenders — as well as landlords.

How to Rent an Apartment with a Lower Credit Score

Just because your credit score isn’t stellar doesn’t mean you’re resigned to sleeping on a friend’s couch or living with your parents. There are ways to rent an apartment even with a lower credit score.

Pay a Higher Security Deposit

One way to show that your credit history is just history is by offering to make a higher security deposit. Say you are required to pay first and last month’s rent upfront. To sweeten the deal, maybe you tack on a couple additional months of rent.

If you want to instill confidence in your potential new landlord, this might do it. Just make sure you actually have the room in your budget to offer up the cash.

Recommended: What Is The Difference Between Transunion and Equifax?

Get a Cosigner

While getting a cosigner may put a damper on feeling like you’re finally a grownup, it may be worth sucking it up and getting a creditworthy parent or other trusted individual to cosign for your apartment. This can give your landlord peace of mind if someone is willing to pay the rent on your behalf if you’re unable to.

Just keep in mind that your cosigner will be on the hook if you miss a payment, and that cosigners generally must meet even steeper credit score and income requirements.

Play Up Your Income

Maybe your credit score is nothing to brag about, but you’ve worked hard and now have your finances in order, with solid savings and a good income. If you could show that you earn three or four times your rent on a monthly basis, that might divert attention from your lousy credit score. Additionally, if you have a solid stash in your savings account, that can also give your landlord assurance that you have the funds to cover your monthly rent.

Consider Getting a Roommate

Adding a roommate to your lease or rental agreement can increase your creditworthiness and your qualifying income. This is especially the case if you can find a roommate with good credit — and get your landlord to pull their credit first.

Benefits of Good Credit When Renting an Apartment

A landlord needs more than their gut instinct to help them determine who to rent to, which is why a credit score carries a lot of weight when it comes to getting your rental application approved. A good or — better still — an excellent score can give landlords the confidence to consider you for the apartment, especially if all other signals they get when checking on your background indicate they should give you the green light.

Having a solid credit score can help you to snag the apartment you want, and avoid the hassles associated with trying to secure an apartment when your credit isn’t as great, such as getting a roommate or a cosigner. Especially if you live in a city with a competitive rental market, a good credit score can be a serious edge.

How to Monitor Your Credit Score

Ideally, you want to check your credit and get a copy of your credit report before you start apartment hunting. It’s important to know where you stand, and if there are any errors, you want to fix them right away.

Through the end of 2023, you can get free weekly credit reports from the three national credit reporting agencies, Equifax, Experian and TransUnion.

To get your free reports, simply go to AnnualCreditReport.com .

While your credit report provides information on your various credit accounts and their balances and your payment history, it does not include your credit score. You can check your credit score by looking at a loan or credit card statement or through an online credit score checker. You can also buy a score directly through credit reporting companies. Even if you might have checked your credit score not that long ago, don’t skip doing so again — your credit score updates every 30 to 45 days.

If your score is low, consider taking steps to improve it before jumping into your apartment search. Actions like paying down credit card balances and making sure you don’t have any more late or missed payments for a stretch can show progress.

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

What to Expect in 2024

According to Zillow, demand for rentals will remain strong this year. There’s an increase in the number of buildings under construction, and vacancy rates are close to what they were before the pandemic.

Market rental rates are slowing down, but that doesn’t mean housing prices are cheap. Apartment rents have risen 23.6% since the start of the pandemic. Inflated prices could lead to a rental market that is even more competitive, which may not bode well for those with less than stellar credit.


💡 Quick Tip: One way to raise your credit score? Pay your bills on time. Setting up autopay can help you keep your account in good standing.

The Takeaway

You’ll want to shoot for having a good credit score — generally in the range of 570-739 — to get an apartment. While you may be able to still get an apartment if you don’t have solid credit, it will make it more challenging with the competition you’re likely to face.

If you have the luxury of time, do what’s necessary to improve your score so that when you begin your search, you’ll be an ideal candidate. An online credit monitoring tool can make it easier.

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.

Photo credit: iStock/MixMedia

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.

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

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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Because a credit score is an important indicator for determining a consumer’s creditworthiness when buying a car, those with excellent credit histories tend to have an easier time borrowing money on favorable terms compared to those with lower credit scores. However, industry data shows that high-risk borrowers remain viable candidates for auto loans. In other words, there is no universally defined credit score needed to buy a car.

Read on to learn how your credit score can affect buying a car, plus some tips for purchasing a car with a lower credit score.

What FICO Score Do Car Dealers Use?

There are a few different scoring models that car dealers may use for determining a customer’s credit score. They may use the FICO® Auto Score, an industry-specific model featuring a score range from 250 to 900. The auto industry also may use VantageScore 3.0 or 4.0, which has a score range from 300 to 850.

No matter which scoring model is used, a bad credit score falls on the lower end of the range and a good credit score sits on the higher end of the range.


💡 Quick Tip: Your credit score updates every 30-45 days. Free credit monitoring can help you learn about your score’s normal ups and downs — and when a dip is cause for concern.

What Is the Minimum Credit Score to Buy A Car?

There may not necessarily be a minimum credit score required to buy a car. Consumers with deep subprime credit scores (300–500) have obtained financing for new and used vehicles in 2023, according to the credit bureau Experian. Although the percentage of borrowers in this category is very low, this indicates that even those with the lowest credit scores still may have access to auto financing.

Average APR by Credit Score Ranges

Consumers from all credit score categories have obtained auto loans in 2023, but car buyers with excellent credit histories tended to secure the lowest annual percentage rate (APR) financing, according to Experian. When assessing what is a good credit score to buy a car, Experian’s data confirms that consumers in the super prime and prime categories obtain the lowest interest rates on average for financing.

Quarterly financing data on new vehicle purchases in the fourth quarter of 2023 shows the following average APRs by credit score ranges:

•   Deep subprime (300-500): 14.78%

•   Subprime (501-600): 12.28%

•   Near prime (601-660): 9.60%

•   Prime (661-780): 7.01%

•   Super prime (781-850): 5.64%

How to Buy a Car With a Lower Credit Score

Obtaining a loan to purchase a new or used vehicle when you don’t have great credit can be cumbersome, but it’s not impossible. Here are some ways a consumer with poor credit may be able to obtain auto financing:

Make a Large Down Payment

Offering a large down payment on a vehicle purchase may allow car buyers to obtain more reasonable rates and better terms for financing, resulting in more affordable monthly loan payments. By putting more money down at the time of purchase, lenders also may view the loan as less risky, thus increasing your odds of approval.

Get Cosigner Assistance

Buying a car with the assistance of a cosigner is another way to potentially bolster your chance of securing favorable financing. A cosigner agrees to share the responsibility of repaying the loan, effectively promising the lender that if you don’t make the payments they will. If the cosigner is creditworthy, it puts the buyer in a much better position to obtain financing than going it solo.

Consider a Less Expensive Car

Especially if you are buying a car with bad credit, it is important to know how much you can realistically afford to spend — and then stick to that budget, even if the dealer tries to upsell you. Additionally, finding a less costly car will reduce the amount you need to borrow, and it may be easier to get approved for a smaller loan amount than a larger one.

Benefits of Good Credit When Buying a Car

The benefit of a good credit score when buying a vehicle is that you may secure lower interest rates compared to consumers with poor credit. Unless a consumer buys a vehicle outright with cash or receives 0% APR financing, the consumer will eventually face monthly principal and interest payments until they’ve paid off the loan balance in full. Auto financing terms may vary in length, with some maturing at 60 months, 72 months or 84 months.

Car loans with a high APR may cause consumers to pay a long-term premium above and beyond the actual sales price of the vehicle.

How to Monitor Your Credit Score

There are a number of ways you can check your credit score, including through your credit company or another financial institution where you have an account, as well as through a credit service or credit scoring website. Contrary to what you may expect, your credit report does not include your credit score, though it does provide valuable information about your credit history and debts, which is why it can still be helpful to read over your credit report before making a major purchase like a car.

Credit scores can fluctuate over time depending upon financial circumstances, and credit score updates occur at least every 45 days. That’s why it’s important to take a look at where your score stands right before you begin the process of car shopping.

Also keep in mind that it’s common for credit inquiries to occur when you’re shopping around to see what auto loan terms you qualify for. While soft inquiries don’t affect your credit score, hard inquiries, such as those that happen when you’re comparing rates for an auto loan, can ding your score. However, most major credit scores will count multiple car loan inquiries made within a certain period of time — typically 14 days — as one inquiry.

What to Expect in 2024

Based on the trends outlined in Experian’s Q4 report for 2023, prime borrowers with good credit in 2024 may continue shifting away from used vehicles in favor of new electric vehicles. Experian’s research also shows that subprime financing remains low, with 14.5% of car loans in 2023 going to consumers in the subprime risk category. These trends could continue through 2024.


💡 Quick Tip: One way to raise your credit score? Pay your bills on time. Setting up autopay can help you keep your account in good standing.

The Takeaway

While it is possible to buy a vehicle with bad credit in 2024, consumers in the subprime or deep subprime risk categories may want to explore ways of improving their credit scores to help secure financing with more favorable terms. As far as what credit score you need to buy a car, any score is potentially sufficient for obtaining financing.

If you want to check your credit or work to improve your score before buying a car, a money tracker app allows you to easily monitor and keep track of your credit score.

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.

Photo credit: iStock/tolgart

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.

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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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A personal loan is a flexible lending product that can be used for anything from covering the cost of a home repair to consolidating high-interest debt. While there’s no universally required credit score for a personal loan, you generally need a score of at least 610 to qualify, and an even higher score to get a lender’s best rates.

That said, some lenders offer personal loans for no credit, and even for bad credit. To make up for the increased risk, however, they will typically charge high interest rates.

Read on for a closer look at the minimum credit score for a personal loan, how your credit score can impact loan amounts and interest rates, plus other factors lenders look at when considering an applicant for a personal loan.

What Personal Loans Are and How They Work

A personal loan enables you to borrow a specific amount of money to use in virtually any way you like — unlike a mortgage or auto loan which is earmarked for one specific purpose. Personal loans are offered by banks, credit unions, and online lenders and are generally unsecured (meaning you don’t have to pledge an asset to secure the loan).

Common uses of personal loans include home renovations, vacations, weddings, car/home repairs, medical expenses, moving expenses, major purchases, and credit card consolidation.

Once you get approved for a personal loan, you receive the funds in one lump sum up front then repay the money (plus interest) in monthly installments over a set period of time, called the loan term.


💡 Quick Tip: Some lenders can release funds as quickly as the same day your loan is approved. SoFi personal loans offer same-day funding for qualified borrowers.

What You Need to Qualify for Personal Loans

These are a few factors lenders take into consideration when deciding whether or not to offer you a personal loan, as well as how much to offer and at what rate. Here’s a look at what you may need to qualify.

Credit Score

A credit score is a three-digit number (typically between 300 and 850) designed to predict how likely you are to pay a loan back on time based on information from your credit reports. There is no universally set minimum credit score for personal loans but many lenders require applicants to have a minimum score of around 620. To get approved for a lender’s lowest rates, however, you may need a credit score closer to 690.

That doesn’t mean borrowers with lower scores or thin credit are out of luck. Some lenders offer personal loans to applicants without any credit history at all. There are also personal loans on the market designed for applicants with poor or bad credit. Keep in mind, though, that these loans often come with high rates and less-than-favorable terms.

Debt-to-Income Ratio

Lenders will also look closely at an applicant’s debt-to-income (DTI) ratio, which measures the percentage of a person’s monthly income that goes to debt payments. You generally want your DTI to be as low as possible because that indicates that your income is well above what you need to cover your monthly expenses.

If you’re applying for a personal loan, lenders typically want to see a DTI of 35% to 40% or less. A lender might allow a higher DTI, however, if you have a strong credit score or other compensating factors, like enough money in your savings account to cover several months of living expenses.

Income

To make sure that borrowers have the cash flow to repay a new loan, lenders typically have minimum income requirements for personal loans. Income thresholds vary widely by lender — some require applicants to earn at least $45,000 per year, while others have a minimum annual income requirement of just $20,000. Lenders don’t always disclose their income requirements, so you may not be able to discover these minimums before you apply for a personal loan.

Lenders see your income by looking at your monthly bank statements, last two years of tax returns, and pay stubs. Some lenders also require a signed letter from an employer. If you are self-employed, you can provide tax returns or bank statements to show proof of income.


💡 Quick Tip: With average interest rates lower than credit cards, a personal loan for credit card debt can substantially decrease your monthly bills.

Personal Loan Options by Credit Score

When it comes to having the right credit score for a personal loan, there is no one set score that disqualifies someone from getting their hands on one. That said, having a FICO® Score in the good range (670-739) or higher gives applicants the widest range of lending opportunities and the most favorable interest rates. Take a closer look at how different FICO credit score ranges can affect lending opportunities.

Exceptional

An exceptional credit score qualifies applicants for the widest variety of personal loan options, the most favorable interest rates, and larger loan amounts.

Very Good

Having a very good credit score qualifies applicants for most if not all of the same rates and lending opportunities as exceptional applicants.

Good

Having a good credit score puts a borrower near or slightly above the average of U.S. consumers, and most lenders consider this a good score to have. Applicants shouldn’t struggle to find a personal loan, but they may not be approved for the lowest interest rates.

Fair

Because a fair credit score is below the average score of U.S. consumers, many lenders will approve loans with this score, but rates and terms might not be as desirable as they are for higher scores.

Poor

A poor or “bad” credit score is well below the average score of U.S. consumers and demonstrates to lenders that the applicant may be a lending risk, which greatly limits the applicant’s borrowing options. If they do qualify for a personal loan they likely can expect to be approved at high interest rates.

Alternatives to Personal Loans

If your credit score makes it difficult to qualify for a personal loan, you may want to explore alternative lending options. Here are some to consider.

•   Credit card cash advance: Consumers with credit cards may be able to request a cash advance from their credit card, which can make it easy to get access to cash quickly. These cash advances typically come with higher interest rates than a regular credit card purchase.

•   Peer-to-peer loans: There are some web-based lending sites that offer some flexibility in qualification requirements. Since these sites are not lenders, and more like matchmakers, they may help you find an investor who is willing to look at other factors besides your credit score.

•   Cross-collateral loans: If you already have a loan secured by collateral with a lender (such as auto loan or mortgage), you may be able to qualify for another loan with the same lender using that same collateral. However, not all lenders allow cross-collateral loans. And there are risks involved for borrowers. To have a lien released from the asset used as collateral, you typically need to pay both loans in full.

Personal Loan Rates From SoFi

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

FAQ

Is a different credit score required for loans of different sizes?

Generally, the higher your credit score, the larger the loan you can qualify for. Maximum amounts for personal loans range from $500 to $100,000. If you have strong credit, you may qualify for a larger loan than you need. Be sure to consider how much you can afford to repay each month before deciding what size loan to take out.

Can you get a personal loan without having a credit score at all?

There are some personal loans on the market with no credit check. Since the lender can’t rely on your credit history, they will typically focus on other indicators of your ability to pay back the loan, such as your income, employment history, rental history, and any previous history with the lender.

When applying for a personal loan with no credit check, you’ll want to carefully weigh the benefits against the costs. Lenders will often charge higher interest rates and impose more fees to lessen their risk.

Can getting a personal loan affect a credit score?

Getting a personal loan can affect credit scores both positively and negatively. Applying for a personal loan typically results in a hard credit inquiry, which may cause a small, temporary drop in your credit score. On the flip side, taking out a personal loan can have a positive impact on your credit by increasing your credit mix. Making on-time payments can also improve your credit profile. (Late payments, however, can have a negative impact on your credit.)

Photo credit: iStock/Moyo Studio

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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.

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 .

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If you have an 810 credit score, congratulations. The score is considered excellent and could help you qualify for loans with more favorable terms or premium rewards credit cards.

Let’s take a closer look at what an 810 credit score means and some different strategies that could help boost your credit score.

What Is a Credit Score?

A credit score is a three-digit number that reflects a consumer’s creditworthiness, or ability to pay back loans in a timely manner. Scores range from 300 to 850. Generally speaking, the higher the credit score, the better you tend to appear to a potential lender.

The two most popular credit scoring models are FICO and VantageScore. To calculate your score, both use credit history information provided by the three major credit bureaus: Experian, TransUnion, and Equifax.


💡 Quick Tip: Your credit score updates every 30-45 days. Free credit monitoring can help you learn about your score’s normal ups and downs — and when a dip is cause for concern.

Reasons to Care About Credit Scores

There are several reasons why a good credit score is essential to your financial health. Here are three to keep in mind.

It can increase your chances of being approved for a loan

The higher your credit score, the more likely lenders will approve loan or credit card applications. Whether it’s to purchase a house, buy a car or private student loans, having access to loans can help you achieve some big financial goals. Note that some banks may also run credit checks before issuing you an account.

You may have access to better loan rates and terms

Lenders are more likely to offer consumers with better credit scores lower interest rates and more favorable terms because they’ve proven they pay back their loans on time. A higher credit score may also get you access to other types of products such as premium rewards credit cards.

You could save money

When you move into a new home, the utility company or your landlord may check your credit score to determine how much of a security deposit you’ll need to put down. Typically, the lower your score, the higher your deposit. Though the money is often refundable, it’s usually held in a third-party account that you won’t have access to. Potential employers may also run a credit check before you’re offered a job.

Is an 810 Credit Score Considered Good or Bad?

An 810 credit score is considered very good. In fact, just 21% of consumers in the U.S. have a credit score of 800 or higher, according to Experian. By comparison, the national average credit score is 715.

What Does an 810 Credit Score Mean?

Having an 810 credit score means you’ve proven through your credit behavior that you are likely to pay back loans on time. As mentioned above, a score of 800 or above places you in the top tier of consumers.

You are also considered to be in the “exceptional” range for your FICO score and “superprime” for your VantageScore. This means lenders are more likely to approve you for loans and offer you access to products such as loans with lower interest rates and premium credit cards. Landlords and utility companies may also ask for a lower security deposit amount (if at all).

How to Build Credit

Looking to build your credit? You have several avenues to explore. Below are a few to consider. Note that there’s no one-size-fits-all solution, so it’s a good idea to research all the options available to you.

Use a Credit Card

Even if you’re just starting out in your career or only have fair credit, you may still be able to be approved for a credit card. For instance, you can open a credit card that’s specifically for college students. Or you may want to consider a secured credit card, where you pay a refundable security deposit that acts as your credit line.

Whatever purchases and payments you make on the card are reported to the three major credit bureaus. This in turn helps to establish your credit history.

Become an Authorized User

An authorized user means that your name will be put on someone else’s credit card account. You can use the credit card much like the primary cardholder can, though this person is ultimately responsible for ensuring the minimum payments are paid on time.

If the primary cardholder has a good credit score, then their positive credit history may be added to yours.

Add Monthly Bills to Your Credit Report

Some free credit monitoring services will report your utility and rent payments to your credit report. Doing so can help build your credit history. Even if there is a small fee involved, it may be worth using for a few months, depending on your financial situation.

Take Out a Credit Builder Loan

Credit builder loans are designed to help borrowers who are looking to build their credit. They’re similar to a personal loan, except you don’t initially receive the loan proceeds. Instead, the money will be held in a separate savings account until you pay off the loan. Meanwhile, your payment activity will be reported to the credit bureaus.

How Long Does It Take to Build Credit?

It can take several months for you to establish and build credit. This is because credit scoring models need enough information from your credit history in order to assess your creditworthiness.

As you work on building your credit, do your best to practice good financial habits, such as making on-time payments.

Credit Score Tips

Even if you have an excellent credit score, it’s a good idea to keep up good credit behavior. This includes:

•   Consistently making on-time payments

•   Keeping your credit utilization, or the percentage of the available limit you’re using on revolving credit accounts, as low as possible

•   Avoiding applying for too many new loan or credit accounts at once

•   Keeping your longest credit card or loan account open

•   Regularly monitoring your credit score

•   Checking your credit history and immediately disputing any errors you find

How to Check Your Credit Score

Wondering how to find out your credit score for free? You have several options. The first is your credit card statement. Many credit card issuers provide customers with a complimentary look at their score. To find it, you may need to log into your account or check your monthly credit card statement.

Another option is to use credit score monitoring tools; some are free, others require a payment. Before opening an account, compare each tool to see which one best serves your needs.


💡 Quick Tip: One way to raise your credit score? Pay your bills on time. Setting up autopay can help you keep your account in good standing.

The Takeaway

It’s good news if you have an 810 credit score and a sign that you have a track record of paying back your loans. A good score may help improve your access to loans with better terms or premium or luxury credit cards. If you want to improve your score — or just maintain it — you can try practicing good financial habits, like consistently making on-time payments, keeping tabs on your credit score, and disputing any errors.

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

What is a decent credit score for a 23-year-old?

Chances are, at 23 you’re probably still building your credit. According to Experian data, the average credit score for people aged 18 to 25 is 679. If yours is higher, then it’s considered above average.

What is the highest credit score possible in 2024?

The highest credit score you can achieve is 850 for both FICO and VantageScore scoring models.

Is a credit score of 800 good at age 23?

Whether you’re 23 or not, an 800 credit score is considered excellent.

Photo credit: iStock/Makhbubakhon Ismatova

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.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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.

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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