Financial Topics Archives

Mar

2025

Why Did My Credit Score Drop 100 Points for No Reason?

Credit scores measure your financial health at a given point in time. Ideally, your score increases as you build your credit history, so a sudden decline can leave you wondering why.

Several things can cause a credit score to fall 100 points (or more), and late payments are often at the top of the list. Here’s a closer look at why credit scores decrease.

Why Did Your Credit Score Drop 100 Points?

A credit score can drop by 100 points or more when there’s a significant change to your credit reports. Possible reasons for a credit score drop of 100 points or more include:

• Late payments

• Missed payments

• High balances relative to your credit limits

• Reduced credit limits

• Delinquencies and collection accounts

• Bankruptcy filing

• Foreclosure or repossession

• Judgments

• Multiple inquiries for new credit in a short timespan

• New credit accounts in your name1

These types of items can drag your score down. Paying off loans or closing credit card accounts can also cost you credit score points, even though you might consider them positive financial steps.

Identity theft and fraud can trigger a sizable drop in your credit score as well. If someone uses your identity to obtain loans or open lines of credit without your knowledge, that could leave you vulnerable to late or missed payments, delinquencies, and collection actions. A money tracker app can help you keep tabs on your credit score, and you’ll also get updates when it changes.

Track your credit score with SoFi

Check your credit score for free. Sign up and get $10.*

Should You Be Worried About Your Credit Score Dropping?

A credit score drop can be worrisome, especially if you weren’t expecting it. You may have cause for concern if you:

• Plan to apply for a mortgage or another type of loan soon

• Would like to refinance an existing debt that you have at a lower interest rate

• Suspect that someone may be using your identity to obtain credit fraudulently

Fluctuating credit scores could make it more difficult to get approved for new loans. If you are approved, a lower score could result in a higher interest rate.

Identity theft is a more serious matter. You may not even be aware that someone is using your identity to obtain credit in your name until you’re denied credit, or worse, sued for an outstanding debt you didn’t create.

Reasons Your Credit Score Went Down

Why did my credit score drop by 100 points for no reason? The short answer is that it didn’t. There must be some change to your credit report to result in a score decline.

Changes that can show up on your credit reports include:

• New accounts opened in your name

• Account closures

• Changes to your balances or credit limits

• Payment activity, including late payments or missed payments

• Delinquencies and accounts that are sent to collections

• Paid off balances

• Debt settlements, in which your creditors agree to let you pay off less than what you owe

• New inquiries for credit1

Inaccurate information can also harm your credit. Between 2021 and 2023, consumer complaints about credit report errors increased by 168%, according to the Consumer Financial Protection Bureau (CFPB). Credit report errors can range from payments being incorrectly reported to accounts listed as belonging to you that are not yours.2

In some cases, a credit score drop might be caused by someone else. This can happen when you cosign a loan for someone. As the cosigner, you’re legally responsible for the debt. Any activity relating to the account, including late or missed payments, can show up on your credit report.3

What Can You Do If Your Credit Score Dropped by 100 Points?

If your credit score drops by 100 points or more, the first thing to do is determine why. Obtaining copies of your credit reports can shed some light on what may be causing the decline.

Here are some things to look for as you review your reports:

• Missing or incorrect payment history

• Incorrect balance information

• Accounts that don’t belong to you

• Collections for debts that don’t belong to you

• Loan accounts you’ve paid off that still show a balance

• Open accounts that are listed as closed or vice versa

• Duplicate debts, meaning the same account is listed multiple times

If you identify what you believe is an error or inaccuracy, you have the right to dispute it with the credit bureau that’s reporting the information. Equifax, Experian, and TransUnion — the three major credit bureaus — all allow you to initiate credit report disputes online.4

Why did my credit score drop over 100 points when there were no errors? That’s trickier to answer, as it depends on the information in your credit file. If there are no errors or inaccuracies, then you’ll need to consider things like payment history, credit limits, and debt balances to see if they’ve had any impact on your score.

Examples of Credit Score Dropping

Hopefully, you never have to deal with a major credit score drop. But it may help to have some examples of what can cause your score to go down.

• You’re ready to buy a home and are shopping for a mortgage lender. You find the one you want to work with and apply for a loan. You’re approved, but the new inquiry and associated debt on your credit reports lead to a score drop.

• You cosign a car loan for your niece, on the promise that she’ll make the payments on time. She loses her job but doesn’t tell you and the loan payments go unpaid for six months. The lender repossesses the vehicle, which lands on your credit report and costs you credit score points.

• You make the final payment to your student loans. The account is now listed as closed and paid in full on your credit reports, but it lowers your score.

Again, not all things that lead to a credit score drop are negative. Paying off debt, for example, is something to celebrate even though it can ding your credit to a degree.

How to Build Credit

How long does it take to build credit? There’s no simple answer, as it can depend on what you’re doing (or not doing) to recover lost credit score points.

Some of the most effective strategies for building credit include:

• Paying bills on time to establish a positive payment history

• Keeping the balances on your credit cards low or paying in full each month

• Paying down debt that you already have

• Periodically requesting credit limit increases from your credit cards (but not running up new debt against them)

• Leaving older credit accounts open, even if you don’t use them

• Using different types of credit, such as loans and credit cards

• Limiting how often you apply for new credit

You can also build credit as an authorized user on someone else’s credit card. Authorized users have charging privileges on the card and account activity will show up on their credit reports, but they’re not legally responsible for the debt.5

Having a checking or savings account typically doesn’t affect credit scores. Banks can, however, report negative activity related to closed accounts to ChexSystems, a consumer credit reporting agency. A negative ChexSystems report could make it difficult to get approved for a new bank account.

Allow Some Time Before Checking Your Score

If you recently checked your credit following a score drop, you may want to wait a while before checking it again. Credit scores change when there’s new information added to your credit reports, whether it’s something positive or negative.

It may be helpful to check your credit monthly or quarterly if you’re working on rebuilding your score. That way, you can track your progress against any steps you’re taking to improve your score to see what’s working.

At a minimum, it’s a good idea to check your credit at least once annually. That can allow you to see what’s changed over the last year and look for any suspicious or potentially fraudulent activity.

Pro tip: Use a free credit monitoring service to get regular credit score updates.

Closing a Credit Card Account Can Hurt Your Score

Closing credit cards can hurt your score if you still owe a balance at the time you close the account. Your credit utilization ratio measures how much of your available credit you’re using. When you close a credit card with a balance due, you automatically increase your credit utilization ratio.6

For example, let’s say you have a combined credit limit of $20,000 across five credit cards. You owe $6,000 in total debt to your cards, which makes your credit utilization ratio 30% ($6,000 / $20,000 = 0.3).

Now, assume that you owe $5,000 to one card alone. That card has a credit limit of $10,000. You close it, cutting your total credit limit in half. Now you have a credit utilization ratio of 60% ($6,000 / $10,000 = 0.6).

Some experts say that 30% or less is an ideal credit utilization ratio to aim for, while others target 10% instead. The main thing to remember is that the lower your credit utilization is, the less harmful changes can be to your score.

In terms of how to lower credit utilization, you can do so by paying down credit card balances and/or increasing your credit limits.

What Factors Impact Credit Scores?

If you’re wondering what affects your credit score, it’s not just one thing. FICO credit scores, which are the most commonly used among top lenders, are determined by five factors.

• Payment history: 35% of your score

• Credit utilization: 30% of your score

• Credit age: 15% of your score

• Credit mix: 10% of your score

• Credit inquiries: 10% of your score7

VantageScores are based on some of the same factors, though they’re calculated differently. The VantageScore model was developed by the credit bureaus as an alternative to FICO scores.

Pros and Cons of Tracking Your Credit Score

Tracking your credit score can be beneficial but there are some potential downsides. Here’s a quick look at the advantages and disadvantages.

thumb_upPros:

• Monitor your progress over time

• Get to know which factors are helping or hurting your score the most

• Easier to spot suspicious activity or potential fraud

thumb_downCons:

• You may feel frustrated if your score isn’t climbing as quickly as you’d like

• Checking your score too often could cause you to obsess over even minor changes

• Keeping up with multiple credit scores could get confusing

How to Monitor Your Credit Score

Credit score monitoring services make it easy to track your credit scores and get notifications when there’s a change to your credit report. SoFi, for instance, offers free weekly credit score updates and access to a certified financial planner if you have questions about credit score changes.

Regardless of which service you use to monitor your credit, keep track of changes as they’re reported. Specifically, look at which changes are positive and which are negative. That can guide you toward what you might need to do to improve your score.

The Takeaway

Seeing your credit score drop by 100 points or more can be disheartening, but it’s not the end of the world. There are things you can do to get your score back on track.

Tracking your money is a good place to start. Tools like a spending app connect all of your accounts in a single dashboard so you can understand the factors that are influencing your credit scores. You can also check your scores for free. It’s a simple way to take charge of your financial health while you work on building good credit.

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.

See exactly how your money comes and goes at a glance.

FAQ

Why did my credit score drop 100 points when nothing changed?

It may seem as if nothing has changed on your credit reports, but there must be some type of change for your score to be affected. If your score dropped, take time to review your credit reports thoroughly. Even a seemingly minor change, such as a new credit inquiry, could make a dent in your score.

Why is my credit score going down if I pay everything on time?

Paying bills on time can help add points to your score, but it might still go down if you have a high credit utilization or apply for new credit frequently. Closing accounts could also hurt your score, even if you pay on time. Using a spending app to track bills and expenses can help you stay on top of your due dates.

How to dispute a credit score drop?

You can’t dispute a credit score drop, but you can dispute the information on your credit reports that you believed caused the drop. Keep in mind, however, that disputing credit report information isn’t guaranteed to improve your score.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

Photo credit: iStock/kate_sept2004

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.

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

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

SORL-Q324-009

Mar

2025

Investment and Financial Brokers Explained

By Michael Flannelly | Growing Wealth, invest, Investing, Terminology | Comments Off

A number of investors trade stocks and bonds through an investment broker. What is a broker? A broker, or brokerage firm, is the middleman between the buyer and seller and can help make a transaction go smoothly. But an investment broker is not strictly necessary. Some companies offer a direct stock plan, allowing investors to purchase shares straight from the company without a broker.

In order to decide if you need an investment broker, it’s essential to know how a broker works, what exactly they do, and how to shop around for one that fits your needs.

Key Points

• Investment brokers assist with buying and selling securities, ensuring transactions are legitimate and handling necessary documentation.

• Brokers include full-service, discount, online, and robo-advisors, each with unique features.

• Using a broker provides accessibility and expertise but involves fees and potential conflicts of interest.

• Investment accounts vary, including taxable brokerage, retirement, and college savings plans.

• Choosing a broker requires comparing fees, account minimums, and the level of guidance offered.

What Is an Investment Broker?

Investment brokers enable individuals to buy and sell financial securities, like stocks or bonds, on an exchange market. It’s really as simple as that. Though brokers do have several varying roles and responsibilities, and can offer a number of services to their clients.

Roles and Responsibilities

Reputable brokers act as a boon to both buyers and sellers: They ensure that each party actually has the money to buy assets or the assets to sell.

Brokers settle trades by delivering securities and payments to each party, while also taking care of all the bookkeeping and tax-related documentation required. In many cases, going through a brokerage firm may be the easiest and most accessible way for individuals to get started with investing.

Types of Brokerage Accounts

There are many kinds of brokerage accounts to choose from. For instance, you may want to choose between a brokerage account vs. a cash management account, both of which are offered by brokerages.

The best product or service for you will depend on your individual financial goals and your budget. Here’s what you need to know to help make an informed decision.

Full-service Brokers

Along with the ability to buy and sell assets, a full-service brokerage account might also include advice from human financial planners and portfolio management to help you make the best investment decisions possible.

However, these perks often don’t come cheap. Full-service brokerage accounts and wealth-management companies usually calculate their charges as a percentage of your total portfolio, and may have account minimums as high as $250,000. They may also collect trade commissions and annual management fees.

Discount Brokerages

Discount brokers offer less consultation and guidance, allowing you to DIY your investment portfolio cheaply. Many have $0 account minimums and may charge less than $10 per trade, or even offer commission-free assets trading.

Both full-service and discount brokerages typically offer both cash and margin accounts. In a cash account, you’ll need the actual cash to buy your assets. In contrast, in a margin account, the broker will lend you some capital to make purchases, using the securities you already own as collateral.

Online Brokers

Many investors today are likely familiar with online brokerages, as there are numerous platforms that allow users to buy and sell stocks or other securities. Many of them don’t charge commissions, either. Online brokers often offer the ability to buy or sell securities, and in some cases, trade derivatives, too.

Robo-Advisors

Robo-advisors aren’t really “brokerages” per se, but more of a service that may be provided by brokers. They’re effectively highly sophisticated robot brokers — they may conduct trades automatically for users or clients, rebalancing their portfolios or allocating their money based on the investor’s risk tolerance and other factors. Some brokerages offer robo-advisory services, and some do not. In some cases, there may be humans in the mix that help with portfolio curation, but it may be a good idea to explore the specifics depending on which broker you’re thinking of using to make sure.

Pros and Cons of Using an Investment Broker

As with any financial service, there are both benefits and drawbacks to using a brokerage firm to facilitate your trades.

Pros of Using a Broker

Some of the pros of using a broker include accessibility, simplicity, and expertise.

Accessibility

Thanks to the internet, you can open a brokerage account in minutes and start trading stocks as soon as your account is funded. That means employing a financial broker is one of the easiest ways to start an investment journey as quickly as possible.

Simplicity

When you buy and sell through a broker, a lot of the tedious footwork — like keeping tabs on your interest earnings for tax purposes — is taken care of for you. Depending on the type of brokerage firm you go with, you may also have access to professional financial advice and other advisory services that could help you make the most of your portfolio.

Expertise and Guidance

Brokers are professionals, and have experience in the market. That is, they may be able to offer a helping hand at times, which may be worthwhile to new or beginning investors who are still getting their sea legs.

Cons of Using a Broker

There can also be drawbacks to using a broker, such as fees and required minimums.

Fees and Commissions

Although they’ll vary based on the specifics you choose and the type of account you open, some brokers charge maintenance fees and trade fees — also known as commissions — which can eat away at your nest egg. In fact, the average stock broker commission charged by brokerage firms is usually 1% to 2% of the value of the total transaction.

That said, you can minimize your investment fees, or even eliminate them, by shopping around for brokers with the lowest costs. For example, many online brokers offer no commission trading.

Required Portfolio Minimums

Although it’s not true of every brokerage firm, some require you to keep a minimum amount of money in your account to use their services. These minimums might be $1,000 or more, which can be a barrier to entry for some beginner investors.

Potential Conflicts of Interest

It’s possible that a broker may have conflicts of interest, in that they may be a part of a broad organization or large company that has many clients. As such, they could have an interest in having investors invest in certain companies, assets, or more — and it may not even be intentional. The point is, it’s possible that these conflicts could exist, and investors should be aware of them.

How to Choose the Right Investment Broker

There’s no one way to choose the right investment broker, as it’ll largely depend on your specific needs and financial situation. That said, you can keep some general guidelines in mind when making a choice. That can include:

• What your needs are (what are you looking to trade, specifically?)

• What your financial goals are

• Any fees or commissions that the broker may charge

• Which specific products and services the broker offers

• How easy they are to work with

• How much guidance you want or need as an investor.

Different Types of Investment Accounts

Aside from deciding what type of brokerage you’d like to do business with (and how much you’re willing to pay for financial services), you’ll also need to decide what type of investment account works best for your goals.

Maybe you’re investing for a shorter-term objective, like purchasing a house, or perhaps you’re trying to ensure you’ll have a comfortable retirement. Either way, specific investment account types, or “vehicles,” are designed to help you get there.

Taxable Brokerage Account

Think of this as a default investment vehicle. It may be a good choice if you’re looking to grow wealth and want to be able to add or withdraw funds on your own terms without waiting to reach a certain age or life circumstance. However, you pay taxes on earnings, so there are no tax advantages to this type of account. If you don’t make any specific investment vehicle choices when you open your brokerage account, this is most likely the one you’re getting.

Individual Retirement Account (IRA)

An individual retirement account, or IRA, is a type of investment account designed specifically for retirement goals and is available to self-employed people and those working for a company. IRAs carry specific tax incentives; for example, contributions to traditional IRAs are deductible. While Roth IRAs allow for tax-free distributions. However, you can’t access the funds without paying a penalty until you reach age 59 ½ or meet certain circumstantial requirements, such as purchasing your first home.

Roth IRA

Roth IRAs are similar to traditional IRAs, with the key difference being that contributions are made with after-tax dollars, meaning that the money in them can be withdrawn tax-free. As such, there may be some advantages for investors to use a Roth IRA versus a traditional IRA, though it may be best to confer with a financial professional to get a sense of which may be a better investment vehicle given your situation.

401(k) Accounts

There are also 401(k) accounts, which are employer-sponsored retirement plans that are similar to IRAs, in some ways. Employees can contribute a portion of their paychecks to a 401(k), and some employers will even match their contributions up to a certain percentage. There may be tax advantages, too.

Regulations for Investment Brokers

Investment brokers need to abide by some rules, most notably, those set forth by regulators like the Securities and Exchange Commission (SEC), and FINRA.

FINRA and SEC Oversight

Investment brokers are regulated by the Financial Industry Regulatory Authority (FINRA). Brokers must register with FINRA, and they are required to follow a standard of conduct known as the suitability rule. Under this rule, brokers need to have suitable grounds for recommending particular investments to clients.
Brokers also need to register with the SEC, which oversees regulatory efforts for the industry.

Fiduciary Responsibility

Brokers also have a fiduciary responsibility, which means they are required to act in their client’s best interest. So, if a broker can talk a client into buying a bunch of assets, which may be to their detriment, while raking in commission fees, they could find themselves in trouble.

Alternatives to Investing With a Broker

Although using a broker to invest in the stock market might be a smart money move for some, there are other ways to get started with investing, including the following options.

Recommended: Buying Stocks Without a Broker

Automated Investing

Automated investment products, or robo-advisors, are platforms that utilize a combination of computer algorithms and human financial planners to create and manage diversified portfolios at low costs to users.

Your funds will be invested in a diversified portfolio, and the platform typically offers goal-planning tools and rebalancing services to help keep your funds moving in the right direction.

If you don’t want to pay the high prices for a full-service broker, but self-managing your portfolio makes you more than a little nervous, a robo-advisor may be right for you.

Buying Stocks and Fractional Shares Directly

Depending on whose stocks you’re interested in purchasing, you may be able to buy them directly from the issuer without needing to go through a brokerage firm.

It pays to read the fine print, however: Buying stocks directly may save you money on trade commissions, but you may also be subject to proprietary fees from the company or minimum purchase amounts. And if you’re buying fractional shares (fractions of shares of stock), you need to have an investment account, such as one with an online broker or robo-adviser.

Diversifying your assets can still be helpful for investors who buy stocks directly. If all of your investments are tied up in a single company, you may not be in a great position if that company begins to falter. In contrast, if you’ve invested in several different firms and other asset classes, you will likely have a wider margin for error.

Choosing Alternative Investments

Although the stock market is one of the most popular ways to invest, there are plenty of other ways to try turning your money into more money.

You might consider exploring alternative investments. For example, you could invest in real estate and sell the property at a profit or turn a condo into a passive income source by putting it up for rent. Or you might invest in art; the value of paintings is not necessarily correlated with the behavior of the stock market, giving it the potential to rise even during a stock market crash.

That said, many alternative investments require significantly more time, work, and know-how than crafting a diversified portfolio of stock market assets. And as always, every investment involves risk. There’s no such thing as a sure thing.

Direct Stock Purchase Plans (DSPPs)

Further, investors can check out whether they can participate in a direct stock purchase plan, or DSPP, which allows investors to buy stock directly from the stock-issuing entity. This way, investors don’t need to deal with a broker at all, they can go directly to the source and purchase stock.

The Future of Investment Brokerage

What does the future hold for investment brokers? Nobody knows for sure, but it’s likely that the entire field will evolve in the coming years, as much of the financial space has. Technology keeps evolving and rapidly changing, and the introduction of artificial intelligence and perhaps, in the future, quantum computing capabilities, may give investors new abilities that were unimaginable a few years ago.

We’re not sure exactly what that will look like, but it’s likely a safe bet that the field will continue to see rapid change

The Takeaway

If you’ve decided stock market investments are the right move for you and your money, going through a broker can be a relatively simple and low-cost way to gain access to the market. However, if you’d rather avoid potential downsides, like fees or required account minimums, you may want to consider the option to invest directly. The choice is yours.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

What is the role of a stock broker?

A stock broker is a financial professional who buys and sells stocks on behalf of clients. A broker generally earns a fee or commission for their services.

How do brokers make money?

Brokers typically work on commission. The average stock broker commission is usually 1% to 2% of the value of the total transaction.

Why do people use brokers?

People use brokers to help them buy and sell stocks and bonds. For many individuals, using a broker is the easiest way to start investing.

How much money do I need to start investing with a broker?

How much you need to start investing with a broker depends on the specific broker or brokerage. Some may not have minimum amounts, while others may have relatively large or high balance requirements.

Are online brokers safe to use?

While there’s no guarantees in the financial world, and there’s certainly nothing that’s “safe,” most brokers are relatively low-risk, so long as they abide by regulatory standards and are registered with the proper authorities. That said, it may be a good idea to do some research before signing up.

Can I switch brokers easily if I’m not satisfied?

Yes, you can open up new or different brokerage accounts with other brokers.

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.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

SOIN-Q125-075

Mar

2025

Student Loan Hardship Forgiveness Plan

By Jennifer Calonia | Financial Topics, Student Loans | Comments Off

Student loan hardship forgiveness was a plan that could have offered relief to federal student loan borrowers who faced “persistent financial burdens” like medical bills, natural disasters, and child care. Former President Biden sought to help relieve this financial burden through a hardship-based student loan forgiveness plan that he proposed while still in office.

The plan was ultimately pulled from consideration shortly before the Biden administration transitioned out of the White House. Here’s what to know about the proposed hardship forgiveness for student loans, plus other options for student loan borrowers dealing with financial hardship.

Key Points

• The Biden administration’s proposed student loan hardship forgiveness plan aimed to provide relief to federal student loan borrowers who were facing significant financial burdens.

• Automatic one-time forgiveness would have been offered to those with an 80% chance of default, based on financial indicators.

• An application-based forgiveness option would have allowed others to apply if not eligible for automatic relief.

• The plan was withdrawn in December 2024 due to operational challenges and limited time left in the administration’s term.

• Other student loan forgiveness options include income-driven repayment plans, although applications for these plans are on hold as of March 2025.

Understanding the Hardship Forgiveness Plan

In 2022, President Biden proposed a sweeping student loan cancellation plan that promised qualifying borrowers up to $20,000 in loan cancellation. The plan was blocked by the Supreme Court in 2023. Following the court’s decision, the student loan relief initiative was reworked by the administration into a student loan forgiveness plan, known as Plan B. The student loan hardship proposal was part of Plan B.

Overview of the Initiative

The student loan hardship forgiveness proposal was designed to offer relief to borrowers who were struggling with ongoing financial challenges. It enabled access to hardship forgiveness for student loans through two pathways:

• Automatic one-time forgiveness: In this pathway, if the Department of Education, using a “predictive assessment,” determined that a borrower had at least an 80% chance of defaulting on their student loan debt within two years, it may have automatically forgiven the loans on a one-time basis.

• Application-based forgiveness If borrowers did not qualify for the automatic student loan hardship forgiveness, they could submit an application that would “holistically assess” how likely they were to default or experience severe and persistent financial hardship.

Eligibility Criteria

For a borrower to qualify for automatic forgiveness, an assessment of varying indicators would be done by the Secretary of Education. If the assessment determined that a borrower’s loans had at least an 80% likelihood of going into default in the following two years, they would qualify for hardship forgiveness under the proposed rule.

Some of the indicators used to assess automatic forgiveness included:

• Income

• Total debts owed

• High costs associated with medical bills

• Child care and other essential expenses

• Whether the borrower had qualified for a Pell Grant

Under the application-based forgiveness, borrowers would need to demonstrate that they faced a high probability of loan default or other severe negative outcome if the hardship forgiveness wasn’t granted. The assessment also had to find that no other student loan payment options would adequately resolve the borrower’s hardship circumstances.

Application Process

Only borrowers experiencing an exceptional financial hardship who did not qualify for the automatic one-time forgiveness would need to complete a student loan hardship application for a holistic assessment.

However, since the hardship-based student loan forgiveness plan was withdrawn before its launch, no formal application was publicly available.

Recommended: Understanding Your Student Loan Statement

Implementation Timeline

The proposal for a student loan hardship forgiveness plan had been in the works for some time under the Biden administration. Here’s what to know about the proposal’s timeline.

Proposed Schedule

If the hardship forgiveness proposal had moved forward, the U.S. Secretary of Education in the Biden administration anticipated finalizing the new forgiveness plan and having it go into effect in 2025.

Legal and Political Considerations

The student loan hardship proposal would have given borrowers facing financial hardship tremendous relief. However, the proposed hardship-based student loan forgiveness plan, like many of the Biden administration’s forgiveness plans, had legal and political opposition.

Legal Challenges

Biden’s student loan hardship forgiveness initiatives were stymied by numerous legal challenges. First, the administration’s initial forgiveness plan that offered up to $20,000 in loan forgiveness was struck down by the Supreme Court in 2023. After that, different iterations of the proposal also faced legal hurdles.

For example, in 2024, seven states — Alabama, Arkansas, Florida, Georgia, Missouri, North Dakota, and Ohio — filed a lawsuit against the Biden administration, alleging that the proposed student loan hardship plan was an overstep of executive power.

Political Climate

In February 2025, the U.S. Court of Appeals for the 8th Circuit ruled that former President Biden’s student loan forgiveness plans were unconstitutional. With the Republican party currently holding the majority in Congress, and President Trump’s executive order in March 2025 to dismantle the Department of Education, a broad student loan hardship forgiveness plan appears unlikely to happen under the Trump administration.

Impact on Borrowers

Had Biden’s proposed hardship forgiveness for student loans been successful, an estimated eight million borrowers would have had their student loan balances erased.

Instead, these borrowers will need to repay their student loans through other alternatives, such as using another repayment plan or consolidating student loans.

Another option some borrowers might consider is student loan refinancing. When student loans are refinanced, the borrower’s current loans are replaced with a new loan from a private lender. Ideally, a borrower may be able to get better loan terms or a lower interest rate, if they qualify.

If you decide to explore how to refinance student loans, just be aware that refinancing federal loans makes them ineligible for federal programs, such as IDR plans and federal deferment.

Recommended: Student Loan Refinancing Calculator

Financial Relief

When borrowers default on their student loans, the remaining balance becomes due upfront, which further compounds their financial challenges. The hardship forgiveness plan would have provided relief to federal student loan borrowers who are at the highest risk of defaulting on their debt.

Credit Implications

With the proposed hardship forgiveness plan, some borrowers in a dire financial situation might have been able to avoid the negative mark of student loan default on their credit record.

Here’s why: A student loan balance that’s forgiven shows up on a credit report as a closed account. This lowers borrowers’ debt-to-income (DTI) ratio, which can impact their access to new credit. A DTI ratio is a formula used by creditors to determine whether an applicant can reasonably make payments toward a new credit account — the lower this percentage is, typically the more favorable it is for borrowers.

Alternatives and Additional Support

For borrowers who are experiencing financial hardship, student loan forgiveness is usually accessible through other federal programs, such as income-driven repayment (IDR) plans. However, as of March 2025, a federal court injunction has prevented the implementation of parts of the IDR plans, and applications for the plans are on hold. You can find out more about this situation and get any updates on the Federal Student Aid (FSA) website.

In the meantime, here is more about these plans and how they typically work.

Income-Driven Repayment Plans

IDR plans offer student loan relief — and ultimately, forgiveness — to borrowers who need lower student loan payments. These plans calculate your monthly payment based on your discretionary income and family size, which must be recertified annually. Depending on the plan, repayment terms are extended to 20 or 25 years, with payments set at 10% to 20% of your discretionary income. After successfully making all payments under your IDR plan, any remaining Direct Loan balance is forgiven.

There are technically four IDR plans, though one of them is no longer available:

• Saving on a Valuable Education (SAVE) Plan: This plan is no longer available after being blocked by a federal court.

• Pay As You Earn (PAYE) Repayment Plan

• Income-Based Repayment (IBR) Plan

• Income-Contingent Repayment (ICR) Plan

However, as discussed, applications for the PAYE, IBR, and ICR plans are on hold as of March 2025, and the application to change student loan repayment plans to an IDR option is unavailable.

The Takeaway

The Biden administration’s hardship-based student loan forgiveness plan would have forgiven student loan debt for an anticipated eight million federal student loan borrowers. However, the proposal was met with legal challenges and ultimately withdrawn by the administration in December 2024.

Although other federal loan forgiveness options, like forgiveness through income-driven repayment, currently still exist, new applications for these plans are not currently available. Borrowers looking for help managing their student loan debt may want to consider other options.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Will the forgiven loan amount be considered taxable income?

Whether a forgiven student loan amount is considered taxable income depends on the forgiveness program that granted the loan cancellation. However, the American Rescue Plan Act of 2021 provides federal loan borrowers a temporary federal tax exemption on forgiven student debt through 2025. Just be aware that some states impose a tax liability on forgiven student loans, regardless.

How does the hardship plan differ from previous forgiveness initiatives?

The proposed student loan hardship forgiveness program was unique in that it offered two different pathways for student debt relief. The first was automatic forgiveness qualification for borrowers who demonstrated an 80% likelihood of defaulting on their student loans. The second was a “‘holistic assessment’ of the borrower’s circumstances” in which forgiveness was to be assessed on a case-by-case basis after the borrower submitted an application.

What legal challenges could affect the plan’s implementation?

The Biden administration withdrew the student loan hardship plan in December 2024, citing operational challenges, and the plan is no longer moving forward. In February 2025, the 8th Circuit Court ruled that former President Biden’s overall student loan forgiveness efforts were unconstitutional.

photo credit:iStock/Damir Khabirov
SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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

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

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

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.

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.

SOSLR-Q125-007

Mar

2025

11 Tips for Surviving on $1,000 a Month

By Rebecca Lake | Budgeting & Goals, Family Finances, money | Comments Off

Table of Contents

What Does Living on $1,000 a Month Look Like?
Is It Possible to Live Off of $1,000 a Month?
How to Live on $1,000 a Month
FAQ

While adopting a frugal lifestyle is a choice for some people, it may be a necessity for others. For example, you might be trying to figure out how to live on $1,000 a month if you’re in school, if you’re working part-time, or if you lost your job and are trying to find a new one.

Getting by on $1,000 a month may not be easy, but it is possible to live well even on a small amount of money. Try these tactics.

Key Points

• Surviving on $1,000 a month requires careful budgeting, prioritizing essential expenses, and finding ways to save money.

• Cutting down on housing costs by sharing living spaces or finding affordable options is crucial.

• Utilizing public transportation or opting for a bike can help save on transportation expenses.

• Cooking at home, meal planning, and buying groceries in bulk can significantly reduce food costs.

• Exploring free or low-cost entertainment options, utilizing discounts, and avoiding unnecessary expenses are key to making $1,000 a month work.

What Does Living on $1,000 a Month Look Like?

If your income is limited to $1,000 a month, you might be wondering exactly how far it will go. Breaking it down hourly, weekly, and by paycheck can give you some perspective on how much money you’ll actually have to work with.

An income of $1,000 a month is….

• $230.77 as a weekly salary

• $46.15 daily

• $6.15 an hour, assuming you work 37.5 hours a week full-time

• $11.54 an hour, assuming you work 20 hours a week part-time.

The numbers above assume that you’re talking about net income, which means the money you bring in after taxes and other deductions.

By comparison, the real median household income in the United States was $80,610 in 2023, according to Census Bureau data. That works out to $6,717.50 in monthly pretax income, but note that it’s for a household, not an individual.

Is It Possible to Live Off of $1,000 a Month?

Living off $1,000 a month is possible, and it’s a reality for many individuals and families. Again, you might be living on a low income because you’re in school. So your monthly budget might look something like this:

• Food: $250

• Gas: $100

• School supplies/equipment: $50

• Rent: $400 (assuming you’re sharing with roommates)

• Utilities: $100

• Miscellaneous: $100

As you may notice, there isn’t room in this budget for debt repayment coming out of your checking account, nor is there money to set aside as savings.

In addition to students living on a frugal budget, this kind of scenario may apply to older people on a fixed income. Retirees may choose to cut their expenses to the bone once they stop working. In addition to students living on a frugal budget, this kind of scenario may apply to older people on a fixed income. Retirees may choose to cut their expenses to the bone once they stop working. And in some cases, money may be tight because you’re getting through a financial hardship (such as job loss or illness impacting one’s ability to be employed), and income is lower than normal.

Can you live well on just $1,000 a month? That’s subjective, as the answer can depend on how responsibly you use the money that you have as well as what the cost of living is in your area. Being frugal and flexible are essential to making life on a smaller income work.

How to Live on $1,000 a Month

Figuring out how to live on $1,000 a month, either by choice or when money is tight, requires some creativity and planning. Whether your low-income lifestyle is temporary or you’re making a more permanent shift to financial minimalism, these tips can help you stretch your dollars farther.

1. Assess Your Situation

You can’t really learn how to manage your money better if you don’t know where you’re starting from. So the first step is creating your personal financial inventory to understand:

• Exactly how much income you have

• Where that money is coming from

• What you’re spending each month

• How much you have in savings

• How much debt you have.

It also helps to consider why you might need to know how to live on $1,000 a month. For example, if you’re knee-deep in debt because you’ve been living beyond your means, that can be a strong incentive to curb spending and live on less.

(Also check to see if bank fees are eating away at your funds. You might consider switching to a low- or no-fee account, which are often offered by online banks, if you are getting hit with charges.)

2. Separate Needs From Wants

Needs are things you spend money on because you need them to maintain a basic standard of living. For example, needs include:

• Housing

• Utilities

• Food

• Health care

Wants are all the extras that you might spend money on. So that may include dining out, hobbies, or entertainment. If you’re trying to live on $1,000 a month, needs should likely take priority over wants. One good budget plan can be the 50/30/20 rule, which allocates 50% of one’s take-home pay to needs, 30% to wants, and 20% to savings.

Here’s a hard truth, however: When working with $1,000 per month, you may have to get rid of most (or all) of the wants to make your spending plan work. As you make your budget, focus on the needs first and if you have money left over, then you can add one or two small extras back in.

For an idea of how your income could be broken up into needs and wants, use the 50/30/20 calculator below.

3. Lower Your Housing Costs

Housing might be your biggest expense, and, if you want to make a $1,000 a month budget work, getting that cost down can help. Some of the ways you might be able to reduce housing costs include:

• Taking on one or more roommates

• Moving back in with your parents

• Renting out a room

• Refinancing into a new mortgage

• Selling your home and moving into something smaller or less expensive.

Are these options ideal? Not necessarily. Living with parents, roommates, or strangers who are renting out part of your home can mean sacrificing some of your privacy. Refinancing a mortgage or downsizing can be time-consuming and stressful.

But if you’re trying to get your budget to $1,000 or less, these are all legitimate ways to slash your housing expenses.

4. Get Rid of Your Car

Cars can be expensive to own and maintain. A car payment could easily run several hundred dollars per month. Even if you own your car outright, putting gas in it, buying tires, and paying for regular maintenance could still make a sizable dent in your income.

If you have the means to do so, selling your car could free up money in your budget. And you could use the money you collect from the sale to pad your savings account, pay down some debt, or simply get ahead on monthly bills.

If you do sell your vehicle, use an online resource like Kelley Blue Book to check your car’s potential resale value before setting a price.

5. Eat at Home

After housing, food can easily be a budget-buster, especially if you’re eating out rather than preparing meals at home. The good news is that there’s a simple way to cut your food costs: Ditch the takeout and restaurant meals.

Planning meals around low-cost, healthy ingredients can help you to spend less on food and still eat well. You can also save on food costs by:

• Using coupons

• Shopping sales and clearance sections

• Downloading cash back apps that reward you with cash for grocery purchases

• Relying on pantry staples that you can make into multiple meals

• Trying Meatless Mondays (which means eating vegetarian on Mondays; meat tends to be a pricey buy)

• Repurposing leftovers as much as possible.

You could also save money on food if you’re able to make things like bread, pizza dough, or pasta yourself using basic ingredients. When shopping at your local grocery stores, take time to compare prices online before heading out. And consider whether you can get in-season vegetables and fruits for less at a local farmer’s market.

6. Negotiate Your Bills

Some of your bills might be more or less unchanging from month to month. But others may give you some wiggle room to negotiate and bring costs down.

For example, if you’re keeping your car, you don’t have to keep the same car insurance if it’s costing you a lot of money. You can shop around and compare rates with different companies, or ask your current provider about discounts. You could also raise your deductible, which can lower your monthly premium, but keep in mind that you’ll need to have cash on hand to pay it if you need to file a claim.

Other bills you might be able to negotiate or reduce include:

• Internet

• Cable TV (bonus points if you can get rid of it altogether)

• Cell phone

• Subscription services (or better yet, cancel them for extra savings)

• Credit card interest.

Also, if you are hit with a major doctor’s bill, know that it can be possible to negotiate medical bills. It’s definitely worth talking with your provider’s office about this.

There are also services that will handle bill negotiation for you. While those can save you time, you might pay a fee to use them so consider how much that’s worth to you.

7. Learn to Barter and Trade

Bartering is something of a lost art, but reviving it could be a great idea if you’re trying to live on $1,000 a month. For example, say you need to cut the grass, but there’s no room in your budget to buy a new lawn mower to replace your broken one. You could barter the use of your neighbor’s mower in exchange for a few hours of raking leaves at their place.

Or, say that you have kids who have outgrown their clothes. Instead of resigning yourself to using a credit card to buy new outfits for school, you could set up a clothes swap with other parents in your neighborhood. You can clean out clutter and get things you need, without having to spend any money.

8. Get Rid of Debt

Debt can be one of the biggest obstacles to making a $1,000 a month income work. If you have debt, whether it’s credit cards, student loans, or a car loan, it’s important to have a plan for paying it down.

When you only have $1,000 a month to work with, you may only be able to pay a little to your debts at a time. But you might be able to make each penny count more by making debts less expensive.

For instance, you might try a 0% APR credit-card balance transfer to save on interest charges. Or if you have loans from getting your diploma that have a high interest rate, you may consider the benefits of refinancing your student loans to reduce your rate and lower your monthly payment.

If you’re really struggling with how to pay off debt on a low income, you may want to talk to a nonprofit credit counselor. A credit counselor can review your situation and help you come up with a budget and plan for paying off debt that fits your situation. One option is the National Foundation for Credit Counseling, or
NFCC.

9. Adopt a No-Spend Attitude

When you want or need to know how to live on $1,000 a month, the fastest way to get overspending in check is to do a no-spend challenge. How this works: You commit yourself to not spending any money on nonessentials for a set time period.

A no-spend challenge can last a day, a weekend, a week, a month, or even a year. The time frame doesn’t matter as much as being all-in with the idea of not spending money on things you don’t need. And you might be surprised at how much money you’re able to save by avoiding wasteful spending.

10. Find Free or Low-Cost Ways to Have Fun

Living on $1,000 a month might mean you don’t have much room in your budget for fun. But you can still enjoy life without having to spend money.

Some of the ways you can do that include:

• Checking out free events in your community, like festivals or fairs

• Adopting hobbies that are low or no-cost, like walking or bike-riding

• Checking out books, DVDs, and CDs from your local library

• Volunteering

• Visiting local spots that offer free admission days, like museums or aquariums.

Those are all ways to spend an enjoyable afternoon without costing yourself any money. And if you do want to do something that requires a little spending, you can use a site like Groupon to check for coupons or special deals to save some cash. Or try Meetup to see if any free or low-cost events of interest are brewing in your area.

11. Grow Your Income

If you try living on $1,000 a month and find that it just isn’t enough, the next thing you can do is see if you can figure out how to bring in more money. Fortunately, there are plenty of ways to do that.

Here are some ideas for making more money to supplement your income:

• Increase your hours if you’re working an hourly job

• Take on a part-time job in addition to your full-time job

• Start an online low-cost side hustle, like freelancing or Pinterest management

• Consider an offline side hustle, like walking dogs or shopping with Instacart

• Sell things around the house you don’t need for cash

• Check for unclaimed money online

• Sell unwanted gift cards for cash.

The great thing about making more money is that you can try multiple things to see what works and what doesn’t. And you can also use found money, like bonuses, rebates, or refund checks deposited into the bank to help cover bills or shore up your savings.

The Takeaway

Making your budget work when you have $1,000 in monthly income is possible, though it might take some serious work. Drastically reducing expenses can be a great place to start, and bringing in more income can of course help, too.

Changing banks is one more money-saving tip to know.

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

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

Where can you live on $1,000 a month?

The best places to live on $1,000 a month are ones that have an exceptionally low cost of living. In the United States, that may mean living in a rural area or a smaller city. When searching for the cheapest places to live, consider what you’ll pay for housing, utilities, transportation, and food, which are among the non-negotiable “musts” in your budget.

How can I live on very little income?

The secret to living on a very little income is being careful with how you spend your money and minimizing or avoiding debt as much as possible. Keeping a budget, cutting out unnecessary expenses, and using cash only to pay can make it easier to live on a smaller income.

What is the lowest amount of money you can live on?

The lowest amount of money you can live on is the amount that allows you to cover all of your basic needs, including housing, utilities, and food. For some people, that might be 25% of their income; for others, it might be 75%; it really depends on your specific situation (household size, debt, etc.) and the cost of living. Residing in a less expensive area can make it easier to live on less of the money you make.

About the author

Rebecca Lake

Photo credit: iStock/David Commins

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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 Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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.

SOBNK-Q424-056

Mar

2025

Stock Market Quiz

By Rebecca Lake | Growing Wealth, Investing | Comments Off

The stock market consists of exchanges, such as the New York Stock exchange and the Nasdaq, where stocks of publicly held companies are bought and sold. But how much do you really know about the stock market? Taking a stock market quiz is a good way to find out.

If you’re interested in investing in stocks, it’s important to understand how the stock market works. For example, do you know the difference between a stock vs. bond? Are you familiar with mutual funds? How about volatility?

Learning your stock market I.Q. can be helpful as you decide how to invest. Investing in the stock market could potentially help you grow your money to reach your financial goals, such as buying a home or saving for retirement. However, there is risk involved with buying and owning stocks, and some stocks are riskier than others.

Taking this stock market quiz is a great way to test your knowledge. It can help you discover how much you know and show you what you still need to learn when it comes to investing.

Ready to take the stock market quiz? Go ahead and get started.

You’ve Got a High Stock Market I.Q.

Based on your answers to the stock market quiz, you have a keen understanding of stocks and how the stock market works. You’re also aware of the risks that come with stocks, and you have a sense of how much risk you can tolerate.

Keep up the good work. That means doing your homework before you make new investments to make sure they’re the right vehicles for you. Also, evaluate your portfolio every few months, or at least once a year, to help ascertain that you have the right mix of assets. If not, consider reallocating some of your assets and rebalancing your portfolio.

And finally, as you get closer to life milestones, such as retirement, consider making your portfolio more conservative and less aggressive, since you may need to live off the funds from your investments sooner than later and don’t want to risk your money.

You Know More Than the Basics

Your quiz answers indicate that you’ve done some investing and you’ve gained fundamental knowledge about the stock market and assets like stocks, bonds, and exchange-traded funds (ETFs). To keep learning more, which could help you when you’re making investment decisions:

• Research any type of investment you’re not familiar with, such as real estate investment trusts (REITs), before seriously considering them. Weigh the pros and cons of any potential investment to make sure it’s right for you and that you understand the risks involved.

• Learn about balancing and diversifying your portfolio and how it may help you to spread your investments across a range of assets.

• Make sure you’ve got the proper investment strategy in place for your future, especially when it comes to planning for retirement. For instance, you might want to consider opening an IRA if you don’t have one.

You’re Still Learning About the Stock Market

You’re a new investor, and according to your stock market quiz answers, you’ve got a lot to learn about the basics of investing. But you’re motivated: You want to grow your money for the future, and you’re eager to learn about how investing might help you.

One way to start is by determining your financial goals. For example, in the not-too-distant future, you might want to start a family or renovate your house. At the same time, you may want to plan for longer-term goals as well, such as your child’s education and your own retirement.

In addition, you can learn investment terminology so that you become better versed in such important factors as asset allocation and volatility. You can also study up on specific investments, such as how to buy stocks and how to know when to sell them.

And importantly, you’ll want to learn about investment risk so that you can make investment decisions that are suited to your risk tolerance.

The Takeaway

A stock market quiz can reveal how much you know about the way the market works and your understanding of different assets, such as stocks, bonds, and exchange-traded funds. It can even help pinpoint fundamentals that you may need to learn more about to make investment decisions that could help you reach your financial goals.

Invest with as little as $5 with a SoFi Active Investing account.

About the author

Rebecca Lake

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.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN1023124