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A home equity line of credit (HELOC) is a revolving credit line secured by your home. HELOCs give you access to cash that you can use to make improvements or repairs, consolidate debts, or cover large expenses.1

Lenders set HELOC requirements to determine who qualifies, but you’ll typically need a minimum amount of equity, good credit, and a steady income. Read on to learn how to get a HELOC and what you can expect during the application process.

What Is a HELOC?

A home equity line of credit is an open-ended line of credit that allows you to borrow against your home equity. Equity is the difference between what you owe on your home and its fair market value.

HELOCs have an initial draw period, during which you can access your credit line. You can borrow what you need when you need it, up to a preset credit limit. You can even make payments to pay down your balance and then borrow up to the credit line again. The draw period may last five to 15 years, and your lender might only require you to make interest payments toward the principal you’ve borrowed during that time. Once the draw period ends, you’ll repay the principal amount, plus interest.

Interest rates on a HELOC are typically variable, meaning they can go up or down over time following movements in a benchmark rate. That means your payment can increase or decrease. Some lenders offer fixed-rate HELOCs, though that’s less common.1 Incidentally, a HELOC isn’t the only type of home equity loan. There’s also a standard home equity loan, in which a lender loans you a lump sum that you begin repaying immediately.

How the HELOC Application Process Works

The HELOC approval process is fairly straightforward. You’ll need to:

•   Choose a lender and apply for a HELOC

•   Provide the lender with required supporting documents

•   Complete underwriting

Underwriting is a process in which a lender verifies certain information about you and your home to assess your creditworthiness and decide whether to approve you for a HELOC.

During underwriting, the lender will check your credit, review your income and debt, and assess your home’s value. That last step is particularly important as you’ll need to have sufficient equity in the home to qualify for a HELOC.

How long does it take to get a HELOC? It varies, but a typical time frame for approval is two to six weeks from the date you submit your application.

HELOC Requirements

Knowing how to qualify for a HELOC can help you gauge whether you’re a good candidate and help you narrow down which lender to work with. HELOC requirements vary by lender but generally include:

•   Good credit

•   A low debt-to-income (DTI) ratio

•   Sufficient home equity

A “good” credit score on the FICO® scale is a score of 670 or better, and as a general rule, lenders like a score in the upper 600s. FICO credit scores are used by 90% of top lenders for credit decisions.

Your DTI ratio measures how much of your gross income goes to debt repayment each month. Lenders look at your DTI ratio to determine how much money you have available each month to make HELOC payments. Home equity lenders generally look for a DTI below 50%, but the lower, the better.

Perhaps most importantly, lenders want to know how much equity you have in your home. This is where your loan-to-value (LTV) ratio comes into play. This ratio measures how much you want to finance versus your home’s appraised value. Typically, lenders look for an LTV of no more than 85%, meaning you have at least 15% equity in the home.

HELOC Approval Tips

There’s no special secret to how to get a HELOC; you’ll just need to find the right lender to work with and meet their approval requirements. With that being said, here are a few tips that could smooth the path to HELOC approval.

•   Reduce debt. Paying down some of your existing debt could improve your DTI ratio, potentially making you more attractive to lenders.

•   Check your credit. Checking your credit reports and scores is an opportunity to learn what lenders will see and address any errors or mistakes that could be hurting your score. If you find an error, you can dispute it with the credit bureaus to have it removed or corrected.

•   Calculate your equity and LTV. If you don’t know these numbers, take a minute to figure them out. Here’s how to calculate home equity: subtract what you owe on your primary mortgage from your estimated home value. To find your LTV, divide your mortgage balance by your home’s estimated value.

You could also get preapproved for an equity loan. HELOC preapproval means that a lender has done a cursory check of your credit and finances to conditionally approve you.

Preapproval for a HELOC can give you an idea of what loan terms you’re likely to qualify for. Keep in mind that you’ll still need to submit a full application and complete underwriting to get a HELOC.

Common HELOC Mistakes to Avoid

You want to know how to get a HELOC, but it’s just as important to understand what could hurt your application. Here are a few HELOC mistakes to avoid as you navigate the approval process.

•   Don’t overborrow. HELOCs only charge interest on the amount of your credit line you use. However, that’s no reason to get a larger line of credit than you need. If you only need $50,000 for a home improvement project, for instance, but get a $100,000 HELOC because a lender is willing to approve you for that amount, you could end up with more debt to repay than you’d planned on.

•   Don’t assume a HELOC is your only option. There are so many ways to use a HELOC, but you may find that a different type of loan makes more sense. Weigh the benefits of a HELOC vs. a home equity loan or a personal line of credit vs. a HELOC to decide which borrowing option to pursue.

•   Don’t apply without comparing options. With so many HELOC lenders to choose from, it makes sense to do some comparison shopping. Study HELOC rates and compare lenders’ draw periods, repayment terms, fees, and approval requirements to see which lender is the best fit for your needs.

•   Don’t forget to plan your budget. Missing payments on a HELOC could put your home at risk, since it secures the loan. Calculating how much you can afford to pay in the draw period and repayment period can help you avoid a scenario where you’re in danger of losing your home to foreclosure because your HELOC payments are too steep.

•   Don’t miss out on tax breaks. Here’s a tip about HELOCs and taxes: if you use the money to pay for home improvements, the interest is tax-deductible. If you’re getting a HELOC to handle major or minor home upgrades, keep your receipts so you can write the interest off at tax time. Right now, this benefit is good through the 2025 tax year; consult a tax advisor for the latest updates.

How to Apply for a HELOC

Ready to apply for a home equity line of credit? It’s not an overwhelming process if you know what you’ll need to do and what you can expect from the lender. Here’s how to apply for a HELOC, step by step.

1. Check Your Home Equity and Credit Score

If you haven’t calculated your equity or checked your credit scores yet, now’s the time to do that.

You can use a home equity calculator and a loan-to-value calculator to find your equity amount and LTV. You can pull copies of your credit reports for free through AnnualCreditReport.com. You can also log in to your credit card accounts to see if free FICO score access is a card benefit. SoFi offers free access to your VantageScore, which is an alternative to FICO.

Note that checking your credit reports or scores yourself won’t impact you in any way. However, hard pulls (which happen when a lender checks your credit) will show up on your credit reports and take points away from your scores.9

2. Gather Required Documents

You’ll need some documentation to complete your HELOC application. The good news is that it’s more or less the same as what you needed to apply for the loan you used to buy the home.

A lender may ask for copies of your:

•   Driver’s license or government-issued ID

•   Bank account statements

•   Investment account statements

•   W-2s

•   Tax returns

•   Profit and loss statement and cash flow statement if you’re self-employed

Gathering these documents beforehand can save you time and potentially speed up your HELOC approval.

3. Submit your HELOC Application

If you’ve chosen a lender and you’ve got your documents, you’re ready to apply for a HELOC. Many lenders allow you to do this online. You’ll just need to complete all required sections, then upload the requested documents.

Review your application carefully before you hit submit to check for errors and look for any questions that you accidentally left blank. If everything looks good, you can move ahead with submitting your application.

4. Underwriting and Home Appraisal Process

Once the lender receives your application, they’ll move forward with underwriting. The lender will check your credit and schedule an appraisal, which you’ll be expected to pay for up front.

Lenders may schedule an in-person appraisal, a drive-by appraisal, or a desktop appraisal. The in-person appraisal requires a professional appraiser to come to the home and look over the property to determine a valuation. A drive-by appraisal doesn’t require the appraiser to enter the home, while a desktop appraisal is done remotely using home valuation software.

What if the appraisal comes in too low? That could keep you from getting approved for a HELOC. You can ask the lender to reconsider or schedule a new appraisal with a different appraiser. You’ll have to pay any additional appraisal fees.

5. HELOC Approval and Closing Process

If all goes well and you’re approved for a HELOC, closing is the final step. You’ll sign all of the HELOC documents and pay closing costs, unless the lender is allowing you to roll them into the loan.

Once you’ve closed on your HELOC, the lender will make your line of credit available to you. That can take a few business days. Once your HELOC account is set up, you may be able to access your credit line using a special credit card or debit card, or paper checks. If you got your HELOC through a local bank, you could also visit a branch to make withdrawals.

The Takeaway

Doing some research can help you decide if getting a HELOC makes sense for you, and once you’re set on a HELOC, a little more research can help you determine which lender will offer the best rate and terms. HELOC approval is ultimately up to the lender, but you can make yourself more creditworthy by paying down debt and taking good care of your credit profile before you apply.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

FAQ

How long does it take to get a HELOC?

The exact timing varies, but generally, it can take between two and six weeks to get approved for a HELOC. Factors that affect the speed of HELOC approval can include your choice of lender, your financial situation, and the results of your home appraisal.

Can I get a HELOC with bad credit?

It’s possible to find lenders who will offer HELOCs for bad credit, though there are some caveats to know. A lower credit score can add more obstacles to approval overall. If you are approved, you’ll likely pay a higher interest rate or more fees to make up for the higher degree of risk the lender is taking on.

Does a HELOC require an appraisal?

Lenders generally require an appraisal for a HELOC because they need to know how much your home is worth. Without an appraisal, they can’t determine how much equity you have and whether you have a sufficient LTV to qualify for a HELOC.

How hard is it to get a HELOC?

How hard — or easy — it is to get a HELOC depends on your financial situation. For example, getting a HELOC may be a breeze if you’ve got near-perfect credit, make a six-figure income, and are sitting on a pile of equity. If everything isn’t universally rosy, you can still qualify. It’s up to each individual lender to decide whom to approve, so if you don’t qualify the first time you apply, you may still be able to borrow.

What are the requirements for a HELOC?

Getting a HELOC is similar to getting a mortgage to buy a home. You’ll need to show a lender that you have sufficient income to repay a HELOC and that you have a history of responsible credit use, which means paying back what you borrow on time. You may also need to undergo a home appraisal to determine the value of your property, and thus your equity amount.

What disqualifies you for a HELOC?

Lack of a credit history, lack of income, lack of adequate equity, or overwhelming debt could all be barriers to getting approved for a HELOC.

Photo credit: iStock/shapecharge

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SOHL-Q225-038

According to 2024 data from Experian®, the average credit score for a 24-year-old is 681. That’s one point higher than the 2023 average and is considered a “good” FICO® Score.

Here, we’ll walk you through the ins and outs of how your age can impact your credit score, how a 681 stacks up against the average score in the U.S., and ways to build your score over time.

Average Credit Score for a 24-Year-Old

As mentioned, the average credit score for a 24-year-old is 681, which the credit scoring model FICO classifies as “good.” With that score, you’re likely to qualify for an array of loans and credit cards, though you may not get the best interest rates and terms.

But take heart: Credit scores tend to increase with age. According to Experian data, the average credit score for Millennials (ages 28 to 43) is 691. Gen X (ages 44 to 59) has an average score of 709, while members of the Silent Generation (ages 79+) boast a 760 score.

What Is a Credit Score?

A credit score is a three-digit number that ranges from 300 to 850. It helps lenders and creditors gauge your creditworthiness, or the likelihood that you’ll pay back the money you borrowed. Generally speaking, the higher your score, the greater your chances of being approved for a credit card or loan.

Two common credit scoring models are FICO and VantageScore®. Most lenders use FICO. Though both models create scores based on similar key factors, the breakdown of scores is slightly different.

FICO Score

•   Exceptional (or excellent): 800 to 850

•   Very Good: 740 to 799

•   Good: 670 to 739

•   Fair: 580 to 669

•   Poor: 300 to 579

VantageScore

•   Super prime: 781 to 850

•   Prime: 661 to 780

•   Near prime: 601 to 660

•   Subprime: 300 to 600

Recommended: FICO Score vs. Credit Score

What Is the Average Credit Score?

According to the latest FICO data, the average FICO credit score in the U.S. is 717 — 36 points higher than the average 24-year-old’s score. And as of February 2025, the average VantageScore is 701. Both scores are well within the “good” or “prime” range, and could help borrowers qualify for favorable loan and line of credit terms.

Average Credit Score by Age

Age doesn’t necessarily determine your credit score. But as the chart below shows, the older you are, the more likely you are to have a higher score.

This makes sense. When you’re just starting out — as many 24-year-olds are — you may not have a long credit history. Plus, you might experience greater financial ups and downs as you find your professional footing, and this could impact your ability to pay off debts.

What’s a Good Credit Score for Your Age?

As we mentioned, the average credit score for a 24-year-old is 681. But remember, that’s just an average. No matter how old you are, FICO defines a good credit score as anywhere between 670 and 739. If your score falls within that range, your finances are likely in a sound place.

It’s worth noting that when you’re starting out, you may not have a credit score. Your credit history typically starts when you take out your first line of credit, and it normally takes around six months or so for credit bureaus to collect enough information for your starting credit to be calculated.

Though it can vary, a starting credit score may be anywhere from 500 to 700. You can gradually see it rise as you continue to bolster your credit.

How Are Credit Scores Used?

Credit scores are used in several ways. Lenders and creditors review your credit when you apply for a card or loan to help determine whether you qualify for financing. As you might expect, the higher your score, the greater your odds of getting approved for a credit card or loan with more favorable terms and rates.

But credit scores can also play a role in unexpected ways. For instance, this three-digit number could help determine how much you pay for insurance premiums or whether you’re approved to rent a home. And some potential employers might review your score during a routine background check.

Factors Influencing the Average Credit Score

To steadily build your credit score, it helps to understand the five key factors that influence it the most. Here’s a closer look at each component — and how much it counts toward your overall score.

•   Payment history (35%). Your track record of bill paying has the biggest impact on your FICO Score, so aim to pay your bills on time, every time. A spending app can help budget for the payments.

•   Credit utilization (30%). Also known as credit usage, this is how much credit you’re tapping into against the total amount available. Try to keep your credit card utilization low, as ringing up a too-high balance might signal to lenders and creditors that you’re spread thin financially.

•   Length of credit history (15%). A longer credit history shows lenders that you have a solid track record of using credit. Generally, the older the average age of your credit accounts, the higher your score tends to be.

•   Credit mix (10%). Having a diverse mix of credit can signal that you can responsibly manage different forms of debt. That said, you’ll want to only apply for the financing you need.

•   New credit (10%). When you apply for credit, a lender performs a hard credit pull, which can ding your credit score by a few points. Though the dip is temporary, it could stay on your credit report for up to a year.

How to Strengthen Your Credit Score

If you’re in your 20s, you might be in the early phases of understanding how long it takes to build credit. Here are a few things you can do to gradually lift your credit score.

Stay on Top of Payments

As we discussed, your payment history has a major impact on your credit score. Consider setting up automatic payments or changing your due dates to a time of the month that works better for you. For example, if the main cluster of bills is due at the top of the month, schedule your monthly credit card payments so they fall after your second paycheck. A money tracker app can help you keep track of payments so you won’t miss a due date.

Keep Credit Usage Low

If you have a credit card balance, try to ensure your credit utilization doesn’t exceed 30%. For instance, let’s say your credit limit on all your cards is $2,000. To maintain a 30% credit usage, you’ll want to carry a balance no larger than $600.

If you want to see whether your hard work is paying off, you can check your credit score for free.

Limit New Credit Application

There are reasons why you should avoid applying for unnecessary credit. For starters, a lender will likely do a hard inquiry with each application, which can temporarily ding your score. Also, applying for multiple lines of credit within an extremely short time frame could signal to lenders that you’re financially strapped.

There is an exception: If you shop for an installment loan, like a car loan or mortgage, lenders give you anywhere from 14 to 45 days to shop for rates. The hard pulls generally count as a single inquiry when you are rate shopping.

How Does My Age Affect My Credit Score?

While age doesn’t factor into your credit score, you may notice that your three-digit number may improve as you get older. This is because as you age, you’ve had more time to establish an account history and may have an easier time managing your debt obligations.

What Factors Affect My Credit Score?

As we discussed, the top factors impacting your credit score are payment history, credit usage, length of credit history, credit mix, and new credit.

If you’ve made some financial blunders and want to build or repair your credit, work on fixing the areas that have negatively impacted your score the most. So, for example, if you’ve fallen behind or missed payments, you’ll want to start paying bills on time.

Keep in mind that boosting credit doesn’t happen overnight. Your credit score updates every 30 to 45 days, so resist the urge to constantly check on your score. Instead, you’d be better off focusing on strategies that build up your credit.

At What Age Does Your Credit Score Improve the Most?

According to Experian data, the biggest jump in credit scores tends to happen between Gen Z and Baby Boomers. But again, the longer you’ve been responsibly managing an account, the higher your score will likely be.

How to Build Credit

There are several ways to build your credit — here are a few simple strategies to explore:

Become an Authorized User

If you have a family member or trusted friend with a solid credit history, ask if they can add you as an authorized user on your card. You’ll be able to make purchases with the card, but the primary cardholder is responsible for making payments.

Report Rent and Utility Payments

Alternative credit reporting, such as reporting your rent, cell phone bill, and utility payments, can be another way to improve your score when you’re just starting out. You usually need to sign up with a third-party platform that reports your on-time payments to the credit bureaus, and you may be required to pay a monthly subscription fee.

Open a Secured Credit Card

A secured credit card is usually easier to get than an unsecured one, though it requires you to put down a security deposit that typically matches your credit limit. Otherwise, a secured card works just like any other credit card. Making timely payments and using credit responsibly can help build your score.

Credit Score Tips

Besides being mindful of best practices to build your credit, you’ll want to check your credit score every so often and note any changes. You may be able to do this with credit score monitoring tools or through your bank or credit card company.

It’s also a good idea to regularly review your credit report for mistakes or inaccuracies. You can receive a free copy of your report each week via AnnualCreditReport.com.

Recommended: Why Did My Credit Score Drop After a Dispute?

The Takeaway

To recap, what’s the average credit score for a 24-year-old? According to Experian, it’s 681, which falls into the “good” category. When you practice sound financial behaviors, your score could increase even more over time. For instance, staying on top of payments, paying down debt, and keeping credit accounts open can all help bolster your 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.

FAQ

What is a good credit score for a 24-year-old?

The average credit score for someone who is 24 is 681, which is technically considered a “good” FICO score. Younger consumers who are starting out on their credit-building journey may have a harder time achieving an excellent score.

What is a good credit limit for a 24-year-old?

The average credit limit for 24-year-olds in the U.S. is $12,899, according to Experian. However, what’s considered good depends on the individual’s finances, spending habits, and ability to pay down the balance.

How rare is an 800 credit score?

According to Experian data, 22% of Americans have a credit score of 800 or higher, which is considered an excellent score.

Is a 900 credit score possible?

Consumer credit scores range from 300 to 850, so a 900 credit score isn’t feasible.

Is 650 a good credit score?

A 650 credit score falls in the “fair” range. With a fair credit score, you can get approved for some forms of financing, but you’ll likely get higher interest rates and the less-favorable terms.

What credit score is needed to buy a $300K house?

If you’re buying a home with a conventional loan, you’ll need a minimum credit score of 620. Lenders may accept a credit score as low as 500 if you’re taking out an FHA loan.

Photo credit: iStock/blackCAT

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.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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.

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 Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SORL-Q225-017

The credit score you’ll need to buy a car will vary depending on your financial circumstances, the type of car you want to buy, and whether you’re buying used or new. That said, the average score needed to buy a car is 755 for new cars and 691 for used cars, according to the credit bureau Experian.

Looking to buy a car in the near future? Here’s what you need to know about the credit scores lenders may use when deciding whether to approve your auto loan application.

Minimum Credit Score to Buy a Car

Your credit score is a three-digit numerical representation of your credit history. There are two main credit scoring models used in the United States: FICO® and VantageScore®. FICO scores, which generally range between 300 to 850, are used in the majority of lending decisions.

If your credit score isn’t as high as you’d like, that doesn’t mean there will be no loan options for you. In fact, there isn’t a universal minimum credit score required to buy a car, though some lenders will set minimums of their own.

What’s important to know is that the lower your credit score, the harder it may be to secure a loan — and the more expensive borrowing could get. That’s because if you have poor credit, lenders may charge higher interest rates and fees.

Recommended: How Long Does It Take to Build Credit?

Understanding Auto Loan Credit Scores

Your credit score is based on information from your credit reports, which are maintained by the three major credit reporting bureaus: Equifax, Experian, and TransUnion. The report documents how you’ve managed credit in the past. For instance, it records how many credit accounts you’ve had, which accounts are active (and for how long), if you’ve paid your bills on time, and how much of your available credit you’re using.

There are many different credit scoring models out there, which use different parts of your credit report to calculate your score. For example, some models might ignore debt collections for smaller amounts, while others may consider them. Lenders can choose which credit score they wish to look at when considering you for a loan.

What Is a FICO Auto Score?

There are several versions of a FICO Score, including FICO Auto Score, which — you guessed it — is designed specifically for the auto industry. These scores help predict how likely a borrower is to repay an auto loan on time. This means your history of paying off a car loan could play an important role in determining your score.

How to Increase Your Credit Score Before Buying

As we mentioned, if you have a low credit score, it may be harder to secure a loan. And the loan you do secure may be more expensive. To make things easier and cheaper for yourself, you may want to look into ways to build your credit before applying for an auto loan.

Chief among the factors that affect your credit score is your payment history, which accounts for 35% of your FICO Score. One of the best things you can do for your credit file is to pay your bills on time, every time.

Tip: A spending app can help you spot upcoming bills, set a budget, and track where your money is going.

But payment history is just one factor that impacts your credit score. Your credit utilization — or the amount you owe versus your available credit — is also important and makes up 30% of your FICO Score. If you are using a lot of your available credit, lenders could worry that your finances are overstretched and, as a result, you may not have the resources to take on another loan. To help build your credit, consider lowering your credit utilization by paying down other debts first.

A long credit history can help improve your credit file, so you may want to avoid closing older accounts that are in good standing. And, if possible, try to avoid applying for multiple loans or credit cards in a short period of time. That’s because each application may trigger a hard inquiry, which can temporarily lower your credit score.

Your credit score updates at least every 45 days. To keep track of your progress as you work to improve your score, you can check your credit score without paying once a week from each of the credit reporting bureaus.

You might also consider signing up for credit score monitoring to help ensure your current credit score is always at hand.

While you’re at it, make it a habit of checking your credit report regularly. If anything is incorrect on the report, you are allowed to file a dispute with the company that reported the information and the credit bureaus that recorded it.

Recommended: How to Check Your Credit Score Without Paying

Where to Get an Auto Loan

When you’re ready to seek a loan, you’ll want to shop around for the best deals among several different lenders. You may consider getting loan offers from banks and credit unions, online lenders, and dealerships that offer financing. Credit scoring companies recognize that people often shop around to multiple lenders when seeking a loan. And in this case, they won’t penalize you for extra hard inquiries.

How Credit Scores Affect Auto Loans

The higher your credit score, the more likely it is that you’ve been responsible with credit in the past. Lenders see borrowers with higher scores as less of a risk, and they typically reward them with lower interest rates and better terms on auto loans.

On the other hand, lenders see borrowers with lower scores as a greater risk. To compensate for this risk, lenders may charge higher interest rates and offer less favorable terms.

Note that while the lowest FICO Score is 300, that is not necessarily your starting credit score. For instance, if you’re just starting building credit and have no credit history, you may in fact have no score yet.

The Takeaway

While there is no minimum credit score you need to buy a car, a higher score can mean you qualify for a loan with lower interest rates and better terms. If you have a lower credit score, consider doing what you can to boost it before you apply for an auto loan. This may include paying your bills on time, lowering your credit utilization, and keeping older accounts open.

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

How to get an 800 credit score from 720?

To raise your credit score from 720 to 800, focus on paying your loans on time, reducing the amount of credit you’re using, and possibly increasing your mix of credit.

What is the average American credit score?

The average credit score in the United States is 715, according to Experian.

How common is an 800 credit score?

Per Experian data, 22% of all Americans have a credit score of 800 or higher.

How rare is a 720 credit score?

A credit score of 720 falls within the “good” range. By that definition, roughly one in five of Americans have a good score.

How big of a loan can I get with a 700 credit score?

A credit score of 700 falls within the “good” range. This means that your loan request likely will not be denied. However, the exact amount you qualify for will depend on a number of factors, including your income, the type of loan you’re applying for, and your debt-to-income ratio.

Is a 720 credit score good enough to buy a car?

There’s no minimum credit score required for an auto loan. Still, a credit score of 720 is considered “good” and can help increase the chances you’re approved for a car loan.

Photo credit: iStock/Ridofranz

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.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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.

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.

SORL-Q225-019

If you’re a consumer in the United States who has a credit history, then you probably have a credit score. More than one, in fact.

FICO® Scores are far and away the most widely used — 90% of lenders rely on them to assess a borrower’s creditworthiness. That said, there’s no single credit score that matters the most. Lenders can and do use a variety of credit scores to determine whether to approve your application for credit and what terms to offer you. Whether you’re looking to make a major purchase or focused on building up your credit profile, it’s a good idea to understand the different types of credit scores out there and how to keep tabs on yours.

Types of Credit Scores

You may have noticed that your credit score varies depending on which website you visit. That’s perfectly normal. As we mentioned, anyone with a credit history probably has more than one score.

One reason for this is that the three main credit bureaus — Equifax, Experian, and TransUnion — may each receive slightly different information from lenders. As a result, your score could vary by bureau.

In addition, there are multiple different ways to calculate a credit score based on the information available. That’s why there’s sometimes a gap between your VantageScore® vs. FICO scores.

This can be an important difference to understand, since Vantage scores are often the credit scores available for free through online platforms. You may sometimes see one credit score (your VantageScore) when you get a free credit report, but then be surprised to learn, when you apply for a credit card or loan, that your FICO Score is different.

Recommended: FICO Score vs. Your Credit Score

How FICO Works

Generally speaking, your FICO Score is calculated based on the following factors and their relative weights:

•   Payment history (35%). This reflects how often you’ve made on-time payments on your debt. Late or missed payments or accounts sent to collections can negatively impact your score.

•   Amounts owed (30%). This is your credit utilization ratio, or the amount of available credit that you’re using. Ideally, aim to keep this ratio below 30%.

•   Length of credit history (15%). This looks at the average length of your credit accounts. Typically, a longer history is a sign to lenders that you have more experience successfully managing your debt.

•   New credit requests (10%). When you open a credit account, the lender may do a “hard” credit inquiry, which could cause your score to temporarily drop.

•   Credit mix (10%). This refers to the mix of credit types in your portfolio, which may include credit cards, car loans, or other types of credit.

How Experian Works

As one of the three main credit reporting bureaus in the U.S., Experian collects information about your credit accounts and payment history and includes those details in your Experian credit report.

The bureau does make it possible for you to access your FICO Score for free, though it also offers a paid service that provides credit score monitoring for all three bureaus.

How Equifax Works

Equifax is another U.S. credit reporting agency that offers similar services to Experian.

Again, while you’ll likely have a credit report from both Equifax and Experian, the scores may differ slightly based on the information each bureau has collected. It’s worth noting that Equifax also allows you monthly access to your VantageScore credit score based on the agency’s data.

Which Credit Score Bureau Is Best?

There’s no one “best” credit score bureau. All three bureaus collect consumer information and produce credit scores.

When you want to look at your credit report, it’s a good idea to request a copy from each of the bureaus. That’s because lenders may choose to pull your credit report from any one — or all — of them. By checking all three scores, you can be aware of negative information that affects your credit score and have a chance to correct any inaccuracies you see.

Recommended: Why Does Creditworthiness Matter?

How Can You Obtain Your Credit Score?

You have several options when it comes to accessing your credit score. You may be able to see it on your credit card statements or when you bank online. You can use free credit score websites or purchase your score from a credit bureau.

MyFICO offers a free service that allows you to check your FICO Score and receive your Equifax credit report each month. (You can also pay for a plan that includes three-bureau credit report access, identity theft insurance, and more.)

Another avenue to consider: A spending app, which often offers credit scores. Unless otherwise indicated, you’ll likely be seeing your VantageScore credit score.

Remember, credit scores update every 30 to 45 days, so it’s a good idea to check yours every so often.

How Can You Obtain Your Credit Reports?

While your three-digit score is a great way to see how your credit is faring, the best way to fully understand everything in your credit history is to read the full credit report. If you see any information that looks suspicious or incorrect, you can file a dispute directly with the credit bureau to have it removed.

Every American is entitled by law to pull their credit reports from all three bureaus for free once a week via AnnualCreditReport.

What Is a Good Credit Score Range?

FICO Scores range from a low of 300 to a maximum of 850. (That’s right: The starting credit score is not zero.) Here’s how FICO categorizes scores:

•   300 to 579: Poor

•   580 to 669: Fair

•   670 to 739: Good

•   740 to 799: Very good

•   800-850: Exceptional

If your score is lower than you’d like, be aware that it can take some time to build credit.

One great way to build your credit is to try to lower your overall credit card utilization. This means paying down your debt, particularly balances on revolving debt. And because on-time payments count for such a heavy part of the score, keeping up with your bills each and every month can also be a big help.

Finally, try not to sweat every fluctuation. Sometimes, filing a dispute or multiple hard inquiries in a short time frame can ding your score, but those dips tend to be temporary.

The Takeaway

If you have a credit history, then you likely have more than one credit score. So which credit score matters the most? Short answer: Whatever score the lender uses when considering your application for credit. Generally, FICO Scores are used in most decisions, though each lender has its own policies around which scoring model and version to use.

Regardless of the scoring model, staying on top of your bills, paying down debt, and regularly reviewing your credit report can help ensure you’re on firm financial footing.

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

Is FICO or TransUnion more accurate?

FICO and TransUnion serve different purposes. FICO is a credit scoring model that uses a proprietary algorithm to calculate credit scores. TransUnion is one of the three major credit reporting bureaus in the United States that collects credit information about consumers from lenders and creates credit reports.

Do lenders look at FICO or TransUnion?

What a lender reviews — whether it’s just your credit score (like your FICO Score) or your complete credit report (like from TransUnion) — usually depends on the type of credit you’re applying for. For smaller lines of credit, like a credit card, they may only check your score. But for larger loans, like a mortgage, they’re more likely to dig into your full credit history.

Why is my FICO score 100 points lower than Credit Karma?

Credit Karma provides its users free access to their Vantage Score, which is calculated using a different algorithm than the FICO Score. If your score on Credit Karma is different from your FICO Score, it’s likely because of the different calculations.

What is a good FICO score?

According to FICO, a “good” credit score falls between 670 to 739. Credit between 740 to 799 is considered “very good,” while credit scores of 800 and above are considered “exceptional.”

Do lenders use FICO or Vantage?

The majority of U.S. lenders use FICO Scores to assess a potential borrower’s creditworthiness. However, a VantageScore is what you’re more likely to see on many web platforms that offer free credit scores.

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.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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.

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.

SORL-Q225-020

For many homebuyers, especially those purchasing for the first time, the prospect of coughing up a five-digit down payment is the most intimidating part of the process. But the good news is, these days, it’s possible to put down far less than 20%. Depending on the loan type you qualify for, you may be able to put down as little as 3%, which translates to $6,000 for a $200,000 house.

Here’s what you need to know about the income requirements, down payment options, and other important pieces of the financial puzzle if you’re considering purchasing a home for $200,000 or so.

How Much Income Do I Need to Afford a $200K Home?

Among other factors, like your credit score and your available down payment, mortgage lenders do consider your income when determining what you can qualify for as a first-time buyer. But instead of enforcing one specific cut-off point for household income, most lenders use a more complicated algorithm to decide whether or not a would-be borrower can qualify.

There is, however, a quick rule of thumb that can help first-time homebuyers figure out an approximate income ballpark that will ensure you can make your mortgage payments. A long-standing financial guideline suggests you should spend no more than 30% of your gross income on your housing payment each month. Although rising costs mean this metric is harder to meet in some American cities and states than others, it’s still a good place to start.

So, consider your $200,000 potential home purchase. It’s not exactly a jumbo loan, but it still comes with costs. Using a mortgage calculator, you can get a rough idea of how much your monthly mortgage payment might be, depending on your interest rate and available down payment.

For a $200,000 home with a 3% down payment ($6,000), with an interest rate of 7%, a 30-year fixed-rate mortgage would come with a payment of about $1,300. But you’ll also need to factor homeowners insurance, property taxes, and — because you put down less than 20% as a down payment — private mortgage insurance. This means your housing costs would be in the neighborhood of $1,600 per month. In order to meet the 30% guideline, that would mean you’d need to earn about $4,800 per month, or $57,600 per year, to comfortably meet your housing payment responsibilities.

However, your lender may require a higher level of income to qualify you for the loan, depending on your other qualifying factors.

How Much is the Down Payment for a $200K House?

If you choose to put down the 20% that will keep you from having to pay private mortgage insurance, the down payment for a $200,000 house will come out to $40,000.

However, conventional loans allow well-qualified borrowers to put down as little as 3%, which is only $6,000 on a $200,000 home. You could also choose to put down an intermediary amount, such as 5% ($10,000) or 10% ($20,000).

What Are the Down Payment Options for a Home Worth $200K?

The specific down payment options that are available to you will depend on your lender, your qualifying factors (such as credit history and income), and what type of mortgage loan you opt for.

For instance, conventional loans allow well-qualified first-time homebuyers to put down just 3%, while down payments for FHA loans, backed by the Federal Housing Administration, bottom out at 3.5% for borrowers with a credit score of at least 580 (or 10% for those whose scores are as low as 500). If you obtain a VA loan (backed by the U.S. Department of Veterans Affairs), you might be able to put down nothing at all.

What Does the Monthly Mortgage Payment Look Like for a $200K Home?

As you’re thinking about how much is the down payment for a $200K house, you’ll also need to consider how the mortgage payments will fit into your budget. As noted, the best way to understand what you stand to pay monthly on a home loan is to use a mortgage calculator. The payment calculated above — $1,300 — assumes a low down payment (3%) and an interest rate of 7% before taxes, insurance, and private mortgage insurance. If, however, you put down a higher amount up front — say, 10% or $10,000 — and had an interest rate of 5%, your loan payment would go down to around $1,000 per month (again, before property insurance, homeowners insurance, and mortgage insurance).

What to Do Before You Apply for a $200K Mortgage

If you’re considering applying for a $200,000 mortgage — or any mortgage, for that matter — it’s a good idea to pull your credit history and ensure that everything on your report is accurate to your knowledge. If you have high revolving debt balances or a relatively low credit score, it may also be worthwhile to work on improving your credit score before you apply so as to attain the lowest available interest rates.

At the big-picture level, deciding where you want to buy a house is perhaps the most important step toward ensuring you’re happy in your new home. Choosing the right locale can really help lower your cost of living. While everyone knows housing prices in big cities have skyrocketed over the last decade or so, there are affordable places to live in the U.S. if you know where to look. Moving to a new city or state is a big project, but doing so can lower the average monthly expense per person by hundreds of dollars.

Finally, if the down payment is the biggest hurdle between you and your homeownership dream, be sure to check out down payment assistance programs that may help bridge the gap. Grants may be available at the state, federal, and local government levels, as well as low-interest loans.

Should I Get Preapproved Before Applying for a Mortgage?

The mortgage preapproval process helps you understand how much house you’re able to afford given your current financial situation — and also shows sellers that you’re motivated and serious. In general, getting preapproved before seriously hitting the housing market is a good idea, but keep in mind that your preapproval does have an expiration date — normally between 60 and 90 days after you go through the process.

How to Get a $200K Mortgage

From banks to credit unions to digital-first financial institutions, there are many places to get a $200,000 mortgage, whether you’re buying your first home or hoping to get better terms and save money as part of a mortgage refinance. These days, much of the application process can be done entirely online. You can prequalify and get a general sense of your borrowing power by answering a few simple questions. Seeking a lender’s preapproval requires submitting more information and financial documentation.

The Takeaway

The down payment for a $200,000 house can be as low as 3% ($6,000) or as high as 20% ($40,000) or even higher, depending on your financial situation and goals. Many homebuyers, especially first-timers, put down less than 20% on the road to their dream home.

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.

FAQ

How much should I make to afford a $200,000 house?

Using the 30% rule of thumb (your housing costs should not exceed 30% of your gross income) and assuming a housing payment of about $1,600 per month (including property taxes, private mortgage insurance, and homeowners insurance), you should make about $4,800 per month, or $57,600 per year, to comfortably afford a $200,000 house. However, your mortgage lender may have different income requirements depending on your other qualifying factors.

What credit score is needed to buy a $200,000 house?

While there’s no specific credit score floor for purchasing a home of any price, the higher your score, the better your loan terms stand to be — including your interest rate. With an FHA loan, which is designed specifically for first-time buyers who may be facing financial hurdles on their journey to homeownership, you may qualify with a score as low as 500 if you can come up with a 10% down payment. Many lenders who offer conventional loans require a minimum credit score of 620.

How much is a $200K mortgage per month?

Your monthly mortgage payment depends on many factors, including your interest rate and loan term (how long you have to pay it off). For a 30-year fixed-interest loan at a rate of 7%, with a down payment of 3%, your monthly mortgage payment on a $200,000 home would be about $1,300 before other expenses such as property taxes, insurance, and private mortgage insurance.

photo credit: iStock/Milan Markovic

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