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It is possible to use your utility bill payment history to help build credit. However, utility bills, like your gas, water, and power bills, aren’t automatically reported to the credit bureau agencies. To get them reported — and thus to have your utility bills affect your credit score — you’ll typically need to work through a third-party company that reports your utility bill payments so they show up on your credit report.

If you’re interested in making this happen, read on, and also learn other options to help establish your credit score.

How Do Utility Bill Payments Appear on My Credit Report?

Utility bill payments typically do not automatically appear on your consumer credit report. That’s because they’re not considered credit accounts. When you pay for utilities, you are paying for a service, rather than opening and maintaining a line of credit, or borrowing money that you then repay over time.

However, utility bill payments can appear on your credit report if you work with a third-party service that does the reporting on your behalf. These services typically charge a small monthly fee, but there are companies that offer this free of charge. If you’re paying utility bills on time, then getting that information reported to the credit bureaus could help to build credit.

Recommended: What Is a Charge Card?

How Do Utility Bill Payments Affect Your Credit Score?

While utility bill payments don’t appear on your credit report, they still can ding your credit score if you fall behind on payments, and the balance you owe becomes delinquent and goes to collections. Under the Fair Credit Reporting Act, debt can linger on your credit report for up to seven years. Because your payment history makes up a lion’s share of your credit score, a debt that enters collections and then remains on your report can have a significant impact on your credit score.

On the flipside, utility bills also have the potential to build credit. As mentioned, this could occur if you sign up to have your utility payments reported to the three major credit bureau agencies, and you consistently make your payments on time. To ensure this happens, you might consider setting up automatic bill payments.

Utility bills could also help build your credit score if you opt to pay bills with a credit card. Staying on top of your credit card payments is a key determinant of your credit score though, so just make sure to pay off your statement balance on time and in full when it becomes due. That way, you’ll avoid late payment consequences and also dodge paying interest on the utility bill payments charged to your card.

By making credit card payments when they are due, you’ll avoid late payment consequences and also dodge paying interest on the utility bill payments charged to your card.

Can Late Utility Bill Payments Affect Credit?

Late utility bill payments can hurt your credit if you miss enough payments for your account to enter “delinquent” status, after which it would get sent to collections or get handled as a charge-off. If this happens, that information can stay on your credit report for up to seven years. (It can be wise to check your credit report at least once a year, to make sure that it properly reflects your history.)

Similarly, if you sign up for a credit reporting service but then are late on making payments, that late payment activity could negatively impact your score. Often services will not report late payments for utility bills too.

Still, given the potential consequences of late payments, organizing your bills is a good idea to help ensure you pay on time and don’t lose track of due dates.

Recommended: How to Avoid Interest on a Credit Card

What Other Bills Help You Build Credit?

Your payment of the following bills will generally show up on your credit report and as such will have an impact on your credit score:

•   Car payments

•   Credit card payments

•   Student loan payments

•   Mortgage payments

Similarly to your utility bills, some bills have the potential to impact your credit, but don’t automatically show up on your credit report. However, you may be able to sign up for a credit reporting service or pay them using your credit card to have them help build your score. These types of bills include your rent payments, insurance payments, and bills for services like internet and cable.

Other Ways to Build Credit

Beyond your utility bills, there are other ways you can establish credit. This includes:

•   Opening one of the different types of credit cards and then using it responsibly.

•   Taking out an auto loan to pay for your next car.

•   Getting a secured card, which is easier to qualify for than a traditional credit card because it requires a deposit.

•   Taking out a personal loan and then staying on top of payments.

•   Becoming an authorized user on the credit card account of someone with a solid credit history and responsible credit usage.

•   Getting your timely rent payments reported to the credit bureaus.

•   Taking out a credit-builder loan, which gives you the funds once you pay it off.

Recommended: Tips for Using a Credit Card Responsibly

The Takeaway

While paying utilities doesn’t automatically establish credit, it can help your score if you work with a third-party service to have your payment activity reported and pay those bills on time. There are other ways you can build credit from scratch as well, such as taking out a personal loan or opening a credit card account, and then handling payments responsibly.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What is the impact of paying your utility bills early on your credit score?

Typically, utility bills are not reported to the credit bureaus and therefore don’t impact your credit score. However, if you work with a third-party service, you could have your utility bills reported. In this instance, paying your utility bills on time could help build your score.

Are utility bill payments reported to a credit reporting service?

Utility bill payments can be reported to a credit reporting service if you sign up for an account and opt in to have your utility bills reported. You might need to pay a monthly fee for this service though.

Photo credit: iStock/tommaso79

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

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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

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

SOCC-Q125-008

It can take six to 12 months to build credit with a secured credit card. This can be a good route for those who are new to credit or are seeking to build a low score, and it requires managing your card responsibly and paying your bill on time. Learn more about how to get the most out of a secured card.

What Is a Secured Credit Card?

A secured vs. unsecured credit card is one that requires the cardholder to put down a deposit (basically, collateral) in order to open an account. The deposit typically acts as the credit limit. For example, if you make a $500 deposit when opening a secured credit card, the issuer grants you a $500 credit limit.

These types of credit cards are usually meant for those with no or limited credit history who need to build their credit history. Since these types of borrowers appear more risky — there’s no or limited evidence of their behavior as borrowers — secured credit cards reduce the risk for the lender.

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

How Do Secured Credit Cards Work?

Secured credit cards require the cardholder to “secure” their debt by putting down a refundable deposit. The credit card issuer will use this amount as the credit limit. The cardholder can then use the card as they would a more traditional credit card, which may be more in line with their idea of what a credit card is.

Cardholders can make purchases (and take out cash advances, depending on the terms of the card) up to the credit limit. Some secured credit cards even offer rewards, such as cash back or points toward travel.

At the end of each statement period, the issuer will send a credit card statement detailing all applicable transactions, the minimum amount due, and the payment due date. Your payment activity is typically reported to the credit bureaus — late payments could negatively impact your score.

Depending on your card issuer’s terms, you may be able to upgrade to an unsecured credit card (where you don’t need to put down a deposit) and get your deposit refunded if you can consistently make on-time payments for a predetermined amount of time.

Recommended: When Are Credit Card Payments Due?

Building Credit From Scratch With a Secured Credit Card

When it comes to building credit from scratch with a secured credit card, you can typically do so in the following ways:

•   Establishing payment history: Getting a secured credit card means the issuer will report your payment activity to the credit bureaus, in addition to letting them know you opened an account. Since your payment history is one of the most important factors that determine your credit score, making on-time payments helps to establish that you’re a responsible borrower.

•   Maintaining a low credit utilization ratio: Your credit utilization is the percentage of the overall credit limit available to you on your revolving accounts (like a secured credit card) that you’re using. This is another major factor that’s used to calculate your credit score. A general rule of thumb is keeping your credit utilization at 30% or less. Meaning, if your credit limit is $750, don’t carry a balance of more than $250 on your card. A high credit utilization may signal to lenders that you’re not as responsible with debt, which could hurt your score.

Recommended: Tips for Using a Credit Card Responsibly

Pros and Cons of Building Credit Using a Secured Credit Card

Trying to decide if a secured credit card is the right route to build credit? Here are the pros and cons to consider:

Recommended: What Is the Average Credit Card Limit?

Tips for Getting the Most Out of a Secured Credit Card

Using a secured credit card can be a great solution to establishing credit. While it’s hard to tell how fast a secured card will build credit, you can get the most out of using one by taking these suggestions into consideration.

Make On-Time Payments

Consistently paying your credit card bill on time can help you to establish a positive credit history. Late payments tend to come with late fees and penalties like additional interest, on top of negative remarks on your credit report.

Pay Your Balance in Full

While you’re only required to make the minimum payment, paying off your balance in full could lower your credit utilization ratio. Further, doing so will help you avoid paying interest on purchases.

Recommended: How to Avoid Interest On a Credit Card

Watch Your Credit Utilization

You can technically spend up to your credit limit, but doing so could negatively impact your score. Instead, keep track of your balance and aim to keep it as low as you can — ideally at 30% off your overall credit limit or less.

Keep in mind that the credit limit for secured credit cards is usually low. To avoid a high credit utilization ratio, you might consider using the card for smaller purchases like subscription services or your daily latte. That way, you’re less at risk of nearing your credit limit.

Monitor Your Credit

Checking your credit report can help you to determine whether your payment activity is being correctly reported to the credit bureaus. This is essential as you’re building your credit from scratch. If there are any errors, it’s best to get those fixed as soon as possible.

Request an Upgrade

A secured credit card can be one of the first steps to accessing other types of credit. It’s helpful to think of the next steps — like upgrading to an unsecured credit card — as you continue to use your current card. Doing so will usually require making on-time payments consistently, and asking your card issuer how getting an upgrade works. While some automatically do it, others may require you to formally submit a request.

Alternative Ways to Build Credit

If you feel like a secured credit card isn’t for you, here are some alternatives to consider to help you build credit:

•   Get your rent, cell phone, and/or utilities payments reported to the credit bureaus. There are many services available if your landlord doesn’t offer this as an option.

•   Become an authorized user on someone else’s credit card.

•   Take out a credit builder loan, with which you can show responsible borrowing behavior for the purpose of establishing credit.

•   Get a cosigner on a personal loan so you can more easily qualify, and then handle repayment responsibly.

•   Consider retailer, gas, or student credit cards, which are generally easier to qualify for.

•   Take out a secured loan, like an auto loan.

The Takeaway

Using a secured credit card to build credit can take time. Exactly how long it takes to build credit with a secured credit card will depend on your financial behavior. Your best course of action is to continue to show your issuer that you’re a responsible user, always make payments on time, and monitor your credit regularly to see where you stand.

If you’re responsible with your secured credit card, you can likely upgrade to an unsecured credit card.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

How do the credit bureaus see unsecured vs secured credit cards?

The credit bureaus see both types of credit cards as a type of credit account. As such, there is virtually no difference in how your activity gets reported.

How often should I use my secured credit card to build credit?

It’s generally a good idea to use your secured card regularly so that more activity gets reported to the credit bureaus. To keep your credit card utilization low, however, consider using the card for smaller purchases.

What are the best ways to use a secured credit card to build my credit?

In most cases, the best ways to use a secured credit card are to make consistent on-time payments, attempt to pay off the balance in full each month (or at the very least, make the minimum payment required), and keep an eye on your credit usage.

Photo credit: iStock/PeopleImages

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

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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

SOCC-Q125-006

Most people in the market for a new dwelling will buy an existing home that more or less fits their needs. But new homes don’t come with the problems that old homes might, from lead paint to a kitchen crying out for remodeling. And building a house may seem attractive because you can construct it to fit your specifications, from the number of bathrooms to building an outdoor kitchen.

If you’re ready to build your own house, here are the steps to take.

10 Steps to Building Your Own Home

Condo. Townhouse. Single-family home. Modular or manufactured home. Cabin or even houseboat. A house hunter has all of those types of homes to choose from. If you’re building a home, you’ll have a lot of choices to make as well, starting with where your home will be located. Here are the steps to building your own home:

1. Find a Location

The first thing you’ll need to do is find a site that’s zoned for a residential property. Look into local building regulations to see how much of the site you are allowed to build on and how far from property lines the building must be set back. Check ordinances that might limit size or height. Is there a homeowners association (HOA)? Scour the rules.

It’s generally suggested that you not spend more than 20% of your total budget on the building site. When you purchase the land, you will acquire a property deed, which will also act as the house deed.

2. Obtain Permits

Before a shovelful of earth is turned, the local building department must OK the plans and provide permits for the whole shebang: grading, zoning, construction, electrical work, plumbing, and more. When the permits are in hand, construction can start.

On a related note, at various points during construction, the home will need to be inspected for code compliance. If you are using a loan for new construction, your lender may also send an inspector to keep track of construction status before releasing payments from a construction loan.

3. Prep the Site and Your Finances

Site Prep

Before you start building, you’ll need to prepare the building site. You’ll want to be sure that soil conditions are stable. You may want to engage a civil engineer to give the site a look. A site surveyor can stake the property boundaries. Then you’ll need to clear brush and debris at least to 25 feet around the planned perimeter of the house.

Size and Cost

The cost of building a house averaged $313,884 in 2022, according to HomeAdvisor, the directory of service pros, but a typical range is from around $137,000 to $582,000. Obviously location, materials, and level of detail affect the bottom line.

But size is the biggie. The larger the build, the more labor and material costs you should expect. The average new home in the country has about 2,200 square feet at $150 per square foot, HomeAdvisor notes.

After the peak of the pandemic, there were months-long delays to receive materials, from appliances to garage doors, and construction costs increased. Oil prices significantly increased transportation expenses. Rising inflation left its mark, but prices leveled off in 2023. All of which is to say, cost numbers are a moving target.

Finance Options

When you build a home, you may need a loan that covers the purchase of land, buying materials, and hiring labor. In this case, you may want to look into a construction loan. Unlike mortgage loans, construction loans are not secured by an existing home, so approval might be tricky and take a bit longer.

The money is paid to your builder in installments. You’ll often only pay interest on the portion of the loan that has been withdrawn. After the typical 12 to 18 months of a construction-only loan, the usual route is to take out a mortgage and pay off the construction loan.

Other financing options are a home equity loan, if you already own a home.

A personal loan of up to $100,000 can pay for part of the construction (or maybe all, for a modest build).

If you’re buying the land, Federal Housing Administration (FHA) one-time close loans cover the lot purchase, construction, and permanent mortgage. But the loans can be hard to find and are tougher to qualify for than traditional FHA loans.

Check out these additional resources for homeowners.

Choosing Materials

Only an experienced and highly organized person may want to act as their own general contractor for a new house build. Most people will put the job in a contractor’s hands, and add 20% to 30% for the cost of materials and labor.

General contractors already have priced and sourced many of the materials when making a bid. They usually have relationships with wholesale distributors, lumberyards, and retailers.

That said, you may have some skills that you could apply to cut costs. For example, you could look into how much it costs to paint a house and determine if painting the home’s interior could help you save.

Building a Work Team

If you choose to fly solo, you’ll be on the hook for finding subcontractors yourself.

A general contractor will hire all of the team members needed to complete the project and charge 20% to 30% of the overall cost of the home. However, they also typically have regular relationships with subcontractors, who may charge them less than they would a person who hires them on a one-off basis.

As a result, you may not end up saving much or any money by finding subcontractors yourself.

4. Pour the Foundation

Once the building site is cleared, construction can begin, starting with the foundation. Some houses are built on level slabs of concrete that are poured on the ground, leaving space in which to run utilities, like plumbing and electrical.

A home with a full basement requires that a hole is dug and that footings and foundation walls are formed and poured. The concrete will need time to cure, and no construction will take place until it has set properly.

5. Set Up Plumbing

Once the concrete has set, crews install drains, water taps, the sewer system, and any plumbing going into the first-floor slab or basement floor, and then backfill dirt into the gap around the foundation wall.

6. Assemble the Frame, Walls, and Roof

With the foundation complete, framing carpenters will build out the shell of the house, including floors, walls, and the roof. Windows and exterior doors are installed, and the house is wrapped in a plastic sheathing that protects the interior from outside moisture while allowing water vapor from inside the home to escape.

7. Install Insulation, Complete Electric and Plumbing Installs

Now plumbers can install water supply lines and pipes to carry water through the floors and walls. Bathtubs and showers may be added at this time.

Electricians will wire the house for outlets, light fixtures, and major appliances. Ductwork and HVAC systems can be installed.

8. Hang Drywall and Install Interior Fixtures and Trim

With plumbing and electrical complete, the house can be insulated and drywall can be hung. A primary coat of paint goes on, and the house will start to look relatively finished.

Light fixtures and outlets can be installed, as can bathroom and kitchen fixtures, like sinks and toilets. Interior doors, baseboards, door casings, windowsills, cabinets, built-ins, and decorative trim go in. The final coat of paint is applied.

9. Install Exterior Fixtures

Crews begin exterior finishes like brick, stone, stucco or siding. Some builders pour the driveway when the foundation is completed, but many opt to do so toward home completion, along with walkways and patios.

10. Install the Flooring

Wood, ceramic tile, or vinyl floors and/or carpet can be installed at this point.

Recommended: First-Time Homebuyer Guide

Is It Cheaper to Buy or Build a New House?

There are so many variables that it’s hard to say.

The median sales price for new construction in April 2024 was $433,500, according to FRED, or Federal Reserve Economic Data. Can you beat that price with a DIY build? Maybe, if you act as the general contractor and choose cheaper materials.

Keep in mind that HomeAdvisor’s average of $313,884 to build a house does not include the land.

Ultimately, the price of your dream home hinges on location, the cost of labor and materials, and your taste.

3 Home Loan Tips

1.   Since lenders will do what’s called a hard pull on an applicant’s credit, and too many hard pulls in a short period can affect your application, it’s a good idea to know what interest rate a lender will offer you before applying for a personal loan. Viewing your rate with SoFi involves only a soft pull on your credit — and takes one minute.

2.   Before agreeing to take out a personal loan from a lender, you should know if there are origination, prepayment, or other kinds of fees.

3.   Traditionally, mortgage lenders like to see a 20% down payment. But some lenders allow home mortgage loans with as little as 3% down for qualifying first-time homebuyers.

The Takeaway

Building your own home will allow you maximum flexibility in terms of your choices of everything from floorplan to finishes. But it is a complex process and you’ll want to take it step by step, with careful consideration of your budget and how you plan to finance what you build.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

How long can you expect to live in a self-built home?

If a home is well built and maintained properly, you can expect it to last a lifetime.

How long will it take to build a home?

The average time it takes to build a home from start to finish is 9.4 months for a contractor build and 12 for an owner build, according to data collected by the U.S. Census Bureau.

Is it dangerous to build a home yourself?

If the question means completely DIY — clearing a lot, pouring a foundation, framing, installing electrical, and so on — the answer is “it sure could be.”

Are there safe financing options for self-build projects?

DIY builders and remodelers may use a construction loan, personal loan, home equity loan, or FHA one-time close loan. If you do use a construction-only loan, shop for a mortgage that makes sense once you stand there admiring the finished product.

Photo credit: iStock/Giselleflissak

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

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SOHL-Q224-1903446-V1

If you’re a Canadian age 18 or older, you may want to open a Tax-Free Savings Account (TFSA). Any income you earn on the funds you deposit into this tax-advantaged account is tax-free, even when it is withdrawn.

TFSAs can be opened at almost any major financial institution across Canada for those age 18 or older with a valid Social Insurance number, or SIN. They can be held in cash, mutual funds, government bonds, guaranteed investment accounts, and sometimes even publicly traded stocks.

In this guide, you’ll learn more about TFSAs, including:

•   What is a Tax-Free Savings Account?

•   How does a TFSA work?

•   How do you withdraw funds from a TFSA?

•   What are the pros and cons of TFSAs?

•   What are U.S. alternatives to TFSAs?

What Is a Tax-Free Savings Account?

TFSAs, or Tax-Free Savings Accounts, can be excellent tax-sheltered accounts that allow contributed funds to grow tax-free. That means no taxes on interest earnings, dividends, or capital gains. What’s more, funds can be withdrawn at any time without penalty for account holders. This is a key difference between TFSAs and retirement savings plans, which are designed to be held till a certain age.

If you compare a TFSA vs. RRSP (Registered Retirement Savings Plan), you’ll see that a TFSA allows you to withdraw your contributions and any subsequent earnings over time, tax-free. With an RRSP, a certain percentage of any withdrawals taken out prior to retirement may be withheld.

To look at this from a different angle, any funds contributed into a TFSA can be withdrawn on demand and are not subject to taxation or penalty, as long as all contributions remain beneath your overall TFSA contribution limit. This can make them a smart tax shelter for both short-term and long-term financing needs.

How Do TFSA Contributions Work?

Here’s the scoop on how TFSAs work:

•   Tax-Free Savings Accounts allow you to contribute up to a certain dollar amount each year, which is set annually by the Canada Revenue Authority (CRA). As mentioned above, your funds within the TFSA can earn interest, dividends, and capital gains without being taxed. The 2025 contribution limit for TFSAs is $7,000. This makes them excellent financial vehicles when it comes to the important goal of saving for the future.

•   TFSA limits accumulate and carry over every year. This means that your contribution limits (commonly referred to as your “contribution room”) will stack up annually. This holds true whether or not you’ve completed a Canadian income tax return or even have an existing account at the time. In other words, if this year’s contribution limit is $7,000 and you only contribute $4,000, next year you can save an extra $3,000 over the limit to catch up. So if the limit for the following year is $7,000, your contribution room will be $10,000 (adding the $7,000 and the additional $3,000).

•   In fact, you’re allowed to make retroactive contributions for all of the cumulative annual contribution limits dating back to 2009, or when you first turned 18, whichever was more recent.

•   Make sure you keep track of your overall contributions, as accidentally overcontributing to the account can result in tax penalties. According to the CRA, overcontributions are subject to a 1% penalty tax on the overcontribution amount each month until it’s withdrawn from the account.

Contributing to a TFSA

To contribute to a TFSA, you’ll want to first figure out what your current annual contribution limit is and then calculate how much additional contribution room you have from years past where you didn’t hit the limit. By the way, there’s no earned income requirement for contributing to a TFSA.

To help you calculate your total TFSA contribution limit, check this table below that outlines all of the annual contribution limits since the program was established in 2009. You’ll also find a cumulative contribution limit to help you back-date your permitted total contribution amount.

If you turned 18 in 2009 or prior and have just begun making contributions this year, your total contribution room is $102,200. If you turned 18 after 2009 and are just starting to contribute this year, your contribution room will be the sum of the cumulative amounts for all years starting from when you first turned 18.

How to Withdraw Money From a TFSA

When thinking about different types of savings accounts, you may wonder how a TFSA stacks up in terms of how you can withdraw funds. One important point: You can withdraw both contributions and earnings from your TFSA at any time, without fear of tax penalty.

Withdrawals from a TFSA are only logged when you transfer or take savings out of your account. So if you convert your investments into cash and the money remains in your account, this won’t be counted as a withdrawal.

You can withdraw any amount up to the entire balance of your TFSA account. One of the best aspects of TFSA withdrawals is that the amount of any withdrawn contributions is automatically added back to your total TFSA contribution room for the following tax year.

However, if you reach your contribution limit in a given year, you won’t be able to make any additional contributions during that year, even if you decide to withdraw funds from the account. Contribution rooms are only recalculated after the beginning of the following year.

You can typically make withdrawals from your TFSA online; contact the financial institution where your TFSA is held for details.

Pros and Cons of a TFSA

Curious about the pluses and minuses of TFSAs? You’re in the right place.

Pros of a TFSA

Here are the main advantages of a TFSA:

•   Tax-exempt interest and investment earnings: TFSAs are excellent places to park excess savings to earn a higher rate of return without having to worry about taxes on interest and capital gains. These tax advantages can be a bonus vs. how savings accounts typically work.

•   Withdrawal and use flexibility: Unlike RRSPs which may incur a penalty when funds are withdrawn prior to retirement, TFSAs have no restriction on the use of the underlying funds.

•   Contribution limits rise annually and do not expire: This means that you won’t miss out on any opportunities to add to your TFSA, even if you don’t have any income to add to your account in the current year.

•   Wide range of permitted investments: Unlike what the name suggests, funds deposited in a TFSA can be invested in stocks, bonds, mutual funds and other investments as permitted by the issuing institution.(Remember, though, that these investments may not be insured.)

•   Some insurance coverage: Deposits held in cash or GICs are insured by CDIC (Canada Deposit Insurance Corporation) to a maximum of $100,000, which is separate from other holdings by the same customer at the same member institution.

Cons of a TFSA

Yes, there are some downsides to be aware of with TFSAs. Consider these three points:

•   Non-deductible contributions: All contributions to TFSAs are made on an after-tax basis. As a result, TFSA contributions can’t be used to reduce your taxable income.

•   Day trading is generally not permitted: The CRA discourages day trading in your TFSA account. Depending on the frequency and type of trading activities within your account, the agency may declare your investment returns to be taxable business income if you’ve failed to follow the rules.

•   Not bankruptcy-remote: Unlike RRSPs which are protected from creditors, TFSAs are subject to the whims of any creditors that may seek to pull your assets back in court. This means that the funds in TFSA are fair game in bankruptcies.

•   Not always insured: If your TFSA funds are held in the market, they will not be insured by CDIC.

Opening a TFSA in 5 Steps

You can open a TFSA at most major financial institutions in Canada. They’re available at banks, credit unions, and even insurance companies. Some offerings may differ slightly in terms of their permitted investments, so it pays to shop around for the one that best suits your financial goals. Here are the five typical steps to opening a TFSA:

1. Shop Around

Research a financial institution that offers TFSAs; make sure it fits your needs and investing style. The following are the types of TFSA accounts available:

a.    Deposit

b.    Annuity

c.    Trust arrangement

d.    Self-directed TFSA.

2. Apply for a TFSA

Once you’ve decided on the right TFSA, contact your chosen institution directly and apply for an account. You may choose to do this in person or online. In some cases, the choice will be yours; in others, the financial institution will dictate how to do so.

3. Gather Documentation

As part of the application process, the institution (issuer) will ask for some personal information. Make sure to have the following items available:

a.    Birthdate

b.    Social Insurance number (SIN)

c.    Government-issued ID

4. Register Your Account

After you’ve provided all the necessary documentation and are approved, your issuer will register the account as a qualifying arrangement with the CRA.

5. Move Funds Into Your Account

You can then set up funds transfers or direct deposits into your TFSA account whenever you’re ready.

Congratulations, you now have a newly formed TFSA!

Keep in mind that, while there are no restrictions on the number of Tax-Free Savings Accounts you can have, your total contribution limit will be shared across all your accounts. Additional TFSAs will not increase your total contribution room.

All contributions will be reported to the CRA by your issuing institution, so remember to keep track of your contributions to avoid running afoul of the tax rules.

Alternatives to TFSAs Available in the US

If you are a U.S. citizen and are looking for an account that is similar to a TFSA, consider these options:

Roth IRA

A Roth IRA is similar to a TFSA in that it is a tax-advantaged vehicle designed to help you save for the future. Contributions are made with after-tax dollars, but grow tax-free. In addition, withdrawals made after age 59 1/2 are not taxed.

Roth 401(k)

If you are employed full-time, your company might offer a Roth 401(k). This is a savings fund that uses after-tax dollars. When you withdraw from the account after age 59 1/2, the money is tax-free.

The Takeaway

Any Canadian who can afford to should consider taking advantage of a Tax-Free Savings Account. TFSAs are versatile tax-advantaged accounts that can be used for both short-term and long-term savings needs. They provide an excellent tax shelter for your investment earnings that can accumulate over time and be applied to a variety of needs. For those looking for a great savings vehicle, this could be it.

FAQ

Can you lose money in a Tax-Free Savings Account?

Yes, depending on the underlying investments, there’s a possibility that you may lose the principal on your investment. When the principal is invested in securities like stocks, bonds, and mutual funds, it is not covered by the Canada Deposit Insurance Corporation (CDIC). However, any uninvested cash in your TFSA is insured for up to $100,000 under the CDIC.

How do tax-free savings work?

Interest, capital gains, and dividends earned in a Tax-Free Savings Account (TSFA) aren’t taxed as long as you adhere to guidelines set by the Canadian Revenue Agency (CRA). As long as you remain beneath the contribution limits and don’t run afoul of any TFSA rules, earnings from your TFSA account won’t be treated as income.

Keep in mind, there may be some exceptions. For example, dividends earned from U.S.-based equities may still be considered taxable income. You’ll want to thoroughly review and understand the investment guidelines set by the CRA when planning your portfolio.

Is a Tax-Free Savings Account worth it?

Depending on your particular situation and goals, it can indeed be worth it. Your interest, dividends, and capital gains will grow tax-exempt, and you won’t pay taxes on any withdrawals.

What does TFSA stand for?

The letters TFSA stand for tax-free savings account, which is used to refer to a savings vehicle available in Canada.

Are TFSAs available in the US?

TFSAs are not available in the U.S., only in Canada. However, there are other savings vehicles in the U.S. that may provide similar benefits.

Photo credit: iStock/Vladimir Sukhachev

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 11/12/25. 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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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.

SOBNK-Q424-108

It’s a good idea to regularly review your credit report. Doing so can help ensure that the information used to calculate your credit scores is accurate and up to date. It can also alert you to fraud or identity theft.

Unfortunately, understanding your credit report can sometimes feel like a challenge — especially if it’s the first time you’re doing it. Below, learn how to read a credit report, as well as highlight some common credit report errors to look out for.

What Is a Credit Report?

Your credit report contains a large amount of information about your financial life and payment history. If you have credit cards or loans, for instance, those accounts and how you pay them are included in your credit report. Often, you’ll have more than one credit report, as creditors are not required to report to every credit reporting company.

Credit card issuers and lenders can pull these reports and review them in order to determine your creditworthiness. They will rely on this information to make a decision on whether to loan you money, as well as the terms they’ll offer if they do.

Who Compiles Credit Reports?

Credit reports are created by three national credit reporting agencies: Equifax®, TransUnion®, and Experian®. The information the credit bureaus compile in credit reports comes from creditors — like lenders, credit card companies, and other financial companies — that submit information on your accounts and payment history to the bureaus.

Who Can See Your Credit Report?

Your credit report is accessed whenever a lender (or an employer or landlord) conducts what’s known as a hard credit inquiry. This is when a business accesses your credit report to make decisions about your creditworthiness, likely in order to make a decision about extending a loan (or a job or housing).

Hard credit inquiries will appear on your credit report, so you should recognize any credit inquiries that appear. They may also subtly affect your credit score. Multiple inquiries in a short period of time may signify to lenders that you’re seeking multiple loans, which may bring up concerns about your financial stability.

Your credit report can also be accessed by consumers (like you). The Fair Credit Reporting Act requires each of the credit reporting companies to provide you with a free copy of your credit report, at your request, once every 12 months. As of early 2025, each of the big three credit bureaus is providing weekly free credit reports at AnnualCreditReport.com. Your credit score will not be impacted when you request a copy of your own credit report.

How to Get a Credit Report

As noted above, you have the right to ask for one free copy of your credit report from each of the credit bureaus, at least annually and possibly weekly. There are a few ways you can request it:

•   By visiting AnnualCreditReport.com

•   By calling (877) 322-8228

•   By downloading and filling out the Annual Credit Report Request form, and mailing it to the following address:

    Annual Credit Report Request Service

    P.O. Box 105281

    Atlanta, GA 30348-5281

You also can request credit reports from consumer reporting companies, though these may charge a fee. Additionally, you’re eligible to request free reports under certain circumstances, such as being denied credit or due to potential inaccuracies because of fraud.

Also know that you can only check your own credit report — checking someone else’s credit report is generally illegal.

Recommended: What is a Charge Card?

Reading Your Credit Report

When you get your credit reports, it’s a good idea to read each section closely. Here’s a rundown of the sections you’ll typically find included, so you’ll know what to expect and thus how to read a credit report.

Personally Identifiable Information (PII)

This section of the report is used to identify you. It contains basic information like your name, address, and place of employment. You may also find previous addresses and employer history listed here. Your employment history doesn’t affect your credit score. Rather, it’s included on your credit report only to verify your identity.

When scanning this area you’ll want to make sure that your name, address, and employer match up. Any incorrect or unfamiliar personally identifiable information (like company names you don’t recognize or employers you never worked for) may be a sign of identity fraud.

Credit Summary

This section summarizes information about the different types of accounts you have, including credit cards and lines of credit, mortgages and other loans, and any accounts that have been sent to collections. For each account, your credit report will include the date the account was opened, its balance, its highest balance, the credit limit or loan amount, payment status, and payment history.

As you read this section, make sure that all the information looks familiar. It’s not unusual for a credit report to have slightly dated information, such as a higher balance because you just paid off a bill this month. However, all information should seem recognizable. In particular, you’re looking for:

•   Unfamiliar accounts

•   Late payments that do not align with your records

•   Balances that do not match your records

Recommended: What is the Average Credit Card Limit?

Public Records

The information in this section is pulled from public records and may include debt collections or bankruptcy information.

If you missed a credit card payment due date and have any debt collections and bankruptcy on your record, it’s important to remember that they won’t stay there permanently. The following statutes of limitations apply to different types of debt, restricting how long the information will remain on your credit report:

•   Chapter 13 bankruptcy: Removed seven years after the filing date

•   Chapter 7 bankruptcy: Removed 10 years after the filing date

•   Late payments: Removed seven years after they occur

•   Payment defaults: Removed seven years after they occur

If you see information that’s not familiar, you’ll want to flag it, since this could be a sign of identity theft. You may also want to flag any information that is still on your credit report after the statute of limitations has expired.

Credit Inquiries

Credit inquiries list all parties who have accessed your credit report within the past two years.
These could be from lines of credit you opened, such as applying for a credit card, or from applying for a loan.

Both hard inquiries and soft inquiries will appear, though they have different impacts on your credit — hard inquiries will affect your credit, whereas soft inquiries will not. You can distinguish the two types of inquiries based on how they appear on the report:

It’s a good idea to make sure you recognize any recent credit inquiries, as they can be a red flag for identity theft.

Why Credit Reports Are Important

Your credit report can play a critical role in determining your financial future. That’s because creditors will refer to your credit report to decide whether to approve you for a loan or a credit card and, if so, what terms they’ll offer you, including the interest rate. In other words, your credit report will help determine whether you’ll get the auto loan you need to purchase a new car or the mortgage necessary to purchase a home. And if you’ve used a credit card responsibly, that could help open the door to additional lines of credit.

It’s not just creditors looking at your credit report either — landlords, insurers, potential employers, and even phone and cable companies may look at your credit report as part of their vetting process. This is why it’s so important to understand what information your credit report contains, so you can know what information these potential parties can learn from viewing it.

Recommended: How to Avoid Interest On a Credit Card

What Information Is Not Found on Your Credit Reports?

One surprising piece of data that you may be surprised to find out credit reports do not include is your credit score. Beyond that, your credit report will not contain the following information:

•   Salary

•   Employment status

•   Marital status

•   Spouse’s credit history, if applicable

•   Assets, such as bank account balances, investments, or retirement accounts

•   Any 401(k) loans

•   Public records outside of bankruptcy

•   Medical information

•   Expired information

•   Race or ethnicity

•   Religious beliefs or information

•   Political affiliates

•   Disabilities

What To Do If You Find Errors on Your Credit Report

None of the information on your credit report should look unfamiliar. In fact, one of the main reasons you want to read your credit report is to make sure that your credit report matches your records.

But sometimes, there can be discrepancies. If you detect an error on your report, such as a payment incorrectly reported as late, you’ll want to file a formal dispute. You’ll need to dispute credit report errors with both the credit reporting company and the entity that provided the information (such as a credit card company).

When writing a dispute letter, you’ll want to include:

•   A clear explanation of what is wrong in the credit report.

•   Supporting documentation showing the information is inaccurate (such as a copy of a paid bill).

•   A request for the information to be fixed.

By law, the credit reporting company must investigate your dispute and notify you of its findings.

If you notice an error that suggests identity theft (such as unknown accounts or unfamiliar debt), it’s a good idea to sign up with the Federal Trade Commission’s (FTC’s) IdentityTheft.gov site in addition to alerting the credit bureaus. The FTC’s tool can help users create a recovery plan and figure out next steps, which may include placing a security freeze on your accounts.

The Takeaway

It’s easy and free once a year (or more often) to gain access to your credit reports from the three major bureaus. Reviewing your credit report can give you a chance to correct any errors, and make sure your credit report is an accurate representation of your financial situation. It can also alert you to any fraudulent activity. In addition, reading your credit report can help you understand how creditors see you as a borrower and identify any potentially problematic information that may negatively impact your creditworthiness.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

When should you check your credit report?

The Consumer Financial Protection Bureau (CFPB) recommends checking your credit report at least once a year to ensure there are no errors and that all information is up-to-date. You might consider checking them even more frequently than that though to have the most accurate picture of your current financial situation.

What do the numbers mean on a credit report?

Your credit report may contain a variety of different numbers. This can include your name identification number, your Social Security number, the IDs for addresses associated with your credit, phone numbers, account numbers, and more. It can help to go through section by section if you’re unclear as to what a particular number means.

What should I look for on a credit report?

When reading your credit report, you’ll want to look out for any changes to your personal information, such as changes to account details, inquiries, or data available in public records. Keep your eye out for any errors or anything that otherwise seems amiss, as this could be a sign of fraud.

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

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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

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.

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

SOCC-Q125-007