If you’re considering buying your first truck, you may be wondering how much the insurance is going to run. While the cost of insuring a truck varies based on a few factors, the national average is $2,160 per year. (By comparison, the national average for car insurance is $2,790.)
Keep reading for more insight into how much truck insurance costs, and how to lower your premiums.
Key Points
• Annual personal auto insurance for a truck averages $2,160.
• Insurance costs can vary based on factors like location, driving history, and truck make and model.
• Comparing quotes from different insurers can lead to potential savings.
• Increasing deductibles may lower premiums but increases out-of-pocket costs in an accident.
• Regularly reviewing and adjusting coverage can ensure rates are competitive and appropriate for your needs.
Differences Between Auto, Truck, and Commercial Truck Insurance
There are really only two types of auto insurance. The type of auto insurance you need depends on what purpose you’ll use your vehicle for.
• Personal auto insurance. If someone wants to buy or lease a truck for personal use, then they’ll need a personal auto insurance policy. This may be referred to as auto insurance or truck insurance.
• Commercial auto insurance. Companies that use cars and trucks for business purposes need this policy instead.
Both types cover property damage, bodily injury, and legal expenses related to auto accidents. Commercial auto insurance takes coverage a step further, usually featuring higher claim amounts and protection against more complex legal issues.
Keep in mind that each state has its own rules about car insurance and what it should cover. If you’re unsure what the minimum requirements are where you live, you can check your state’s DMV site.
Exactly how much is insurance for a pickup truck? The average annual cost of personal auto insurance for a truck is $2,160.
The typical cost of commercial truck insurance depends on the type of business. Transport truckers haul general freight, such as automobiles, food, and products for retail stores. Specialty truckers cover a single type of freight, like logs or garbage. The average monthly premium for commercial insurance is around $1,000 for specialty truckers, and $650 for transport truckers.
Does It Cost More to Insure a Truck or Automobile?
It isn’t necessarily more expensive to insure a truck over a car. In fact, it’s generally cheaper to insure a truck than some other types of cars, such as electric vehicles or luxury SUVs.
One exception is the age of the driver. College students may have a harder time finding affordable car insurance for their truck.
Average Cost of Car Insurance for Truck by Make and Model
How much is insurance for a new truck? Below are the average monthly rates for 10 of the least (and most) expensive trucks to insure, per Insure.com. You may figure out at a glance whether it’s worth switching car insurance companies.
Make and Model
Average Monthly Premium
Average Annual Premium
Ford Maverick
$146
$1,746
Ford Ranger
$155
$1,864
Nissan Frontier
$157
$1,885
Toyota Tacoma
$160
$1,917
Hyundai Santa Cruz
$162
$1,941
Ford F-350
$196
$2,347
Ram 3500
$203
$2,434
Nissan Titan XD
$205
$2,464
Ram 1500 TRX
$214
$2,565
Ford F-450
$251
$3,010
Make and model aren’t the only things that determine auto insurance prices. For example, first-time drivers are more likely to pay more for auto insurance.
What Is the Cheapest Pickup Truck to Insure?
Many factors can impact the cost of car insurance, such as the type of deductible you choose and the make and model of your car. Generally, the Ford Maverick is one of the more inexpensive pickup trucks to insure with an annual average full coverage rate of $1,746, according to Insure.com.
It’s important to note that even if someone chooses a model that is known to be inexpensive to insure, their personal driving history impacts the insurance rate they’re offered. A driver with a clean record typically will get a better rate, whereas the same insurance goes up after an accident.
It’s always a good idea to shop around to get several quotes. You can include traditional insurers and online insurance companies. This will give you a good idea of which companies offer the most complete coverage and affordable rates.
There are several ways to lower your car insurance, but the easiest may be to choose a higher deductible. The following companies offer the lowest annual rates for car insurance, per U.S. News:
Insurer
Annual Premium
USAA
$1,335
Erie
$1,532
Auto-Owners
$1,619
Nationwide
$1,621
GEICO
$1,778
American Family
$2,170
Farmers
$3,253
Allstate
$3,374
Before shopping for quotes, it’s helpful to brush up on car insurance terms to better understand what type of coverage each provider is offering.
Truck Features That Impact Insurance Costs
Truck features don’t directly impact the cost of insuring the vehicle — unless they increase the overall cost of the car. Generally speaking, the more expensive a truck is, the more it costs to insure.
Any features that increase the likelihood of theft or the cost of maintenance and repairs can also drive up the price of insurance for trucks.
The Takeaway
The average annual rate for personal car insurance (as opposed to commercial) for a truck is $2,160 per year. The overall cost of the truck can impact the price of insurance. In general, the more expensive a truck is, the more it costs to insure it. For this reason, special features may also increase your cost. Perhaps surprisingly, truck insurance is not more expensive than car insurance. In fact, pickups are relatively less expensive to insure than other types of vehicles.
When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.
SoFi brings you real rates, with no bait and switch.
FAQ
Do trucks cost more to insure than cars?
Generally, trucks don’t cost more to insure than other types of cars. They’re actually relatively cheaper to insure than some types of vehicles. How much it costs to insure a car is usually based more on the overall cost of the car than the type of car someone chooses to drive. So an inexpensive truck may cost much less to insure than a luxury SUV or sedan.
Is insurance high on a pickup truck?
Insurance isn’t necessarily high on a pickup truck. Trucks usually cost less to insure than other types of cars. That said, high-value pickups can cost a lot to insure. The higher a truck’s (or any car’s) price, the higher the insurance premiums tend to be.
Photo credit: iStock/JMichl
Insurance not available in all states.
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Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
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.
A car is typically considered totaled when the insurance company determines it will cost more to repair than the vehicle is worth. Beyond that, states have their own guidelines for when a car should be declared totaled. That guideline is called the “total loss threshold.”
Learn more about the different thresholds for totaled cars in each state, and what to do if your car is totaled in an accident.
Key Points
• Total loss thresholds vary by state, ranging from 60% to 100% of a car’s actual cash value (ACV).
• Some states use a total loss formula, considering repair costs against fair market value minus salvage value.
• Alabama’s threshold is 75%, while Georgia uses the total loss formula.
• Insurers may declare a car totaled if repair costs are close to the ACV, often around 75%.
• Understanding state-specific thresholds is crucial for navigating insurance claims after an accident.
What Is a Totaled Car?
A totaled car, according to insurance companies, costs more to repair than its current book value. An insurance company can also declare a car totaled when the vehicle may be unsafe to drive even after repairs are complete.
Not all damage is the result of a crash. Vehicles that are caught in a flood usually sustain so much damage that it’s common for a flooded car to be deemed a total loss.
What Insurance Covers When a Car Is Totaled
If your car has been damaged, you may wonder how much it’s worth. When an insurer considers a car to be totaled, they reimburse the owner for the “actual cash value,” or ACV. That is the amount the car was worth right before the crash or incident.
The ACV is not the same as what you paid for the car. That’s because the original purchase price is reduced over time by depreciation. The ACV is also typically less than what it will cost to replace the car, known as replacement value.
How Is a Totaled Car’s Value Determined?
As mentioned above, insurance online insurance companies evaluate totaled cars based on their condition and mileage just before the accident or incident. Other factors include make and model, age, and where you live.
What Is a Total Loss Threshold?
An insurance company may consider a car totaled even when repair costs are less than its ACV — sometimes quite a bit less. That’s because when a damaged car is assessed, the insurance adjuster is limited to a superficial visual inspection. It’s recognized that more damage is often uncovered during the repair process, as the mechanic takes a close look at hidden components. (By the way, some drivers might find this rundown of car insurance terms helpful.)
The total loss threshold is a set percentage of the ACV where a vehicle is still considered totaled. Each state sets its own percentage; the threshold for Alabama, for example, is 75%. Insurance companies may use a lower percentage, but they must meet the state’s minimum.
Total Loss Threshold by State
You can find your state’s total loss threshold in the table below. For states that use the “total loss formula,” the threshold is set as the vehicle’s fair market value less its salvage value.
After an accident, you probably know to call the police and then alert your insurance company as soon as possible. But then what? Here are the steps.
1. File a Claim
Filing a police report is not enough. You must contact your insurance company separately. Do so as soon after the accident as possible so they can begin working on your claim. You can also find out how much your insurance may go up after the accident if you’re found at fault.
Your insurance company may direct you to one of their approved body shops for a review of the vehicle and its damage. If you have your own trusted body shop, ask the insurer if you can take it there. As long as the estimate seems reasonable, then the insurer should accept it.
3. Know Your Car’s Fair Market Value
You can use sources like Kelley Blue Book (KBB.com) and Edmunds True Value (Edmunds.com) to look up your car’s value. Just enter the make, model, and year. (Users of SoFi’s Financial Insights app also have access to our Auto Tracker.)
Besides online research, you can work with a dealership to get an estimate. No matter which route you go, this is important information to have because it will give you an idea of how much your insurer may pay for your car.
4. Contact Your Lender
If you owe money on the totaled vehicle, let your lender know about the accident. Your insurer will either pay off the lender directly (if you receive enough funds to cover the balance) or write a check for you to forward to the lender. If you receive more for the totaled vehicle than you owe, then the balance beyond the loan amount goes to you.
If you have a gap insurance policy on the totaled car, that will pay off your lender if your insurance reimbursement doesn’t cover all that you owe on the vehicle.
5. Negotiate the Claim With the Insurer
Depending on who is at fault, you may or may not need to pay your insurance deductible. If your insurance assessment feels off, you may want to negotiate the ACV or the cost of repairs.
If your negotiations are fruitless, switching car insurance is always an option. You can also contact your state’s department for insurance for help.
6. Shop for a New Car
It can take two to four weeks to get a check. States usually provide time frames in which a claim should be processed. Your insurance company can also give you an estimate on their typical processing time.
Pros and Cons of Keeping a Totaled Car
Sometimes, a totaled car’s owner may want to hold onto it. This is known as an “owner-retainer option.” In this case, the insurance company will typically reimburse the owner the amount owed minus the salvage value.
The owner can take the payout and repair the vehicle to a drivable condition, which will likely cost less than buying a replacement vehicle. The downside is that the owner gets less cash and will need to get car insurance for the old vehicle, which can become a more expensive proposition than simply taking the cash. The owner may also keep the car and not fix it — or partially fix it — assuming that it’s drivable.
The owner can then sell the vehicle, perhaps to a salvage yard or other drivers for parts. You may end up getting more money than the insurance company would pay out. However, this isn’t guaranteed. Instead, you can end up with less money and more work.
• Gather your loan paperwork (if applicable), car title, and maintenance receipts to have all the information you may need at hand.
• Remove personal belongings, such as phone chargers and sunglasses, from the vehicle. In most states, you’ll need to give the state DMV your license plate. In some states, you can keep the plates and put them on your replacement car.
• Consider whether donating the car is a good option. You may be able to claim a tax deduction for your good deed (keep your receipt), but you won’t get the funds you would from selling the car.
The Takeaway
A car is considered totaled when the insurance company determines it will cost more to repair than the vehicle is worth. However, insurance companies often pick a figure that’s considerably lower than the vehicle’s actual cash value, because more damage is typically found once repairs have begun. That amount is called the “total loss threshold.” The legal threshold varies by state, but is typically between 60% and 100 of a vehicle’s value.
When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.
SoFi brings you real rates, with no bait and switch.
FAQ
What is the percentage before a car is considered totaled?
You’re referring to the “total loss threshold.” After an accident, if repairing a damaged car will cost close to its actual cash value — say, 75% or more — then the insurer may consider the car totaled. This threshold varies by state but is typically 60% to 100%.
What is the total loss threshold for GA?
Georgia is a Total Loss Formula state. That means that a car is considered totaled if the cost of repairs equals the vehicle’s fair market value minus its salvage value.
What is the threshold for totaling a car?
It depends upon the state where the accident occurs and your insurance policy. Most state thresholds are 60% to 100% of a car’s value. Insurance company thresholds may be lower, but by law cannot be higher.
Photo credit: iStock/Pakhnyushchyy
Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
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SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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.
The average FICO® credit score in America is 717, as of October 2023. And as of May 2024, the average VantageScore® is 702. Both scores are considered to be in the good range and could help a borrower qualify for favorable loan and line of credit terms.
As you’re comparing your own credit score to the national average, it helps to understand how scores are calculated and how these three digits could impact your financial health and long-term goals. Here, learn more about credit scores and some steps you can take to build yours.
Key Points
• The average FICO credit score in the U.S. is 717, while the VantageScore is 702, both falling in the good range.
• Average credit scores differ by state across the U.S., and there are multiple types of credit scores (for auto loans vs. mortgages, for example).
• Key factors in a credit score include payment history, amount of debt vs. credit limit, credit history length, new credit requests, and credit mix.
• Monitoring one’s credit score and report is vital for financial health and can be done for free.
• Ways to build a credit score include being an authorized user on a credit card, obtaining a secured credit card or credit-builder loan, and always paying debt on time.
How Do Average Credit Scores Compare by State?
While there’s a national average credit score, there are also state numbers that vary a bit. The chart below shows the average credit score by state as of the third quarter of 2023, according to Experian®.
State
Average Credit Score
Alabama
692
Alaska
722
Arizona
713
Arkansas
696
California
722
Colorado
731
Connecticut
726
Delaware
715
District of Columbia
715
Florida
708
Georgia
695
Hawaii
732
Idaho
729
Illinois
720
Indiana
713
Iowa
730
Kansas
723
Kentucky
705
Louisiana
690
Maine
731
Maryland
716
Massachusetts
732
Michigan
719
Minnesota
742
Mississippi
680
Missouri
714
Montana
732
Nebraska
731
Nevada
702
New Hampshire
736
New Jersey
725
New Mexico
702
New York
721
North Carolina
709
North Dakota
733
Ohio
716
Oklahoma
696
Oregon
732
Pennsylvania
723
Rhode Island
722
South Carolina
699
South Dakota
734
Tennessee
705
Texas
695
Utah
731
Vermont
737
Virginia
722
Washington
735
West Virginia
703
Wisconsin
737
Wyoming
724
Why Do I Have More Than One Credit Score?
As mentioned, the chart above shows FICO scores, which are used in 90% of lending decisions. But that’s not the only credit score you have. The other is called VantageScore. You’ll find different credit scores for two main reasons. First, they are competitors in this category, and each one calculates credit scores differently.
The other reason you might see a different credit score is due to the fact that FICO has different credit scoring models based on what the lender is looking for (mortgage, auto, credit card). In addition, FICO also releases credit score updates, or versions, of their credit-scoring model, similar to an Apple or Microsoft software update.
Here’s an example of what FICO scores you might see and the purpose they serve. (Note: You will see that the numbering does not always go sequentially; for instance, there isn’t a FICO Bankcard Score 6 or 7 in use.)
FICO credit-scoring model
Purpose
FICO Score 2
FICO Score 5
FICO Score 4
Mortgage lending
FICO Bankcard Score 9
FICO Bankcard Score 8
FICO Bankcard Score 5
FICO Bankcard Score 4
FICO Bankcard Score 3
FICO Bankcard Score 2
Credit card lending
FICO Auto Score 9
FICO Auto Score 8
FICO Auto Score 5
FICO Auto Score 4
FICO Auto Score 2
Auto lending
FICO Score 9
FICO Score 8
General
FICO Score 10
FICO Auto Score 10
FICO Bankcard Score 10
FICO Score 10T
Newly released scoring models
As you can see, there are many scoring models currently in use. But your score likely won’t vary drastically with the different versions.
What Is a Good Credit Score Range?
Technically, a good credit score range is between 670 and 739, according to FICO, the original provider of credit scores. (For VantageScore, the good range runs from 661 to 780.) But if you’re casually talking about what a “good” credit score is, anything above 670 is considered good. A score of 850 is the maximum credit score and is considered excellent or exceptional.
If you are curious about what the starting credit score is, you’ll find two different answers: the lowest credit score and the first credit score you get. The lowest credit score is 300, but that’s not where you’ll start. If you take out your first loan and make on-time payments, for instance, you’ll get your first credit score about six months later. Chances are, your consistent payment history will bump it up closer to the 500-700 credit score range. A score lower than that would likely reflect bad marks on your credit report.
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• Your bank or credit card issuer: You’ll often see a free credit score — and sometimes a full credit report — supplied by your bank or credit issuer located in your online account. Be sure to check if the credit score is supplied by VantageScore or FICO, as the numbers can be different.
• Nonprofit credit and housing counselors: You may be able to get help accessing your credit score through nonprofit agencies.
• Credit score service: You may be able to pay to monitor your credit score with various companies. Usually, there are more services they can offer in addition to monitoring your credit score to make it worth your while.
Checking your credit score can help you see where you are, if there are any errors on your report, and whether you might address areas that are dragging your score down.
What Affects Your Credit Scores?
What affects your credit score is related to how well you manage credit. Credit scoring models were developed as a way to help lenders evaluate how risky it is to lend you money based on how you have handled credit to date.
There are different ways lenders gain insight into how you manage credit with the credit scoring model, which is further broken down into categories. That said, key facets of your credit score (which are detailed below) include such aspects as whether you pay on time, how much you owe, the mix of ways in which you’ve accessed credit, and the length of time you’ve been using credit, among others.
Credit Score Factors by Percentage
The breakdown of factors contributing to FICO credit scores is 35% payment history, 30% amounts owed, 15% length of credit history, 10% new credit, and 10% credit mix. Here’s how they work.
Payment History: 35%
Payment history captures your past behavior of making payments on time or not. It also includes whether or not any of your accounts have fallen into delinquency. In other words, if you have a long history of paying on time, that can contribute positively to your credit score.
Amounts Owed: 30%
Most financial experts believe that you should only use 30% of your credit limit. Ten percent is better still. Using too much of the credit available to you is seen as a sign of risk to lenders, and it’ll pull down your score. Learning how to lower credit card utilization may help build your score.
Length of Credit History: 15%
When you have a short credit history, you are something of an unknown quantity to lenders. Those who have been accessing credit for a significant period of time have proven how well they can handle this aspect of their finances. That is why a longer credit history can positively impact your score.
If you are just starting out on your credit journey, you will likely need to manage your payments well for several months in order to start building your credit score.
New Credit: 10%
This factor reflects whether you have been seeking additional credit recently. Applying for a lot of new credit in a short period of time is typically seen as risky to lenders. They may see it as a sign that you’ll be overextended and have financial trouble ahead. For this reason, it’s best to limit the amount of credit you apply for.
Credit Mix: 10%
Credit mix refers to the different types of credit accounts you have. This includes installment accounts (such as auto loans, personal loans, and mortgages) and revolving credit accounts (such as credit cards and HELOCs). Good management of a mix of credit shows lenders you can be responsible with different types of credit.
What Information Credit Scores Do Not Consider
You might also be curious to know what doesn’t affect your credit score. FICO lists the following as factors that do not affect your FICO Score:
• Where you live
• Salary and employment
• Age and sex
• Color, ethnicity, race, or national origin
• Marital status
• Religion
• Receipt of public assistance
• Child or family support obligations
• Interest rate being charged on another card
• Any information not found on your credit report (such as your bank account details)
• Whether or not you’re participating in credit counseling of any kind
• Nonbankruptcy public records
How the VantageScore Is Calculated
Now that you know all about the FICO scoring system, consider how VantageScore is determined. The VantageScore calculation breakdown is a little different from FICO. The following breakdown is based on VantageScore 4.0, the most recent model released in 2017:
• Payment history: 41%
• Depth of credit: 20%
• Credit utilization: 20%
• Balances: 11%
• Recent credit: 6%
• Available credit: 2%
In this model, payment history is the biggest driver of your credit score, much like it is with FICO. But the weights and calculations are different from FICO’s, so it’s natural to see a different score when the credit score provided to you is a VantageScore instead of a FICO score.
The first credit score was the FICO score, launched in 1989 with the leading credit bureaus to help them evaluate a consumer’s creditworthiness. (FICO, incidentally, is an acronym for Fair Isaac Corporation.) The VantageScore was launched in 2006, a joint venture among the big three credit bureaus, Equifax®, Experian®, and TransUnion®.
Different lenders use different scoring models, and once they’ve committed to a version of the scoring model, it’s not easy to change. Each individual lender chooses when to update to new scoring models released by FICO or VantageScore.
One auto lender may use FICO® Auto Score 9 while another lender may use FICO® Auto Score 8. One credit card company may show you a VantageScore while another shows you a FICO score.
To sum up, the reason you see different credit scores is due to three main factors: different providers (VantageScore vs FICO) with different credit scoring models and different versions.
Why Having a Good Credit Score Is Important
A good credit score can benefit your financial life. Here’s how:
• Better loan rates: You may be able to secure a better interest rate on your loan.
• Easier to get a loan: A better credit score can help you qualify for a loan.
• Better insurance rates: You likely won’t pay as much for car insurance when you have a good credit score.
• Easier to get an apartment: If you apply for an apartment, your landlord may look favorably on a good credit score.
• Higher credit limits: A better score can help you be approved for a higher credit limit, which can help with your credit utilization ratio.
• Better rewards: You may be able to qualify for the premium travel cards and rewards programs with good credit.
• No security deposit for utilities: If you’re setting up utilities, your credit is typically checked. If you have a good credit score, the deposit may be waived.
How to Build Your Credit Scores
It’s not uncommon to need to build your credit score before applying for financing. Doing so can help your chances of being approved as well as possibly secure competitive terms.
• Check your credit report for errors. Any information that is incorrect, such as dates or amounts, can be disputed.
• Set up autopay. Your payment history makes up 35% of your FICO credit score, so you want to get your bills paid on time, every time. Putting your bills on autopay helps make this task a snap.
• Consolidate credit card debt. Replacing credit card balances with a personal loan can help improve your credit utilization ratios and get the debt paid off with the regularity that an installment loan brings.
• Use a money tracker app. Technology is incredible for facilitating money decisions. It can be helpful for seeing your income, spending, saving, investing, planning, credit score monitoring, and more. A good starting point: See what tools your financial institution offers.
If you don’t have a credit score yet, don’t stress: There are plenty of ways to start building your credit. Here are some strategies to consider:
• Become an authorized user. Being added to another credit card account (like a parent’s) can build credit history.
• Get a secured credit card. A secured credit card requires a deposit in exchange for a line of credit. When you pay it off on time, you’ll build a positive credit history.
• Take out an installment loan. It may be possible to build credit history with an installment loan. Auto loans are an example of an installment loan that often advertise possible loan approvals with little to no credit history. In some cases, you may need a cosigner to get the loan approved.
• Consider a credit-builder loan. You may want to look at credit-building loans, which can benefit people who don’t have a credit score (or have a low credit score). They usually require a deposit or paychecks be automatically deposited to the account to qualify.
At times, you’ll see your credit score change, and it might worry you. Here are some common reasons why your credit score may have changed.
• Too many credit inquiries. Don’t apply for too much credit in a short period of time. This can look like risky behavior on your part (say, like you are strapped for funds), and your score will likely decrease.
• Late payment. If your payment is more than 60 days past due, it may show up on your credit report, and when it does, you may see a noticeable drop in your credit score.
• Maxed out a card. When your credit utilization ratio increases (how much credit you’re using relative to how much is available to you), you’ll typically see a decrease in your credit score.
• Paid off an account. It might seem illogical, but when you pay off a loan and close the account, your credit score may go down. This is because you’re decreasing the credit available to you and shortening the length of your credit history, both of which can pull down your credit slightly. But don’t panic — your score will usually recover quickly.
• Collection account, bankruptcy, foreclosure, or other derogatory mark: Your credit score may decrease drastically if there’s negative information in your credit report. These kinds of marks can stay on your credit report for seven to 10 years.
Monitor Your Credit Report and Score
Monitoring your credit score and report can help keep you on track to reach your financial goals. This is especially true if you are focused on building your score to a certain level (say, if you plan to apply for a mortgage in the near future).
There are a lot of smart tools you can use to monitor your credit report and score, as well as budgeting and spending apps that can help you manage your money more effectively and pay down debt
The Takeaway
The average credit score in America is 717 using the FICO system, while the average VantageScore is 702. Knowing the factors that comprise a credit score, how the different scoring systems compare, and where your score stands can be helpful information. You can check your score and empower yourself with the knowledge to build it so you have access to the best lending terms possible.
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
How many Americans have an 800 credit score?
According to data collected by credit reporting agency Experian, 22% of Americans have a credit score of 800 or greater.
How common is a 750 credit score?
Approximately 25% of American have a credit score in the 750 range, according to data collected by credit reporting agency Experian.
Does anyone have a 900 credit score?
It’s impossible to have a 900 credit score, as both FICO and VantageScore models only go as high as 850.
What is the riskiest credit score?
Lenders may see a borrower with a “poor” credit score as a high risk. Poor credit scores fall between 300 and 579.
What is the most respected credit score?
While lenders use both VantageScore and FICO and consider them reliable, FICO is used in 90% of lending decisions.
What is a good credit score to buy a house?
Borrowers with higher credit scores are often in a better position to secure favorable rates on a home loan. Generally speaking, lenders require a credit score of at least 620 to buy a house with a conventional mortgage, though requirements vary based on the type of loan you’re pursuing.
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SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
This content is provided for informational and educational purposes only and should not be construed as financial advice.
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After-hour trading is stock trading that occurs after the normal close of the trading session. Ordinarily, stock trading begins at 9:30 am ET and ends at 4 pm ET, Monday through Friday. The after-hours trading period begins following the close of regular trading at 4 pm and ends at 8 pm.
Trading after hours may appeal to investors who have limited time to trade during the day or want to take advantage of overnight market movements. If you’re new to trading stocks or even if you know some of the investing basics, aftermarket trading can still be a confusing concept to understand. Understanding what happens with the stock market after hours can help answer those questions.
Why Is Access to After-Hours Trading Important?
After-hours trading allows investors to respond to news and events that occur after regular stock market hours. This can be important because it will enable investors to take advantage of opportunities that may not be available during regular trading hours.
For example, if a company announces a significant acquisition after the markets have closed, investors who can trade after-hours will be able to buy shares of the company before the news is reflected in the stock price during regular trading hours. Knowing regular and after-market hours, among other things regarding stock market basics, can help investors become more knowledgeable in their trading strategy, too.
Market Hours Schedule
Stock exchanges operate on a regular schedule during which investors can buy and sell securities. The New York Stock Exchange (NYSE) and Nasdaq are open between 9:30 am and 4 pm ET. Most stock trading occurs during these normal business hours.
After-hours trading does not follow this schedule, however.
How Does After-Hours Trading Work?
After-hours trading is what it sounds like: buying and selling stocks after the stock market has closed. However, unlike standard hours trading, after-hours trading is conducted through computerized trading systems called electronic communications networks (ECNs). Traders generally access ECNs through their preferred brokerage.
After-hours trading generally lasts four hours, from 4-8pm ET on weekdays. However, the precise time of after-hours trading depends on the specific brokerage that an investor uses.
Pre-Market Trading
Pre-Market trading occurs from 4-9:30 am ET on weekdays. After-hours and pre-market trading is sometimes called “extended-hours trading.”
Some online brokerages take after-hours trading a step further and offer 24/7 stock trading. This allows investors to make trades during the gap between after-hours trading and pre-market trading. The advantage of 24/7 trading is that investors are not bound by the regular market hours schedule for making trades.
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Potential Advantages of After-Hours Trading
After-hours trading provides investors with several advantages over regular trading alone.
Convenience
One of the benefits of trading later in the day is convenience. If you’re busy with other pursuits during business hours or live in a different time zone, this might be a more optimal time to buy and sell stocks.
Leveraging New Information
Another potential advantage is the opportunity to take action based on new information, such as a company’s earnings report or a major news event, without having to wait for the market to reopen.
Potential for Cheaper Prices
Investors can sometimes find lower prices for individual stocks or exchange-traded funds (ETFs) during after-hours trading. This may reflect lower competition since fewer people are trading, but it’s far from guaranteeing you’ll get better prices.
Cons of After-Hours Trading
Buying and selling stocks outside regular trading hours come with risks and disadvantages.
Fewer Transactions Happen After-Hours
There are fewer transactions happening after-hours than while the stock market is open, which can affect the market’s liquidity.
Since there are fewer people buying and selling stocks, finding someone who wants to trade at the price you have in mind can be challenging. Likewise, getting a hold of a stock you want can be hard when trading volume is low. The trade will be canceled if there is no counterparty available for a trade you want.
Prices Are More Volatile
Another drawback is that prices are more volatile after-hours. Although it’s normal for the stock market to fluctuate, you tend to see much wider swings in price after-hours than during the typical trading day.
This is partly a result of lower liquidity: Since fewer people are participating in the market, trades may significantly affect a stock’s price due to wider bid-ask spreads.
Stock price volatility can also result from many people reacting quickly to major news or announcements. A company’s share price can climb in response to a news event after-hours and then fall dramatically as soon as markets open. Prices adjust after more information becomes available, or investors get the chance to digest it more thoroughly. And with major ups and downs, of course, comes greater risk and potential for losses.
Best Prices May Differ
Another thing to consider is that you might not be able to confirm the best available price during after-hours trading. During regular hours, brokerages must offer the best possible price at that time. However, this doesn’t extend into after-hours, and the share price you see in one place may differ from the one you see in another.
After-Hours Trading vs Standard Trading
Here’s a quick breakdown of the differences between after-hours trading and standard trading:
After-Hours Trading
Standard Trading
Trading occurs between 4-8 pm ET
Trading occurs between 9:30 am and 4 pm ET
Trades conducted through ECNs
Trades conducted through stock exchanges and market makers
Trades may not be completed due to low volume and liquidity
Trades are generally executed quickly because of large trading volume and liquidity
Only certain stocks and ETFs available for trading
A wide range of assets, like stocks, ETFs, mutual funds, and options, are available for trading
Is After-Hours Trading the Same Thing as Late-Day Trading?
Investors should be aware that after-hours trading differs from late-day trading. Late-day trading is an illegal practice in which mutual fund managers allow hedge funds to record some trades made after-hours as having happened right before closing during regular hours.
Late-day trading pushes up the mutual fund’s net asset value, which summarizes how much the fund is worth at the end of the trading day. When the net asset value (NAV) increases the following day to reflect those late-day trades, the hedge funds can sell the shares they bought at a higher price.
After-hours trading itself is considered ethical and is legal.
After-hours trading typically only allows limit orders. Limit orders generally protect investors from unexpectedly bad prices, which are more likely to occur during after-hours trading than standard trading.
Stop, stop-limit, or orders with special instructions are not usually accepted. Moreover, orders are typically only good for the after-hours trading session in which they’re placed; if a trade is not executed during the session, it is usually canceled.
Additionally, only certain stocks and ETFs are available for after-hours trading. Trading bonds, mutual funds, and options are not allowed during after-hours.
Is It Bad to Trade After Hours?
Trading stocks after hours is neither bad nor good. But whether it makes sense for you to engage in after-hour trading can depend on your risk tolerance and investment goals.
As mentioned, the stock market after hours can be more volatile than regular trading hours. You could expose yourself to greater risk by trading stocks after the closing bell. Increased volatility can also make it more difficult to gauge how likely limit orders are to be executed.
Pricing risk could also cause you to pay more for securities after hours than during the regular trading day. In that scenario, you’d get less value for your investment dollars. So it’s important to consider how much of your time you’re willing to devote to watching the after-hours market and how much risk you’re willing to accept.
Does After-Hours Trading Affect Opening Price?
After-hours trading can affect a stock’s opening price. Buying and selling activity can influence a stock’s price during normal market hours. The same is true for aftermarket trading.
A stock could close at one price point during regular trading hours but have a different open price once the new trading day begins. Whether this price difference is negligible or significant depends on how much trading activity occurred after hours and what motivated the activity.
For example, price fluctuations between the regular day’s closing and the next day’s opening could be more substantial if investors get wind overnight that a company is planning a merger or has a scandal brewing. Likewise, if a company’s earnings miss expectations or the Federal Reserve makes an announcement about interest rates, those things could affect stock pricing after hours.
Is After-Hours Trading a Good Indicator of Market Sentiment?
After-hours trading activity could help investors gauge where the market will start on the next trading day. But it’s important to remember that this is a short-term prediction at best, as pricing can change at a moment’s notice.
Investor attitudes and behaviors can quickly shift the market’s momentum and stock prices along with it. Again, something as simple as the release of an earnings report or the announcement of an acquisition could affect a stock’s price. So rather than focusing on aftermarket trading as a sole indicator of what a stock may do next, it’s important to look at the bigger picture.
If you’re primarily a day trader, learning some technical analysis basics can help you become more attuned to market trends and how to interpret them when making investment decisions.
If you are a hands-on investor and want to experiment, exploring after-hours trading may be an additional way to make trades. However, for most investors who don’t actively manage their investments and want to minimize risk, there may be better strategies than after-hours trading. Instead, they may want to feel confident that they’re investing their money with less risk, building wealth for long-term financial goals.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.
FAQ
When does after-hours trading for SoFi start?
SoFi offers extended-hours trading, where investors can place limit orders during after-hours starting at 4 pm.
When does after-hours trading for SoFi end?
SoFi offers extended-hours trading, where investors can place limit orders after-hours ending at 8 pm.
What are the benefits of trading after-hours?
Some benefits of trading after-hours include the convenience of trading when the markets are closed and having the opportunity to make trades right after an important news event breaks.
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The Federal Reserve, or “Fed,” can change the federal funds rate as a tool to sway the economy. For instance, when inflation is high, it can raise interest rates to attempt to curb overall demand in the economy, hopefully lowering prices. As of November 2024, the current federal funds rate is between 4.75% and 5.00%. That rate can affect other interest rates throughout the economy, such as those tied to mortgages, auto loans, and more.
There’s a connection between the Fed’s interest rate decisions, the national economy, and your personal finances. The Fed works to help balance the economy over time — and its actions and influence on monetary policy can affect household finances. Here’s what consumers should know about the Federal Reserve interest rate and how it trickles down to the level of individual wallets.
What Is the Federal Funds Rate?
The federal funds rate, or federal interest rate, is a target interest rate assessed on the bank-to-bank level. It’s the rate at which banks charge each other for loans borrowed or lent overnight.
The federal funds rate is not directly connected to consumer interest rates, like those that might be paid on a personal loan or mortgage. But it can significantly influence those interest rates and, over time, can impact how businesses and individuals access lines of credit.
How Is the Federal Funds Rate Set?
The Federal Open Market Committee (FOMC) sets the federal funds rate. The FOMC is a 12-member group made up of seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis.
The FOMC meets a minimum of eight times per year — though the committee will meet more often than that if deemed necessary. The group decides the Fed’s interest rate policy based on key economic indicators that may show signs of inflation, rising unemployment, recession, or other issues that may impact economic growth.
The FOMC often slashes rates in response to market turmoil as an attempt to boost the economy. Lower rates may make it easier for businesses and individuals to take out loans, thus stimulating the economy through more spending. The Federal Reserve enacted a zero-interest rate policy in 2008 and maintained it for seven years to boost the economy following the Great Recession, for example.
On the other hand, the FOMC may raise interest rates when the economy is strong to prevent an overheated economy and keep inflation in check. Higher interest rates make borrowing more expensive, disincentivizing businesses and households from taking out loans for consumption and investment. Because of this, higher interest rates, theoretically, can cool the economy.
Current Federal Funds Rate
As noted above, the current federal funds rate is between 4.75% and 5.00% as of early November 2024. The FOMC raised interest rates rapidly throughout 2022 in an effort to bring down inflation, which was at the country’s highest levels since the 1980s. But in the fall of 2024, it issued a rate cut for the first time since the start of the pandemic in early 2020.
The federal funds rate is a recommended target — banks can ultimately negotiate their own rate when borrowing and lending from one another. Over the years, federal fund targets have varied widely depending on the economic outlook. The federal funds rate was as high as 20% in the early 1980s due to inflation and as low as 0.0% to 0.25% in the post-pandemic environment, when the Fed used its monetary policy to stimulate the economy.
How Does the Fed Influence the Economy?
The Federal Reserve System is the U.S. central bank. The Fed is the primary regulator of the U.S. financial system and is made up of a dozen regional banks, each of which is localized to a specific geographical region in the country.
The Fed has a wide range of financial duties and powers to take measures to ensure systemic financial and economic stability. These duties include:
• Maintaining widespread financial stability, in part by setting interest rates
• Providing financial services like operating the national payments system
The Fed has authority over other U.S. banking institutions and can regulate them in order to protect consumers’ financial rights. But perhaps its most famous job is setting its interest rate, otherwise known as the federal funds rate.
How Does the Federal Funds Rate Affect Interest Rates?
Although the federal funds rate doesn’t directly influence the interest levels for loans taken out by consumers, it can change the dynamics of the economy as a whole through a kind of trickle-down effect.
The Fed’s rate changes impact a broad swath of financial areas — from credit cards to mortgages, from savings rates to life insurance policies. The Fed’s rate change can affect individual consumers in various ways. They can also affect the stock market, which may have an outsized impact on those who are online investing or otherwise have money in the markets.
The Prime Rate
A change to the federal funds rate can influence the prime interest rate (also known as the Bank Prime Loan Rate). The prime interest rate is the rate banks offer their most creditworthy customers when they’re looking to take out a line of credit or a loan.
While each bank is responsible for setting its own prime interest rate, many banks choose to set theirs mainly based on the federal funds rate.
Generally, the rate is set approximately three percentage points higher than the federal funds rate—so, for example, if the rate is at 5.00%, a bank’s prime interest rate might be 8.00%.
Even for consumers who don’t have excellent credit, the prime interest rate is important; it’s the baseline from which all of a bank’s loan tiers are calculated.
That applies to a wide range of financial products, including mortgages, credit cards, automobile loans, and personal loans. It can also affect existing lines of credit that have variable interest rates.
Savings Accounts and Certificates of Deposit
Interest rates bend both ways. Although a federal rate hike may mean a consumer sees higher interest rates when borrowing, it also means the interest rates earned through savings, certificates of deposit (CDs), and other interest-bearing accounts will increase.
In many cases, this increase in interest earnings influences consumers to save more, which can help as an incentive to build and maintain an emergency fund that one can access immediately, if necessary.
How Does the Federal Funds Rate Affect the Stock Market?
While the federal funds rate has no direct impact on the stock market, it can have the same kind of indirect, ripple effect that is felt in other areas of the U.S. financial system.
Generally, lower rates make the market more attractive to investors looking to maximize returns. Because investors cannot get an attractive rate in a savings account or with lower-risk bonds, they will put money into higher-risk assets like growth stocks to get an ideal return. Plus, cheaper or more available money can translate to more spending and higher company earnings, resulting in rising stock performance.
On the other hand, higher interest rates tend to dampen the stock market since investors usually prefer to invest in lower-risk assets like bonds that may offer an attractive yield in a high-interest rate environment.
What Other Factors Affect Consumer Interest Rates?
Although the Federal Reserve interest rate can impact personal finance basics in various ways, it may take up to 12 months to feel the full effect of a change.
On a consumer level, financial institutions use complex algorithms to calculate interest rates for credit cards and other loans. These algorithms consider everything from personal creditworthiness to loan convertibility to the prime interest rate to determine an individual’s interest rate.
The Takeaway
The federal funds rate — or federal interest rate — set by the Federal Reserve is intended to guide bank-to-bank loans but ends up impacting various parts of the national economy—down to individuals’ personal finances.
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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
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SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
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