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Establishing a robust credit profile takes time, so teaching your children how to start building credit at 18 or even younger can help them get ahead. Building a positive credit history can play a key role in accessing competitive borrowing opportunities in the future.

If you have a teen or early-adult child, there are a few ways to help them establish credit at age 18. This can include getting a secured credit card, becoming an authorized user, or implementing other strategies.

What Is Credit and How Does It Work?

When a person purchases an item on credit, they aren’t using money they already have. Instead, they’re borrowing the funds to make that purchase and promising to repay the amount, plus interest, in the future.

A credit history is a complete record of a consumer’s installment loans and revolving credit accounts. It logs data about the type of credit that’s borrowed, their amounts, the lender that issued the credit, whether payments were made on time, and each account’s status.

Creditors report this data to the three major credit bureaus: Experian®, Equifax®, and TransUnion®. Activity is submitted at regular intervals as soon as a consumer submits an application, and as long as the account is active. Data is also reported when an account is closed.

Recommended: What Is a Charge Card?

Why Is It Important to Start Building Credit Early?

The earlier your child builds their credit, the more time they have to establish and positively impact their credit history and their scores. Credit scoring models, like the commonly used FICO® score, will use your child’s credit history to calculate their credit score.

This score is like a snapshot of your child’s creditworthiness. Businesses and lenders may refer to that score when evaluating your child for future jobs, apartment rental applications, and new loans and credit cards.

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

Tips to Start Building Credit at 18 Years of Age

As a parent of a teenager or early-adult child, there are a handful of ways to assist them in building credit under their name.

Recommended: Tips for Using a Credit Card Responsibly

1. Add Your Teen as an Authorized Card User

One of the easiest and best ways to start building credit at 18 for your child — and sometimes younger, depending on your card issuer — is by adding them as an authorized user. As an authorized user, your child will be able to make purchases using the card, with the primary account holder remaining liable for monthly payments.

If you have a credit card in good standing, making your child an authorized user on your account lets them reap the benefits of your positive borrowing habits. See if your card issuer allows authorized users (different types of credit cards may have different policies). Also double-check if it reports the account’s data to the credit bureaus for all users under the account.

Your credit card company might have a minimum age requirement for card users (and it often differs from the age to get a credit card independently). If your child meets the issuer’s requirement, your continued good borrowing activity on the card will get reported to credit bureaus to develop their credit file.

Recommended: How to Avoid Interest on a Credit Card

2. Work a Student Loan Into Their Education Financing Strategy

Talk to your college-bound high school graduate about strategically using a student loan to pay for some of their higher education costs. Student loans are installment loans in which your child is the primary borrower. They’re designed to cover school-related expenses and are paid back over time.

Some students might be eligible for a federal student loan, which offers fixed interest rates and borrower protections, like student loan forgiveness as well as flexible repayment and forbearance options. Although payments can be deferred on federal student loans while your child is in school, making payments during school can help them establish credit early on through student loan payment data.

Recommended: When Are Credit Card Payments Due?

3. Help Them Research for a Starter Credit Card

Getting a credit card for the first time can be an overwhelming process for your 18-year-old. There are many types of credit cards on the market with varying benefits. A credit card for individuals who are new to credit, like a secured card, might be an effective way for your child to initiate their credit history.

With a secured card, your child will need to provide the card issuer with a deposit that sets the card’s borrowing limit. Since the issuer uses the deposit as collateral for the account, it can be easier for individuals without credit to qualify. As your child uses the card and makes on-time monthly payments on the account, that data is reported to the credit bureaus.

Recommended: What Is the Average Credit Card Limit?

4. Find Ways To Report Their Payment History

If your child is moving into their own apartment or has done so already, look into whether their landlord is willing to report their rental payment history to the credit bureaus. Additionally, other types of non-traditional payment data can be reported to the credit bureaus by utility service providers.

Your child also might look into a service like Experian Boost®, which is offered by the credit bureau Experian. This service helps individuals who are new to credit start their credit history by accounting for payments toward services, like cell phone and streaming plans.

The Takeaway

Helping your child understand how to build credit at 18 can help them access favorable borrowing opportunities later on. That is, assuming they maintain positive borrowing habits once they have credit accounts of their own, like making payments on time and not taking on too much debt. Strategies can include getting their own credit card or becoming an authorized user on a family member’s card.

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

Can you build your credit before 18?

Yes, parents can help their child’s credit during their high school years by adding them on their credit card account as an authorized user. Depending on the credit card, there might not be an additional fee for adding an authorized user, though some card issuers do charge an annual fee per card user.

What credit score do you start with at 18?

If at 18 years old, a consumer hasn’t had a credit account, they simply won’t have a credit score at all since a credit score of “zero” does not exist. The lowest FICO score possible is actually 300, but a person’s starting score is typically higher than this, unless they’ve already demonstrated poor borrowing behavior early in their credit-building history.

When should I get my first credit card?

There’s no one “right age to get a credit card”; however, card issuers typically set a minimum age requirement of 18 for their card users. Parents can help their child access their first credit card as an authorized user, sometimes before the age of 18 years old. As an authorized user, your child can make purchases on your card, and start building their credit without being liable for monthly payments.

What is the fastest way to build credit at 18?

One of the fastest ways for parents to help their 18-year-old child build credit is by adding them to the parent’s existing credit card account as an authorized user. As parents make on-time monthly payments for at least the minimum amount due, some card issuers report this positive payment data to the credit bureaus for all users listed on the account.

Photo credit: iStock/PeopleImages

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.

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 .

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.

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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Figuring out whether you will get approved for a credit card is seemingly simpler now with credit card approval odds calculators. These tools can offer guidance, highlighting credit cards with high approval odds in your favor. However, they are not always reliable.

It can be helpful to also understand the key factors that can help make you a more desirable borrower for credit card companies, thus increasing your future approval odds.

What Are Credit Card Approval Odds?

Credit card approval odds inform you of the likelihood that you’d get approved for a particular credit card. How these approval odds are determined, including which details are assessed, can vary between services and card issuers.

For example, a credit card approval odds calculator might suggest that, based on your credit score and income, you have an 80% chance of getting approved for a credit card. It might also offer you a few credit cards with high approval odds to explore.

Checking Your Credit Card Approval Odds

Using a credit card approval odds calculator offers a glimpse of your approval chances, but not a promise. That’s because a credit card company or credit card marketplace can’t provide a 100% assurance of your approval without going through a formal underwriting process.

Underwriting is the step where a lender or issuer evaluates your credit portfolio and application details (like existing debt and income) to calculate whether it would be a risk to extend credit to you. Since this process can only happen after an application is submitted, a tool that states you have high approval odds doesn’t mean your eventual approval is guaranteed.

Prequalifying for a Credit Card Approval

There are a couple of ways to obtain a pre-screened credit card to gauge your approval odds: Receiving a prequalification offer or requesting a prequalification from a credit card issuer.

Using a Prescreened Offer

Based on your general information from the credit bureaus, card issuers might send you an unsolicited prescreened offer stating that you might be qualified for its credit card.

At this step in the process, the card company has only looked at limited markers, like whether you’ve met its minimum credit score requirement. It hasn’t performed a hard credit check nor evaluated your existing debt or income to base an approval on. However, if you receive a prequalification offer, this can be a positive sign that your approval odds are better than if you hadn’t received it.

Checking the Card Issuer’s Website

You don’t always have to cross your fingers in hopes that a card issuer will give you a prescreened offer. Some credit card issuers offer a prescreening form that you can fill out to see if you’re prequalified for its card. If your preferred card doesn’t let you request a prequalification, you might find more insight on the issuer’s website about what’s required for approval.

While you’re on the card issuer’s site, it’s helpful to review its response timelines so you can track your pre-qualification or application progress. This includes the timeline for an application decision, as well as how long it takes to get a credit card if you’re approved.

What To Do if You Prequalify

If you prequalify for a credit card, you can choose to submit an application. Doing so will require a hard credit inquiry before a decision is made, which can temporarily have an effect on your credit score.

Additionally, you can continue shopping around for different cards to see if another product offers a lower interest rate or better incentives.

Recommended: How to Avoid Interest on a Credit Card

What To Do if You Don’t Prequalify

If you don’t prequalify for a credit card, you can proceed in a few ways:

•   Hold off on getting a new card. Too many hard credit inquiries might flag you as a high-risk borrower who’s reliant on credit. If you’ve recently had multiple inquiries on your credit, consider waiting a couple of months before re-applying for a new card.

•   Build your credit score. Card issuers typically look at your credit score to see if it meets its minimum requirement. A higher credit score is a positive indicator that you’re a responsible borrower.

•   Apply for a secured credit card. A secured credit card can be a credit-building card in which you deposit money or collateral in a certain amount. This amount acts as your credit limit.

•   Appeal the decision. If you applied for a credit card and were denied, the issuer must legally inform you of the reason for the denial. If you can provide more information that might sway the issuer in your favor, you can ask them to reexamine your application.

Recommended: Tips for Using a Credit Card Responsibly

Tips for Improving the Likelihood of Approval

Whether you’re getting a credit card for the first time or adding a new card to your rotation, there are a few steps you can take to improve your approval odds.

Reviewing Your Credit Report

Your credit report gives credit card issuers a comprehensive view of your borrowing habits to date. Since it’s a highly scrutinized factor when approving applications, review your credit report before submitting an application.

Check that all accounts, their statuses, and the amounts are accurate. If you spot an account that looks outdated or incorrect, reach out to the credit bureaus immediately to dispute it.

Taking a Look at Your Credit Score

In addition to ensuring your credit report is accurate, evaluate where your credit score stands today. Credit scores are the most common credit card requirements that influence your approval odds. For instance, if a card issuer explicitly states that its minimum credit score required is 720, but your score is 650, your credit card approval odds might be low.

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

Minimizing Your Debt

Keep your debt-to-income (DTI) ratio as low as possible. Credit issuers use this ratio as a way to determine whether you can afford to pay back potential purchases made on the card. The ratio is based on your aggregate monthly debt amounts divided by your gross monthly income.

Stating All of Your Income

As mentioned above, your income is one of multiple factors used to determine your credit card approval odds. A higher income can reduce your DTI ratio, making you a less risky customer to extend credit to.

You can include various types of income sources on your application. This might include your salary from your full-time job, earnings from a side gig, Social Security benefit payouts, and alimony.

Managing Payment History and Credit Utilization

Staying on top of your existing loan and credit card payments keeps your credit score healthy. This means paying at least the minimum amount due, and making those payments on time every month.

Additionally, be aware of how much of your total credit limit you’re using, compared to how much credit you have access to. This ratio is called your credit utilization ratio. The lower it is, the better. Many financial experts say that no more than 30% or, better still, less than 10% is a good number.

Recommended: When Are Credit Card Payments Due?

Comparing Cards Carefully

With so many credit card products on the market, choosing a credit card that suits your borrowing needs and qualifications can help you find the right card.

Ensure you’re comparing credit cards with the same credit card features between different cards to accurately determine their pros and cons. Some considerations to make when comparing credit cards include:

•   APRs. The annual percentage rate, or APR, is how much you’ll pay in interest if you carry a balance on the card. The lower the interest rate, the better.

•   Balance transfer costs. Some issuers offer a zero-interest balance transfer promotion for a limited period, while others don’t. Similarly, some credit cards charge an additional balance transfer fee.

•   Penalty APRs. If your account becomes delinquent, some card issuers impose a higher penalty APR on your existing balances and future transactions. Make sure you understand how a credit card works and which rules apply.

•   Fees. Certain cards charge an annual fee just for the privilege of carrying the card. This fee is in addition to interest charges you might pay for rolling over a balance, month over month.

•   Rewards program. If you’re after credit card rewards, compare the details of each card’s program. For example, look at whether rewards points or miles are tiered or offered for specific categories or if there’s a flat rewards rate for all purchases.

•   Incentives. You might encounter special promotions, like a welcome bonus or promotional 0% APR. These added perks can factor into your decision.

The Takeaway

Although a credit card approval odds tool can offer broad guidance about whether you’ll be approved for a credit card, it doesn’t replace a card issuer’s underwriting criteria. The credit card company relies on its own underwriting team and algorithms to ultimately decide whether your application is approved. This decision is based on the specific information on your application and your creditworthiness.

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

Does getting rejected for a credit card hurt my credit?

It depends on the specifics of how you are rejected. A credit card preapproval rejection typically doesn’t hurt your credit since preapprovals usually involve a soft credit check. However, if you move forward with a credit card application that involves a hard credit inquiry, your credit score might temporarily drop, regardless of whether you were approved or denied.

Are credit card approval odds accurate?

Generally, credit card approval odds calculators don’t provide a 100% guarantee that you’ll be approved. There have been reported cases of tools claiming that a consumer has high approval odds for a card, only to get denied upon applying. The card issuer is the only entity that can accurately say whether you’re approved for a credit card.

How can I improve my credit card approval odds?

The best way to get good approval odds for credit cards is to minimize high-risk borrowing practices. One way to achieve this is by building your credit score. Keep your credit balances low, make timely monthly payments, maintain long-standing credit accounts, and avoid opening multiple new lines of credit in a short period.

How do you guarantee credit card approval?

There’s no way to absolutely guarantee credit card approval to any particular card. Card issuers base their decisions on a number of factors, like your credit history, credit score, income, credit utilization, debt-to-income ratio, and more.

Photo credit: iStock/akinbostanci

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.

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 .

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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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.

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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.

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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.

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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.

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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria 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.

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