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, we’ll walk you through how to leverage paying utilities to build credit, and also explore 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.
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.
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.
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.
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 a traditional credit card 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.
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. 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.
If you’re looking for a credit card, the SoFi Credit Card offers an array of perks. Cardholders can earn cash-back rewards on all eligible purchases. Plus, you’ll get rewarded for responsible usage, as SoFi will lower your APR after you make 12 on-time payments of at least the minimum amount due.
FAQ
What is the impact of paying your utility bills early on your credit score?
Historically, utility bills are not reported to the credit bureaus and in turn, 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.
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.
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 .
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, we’ll explain 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. Your credit score will not be impacted when you request a copy of your own credit report.
How to Get a Credit Report
Each year, you have the right to ask for one free copy of your credit report from each of the credit bureaus. 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 beyond your one per year 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.
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.
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.
Personally Identifiable Information Included in Your Credit Report
• Name(s) associated with your credit
• Social Security number variations
• Address(es) associated with your credit
• Date of birth
• Phone numbers
• Spouse or co-applicant(s)
• Current or former employers
• Personal statements, such as fraud alerts, credit locks, or power of attorney
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
The information in this section is pulled from public records and may include debt collections or bankruptcy information.
If you 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 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:
How a Hard Inquiry Will Appear
How a Soft Inquiry Will Appear
Business name
Company name
Business type
Inquiry date
Inquiry date
Contact information
Date inquiry will be removed
Contact information provided by the creditor for the account
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.
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.
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 to gain access to your credit reports from the three major bureaus. Taking advantage of this service can help you maintain good credit and good overall financial health.
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 cue you into any potentially problematic information that may lead to a lower credit score than you would like.
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.
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.
A mobile wallet can be a great way to pay for things as you go through your day without having to carry an actual, potentially cumbersome wallet with you. Instead, an app holds digital versions of your credit, debit, loyalty, and ID cards, allowing you easy access when needed.
But you may wonder which of the mobile wallet options are best, how safe these transactions are, and whether it wouldn’t just be better to slip your debit card in your pocket on most days.
Read on to learn more, including:
• What is a mobile wallet?
• How does a mobile wallet work?
• How do you set up a mobile wallet?
• What are the pros and cons of a mobile wallet?
What Is a Mobile Wallet?
A mobile wallet is just what it sounds like: It’s a virtual wallet that lives on your mobile device (aka your cell phone). It can store credit cards and charge cards, as well as debit, loyalty, and store card information. This allows you to quickly and easily pay for goods and services with your smartphone, smartwatch, or another mobile device. No more digging through your bag or backpack for your “real” wallet and fishing out the right piece of plastic.
Mobile wallets (sometimes called digital wallets) can go a step further, too. You can also stash insurance cards, ID, coupons, concert tickets, boarding passes, and hotel key card information in them. Some digital wallets also enable you to send money to friends, as well as receive payments.
You may also be able to use your mobile wallet instead of a physical card at some ATMs for contactless withdrawals.
💡 Quick Tip: One way to add your debit card to your mobile wallet is by accessing your online checking account via your preferred banking app and following the instructions in-app.
How Does a Mobile Wallet Work?
Here’s how a mobile wallet works:
• You install the app and type in your personal and payment information, which is securely stored. (Unique identifying numbers are used for your details vs. your actual card or account information.)
• When you are ready to make a payment with the mobile wallet, a technology called NFC (near-field communication) kicks in. This allows the two devices (your mobile wallet and the vendor’s reader) to communicate. Typically, you will wave your device over the merchant’s terminal or tap your device against it.
• As the two devices communicate, your transaction will likely go through. Funds will transfer, and you will usually be pinged with a confirmation.
What Is the Best Mobile Wallet App?
The major mobile wallets are:
• Apple Pay
• Google Pay
• Samsung Pay
These may come already installed on mobile devices. Although they differ in layout, these mobile wallet apps have the same basic function that allows you to pay with a phone tap.
Other ways to make payments on the go include mobile wallets you can download from app stores, including wallets from banks and merchants such as PayPal, Walmart, and Starbucks.
Deciding which mobile wallet is best will largely depend upon your own personal needs, which options are compatible with your device, how you like to manage your money, and what your financial goals are. A couple of points to keep in mind:
• When choosing a mobile wallet app, be aware that a mobile wallet offered by your credit card company may only be accepted at certain retailers.
• Merchant wallets will typically only work in that merchant’s store or online. For instance, the Starbucks wallet will only work at Starbucks. Enjoy that latte, but don’t expect to buy new boots at the mall with it.
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Setting up and Using a Mobile Wallet
Here’s how to set up most of the major mobile wallet apps; it’s usually quite simple:
• You launch the app (it may be pre-installed on your device), take a photo of your card or enter its information (such as your credit card number), and follow the step-by-step instructions.
• This process is then repeated for all other cards entered. Generally, even if you load up several credit cards into your mobile wallet, only one of them will be your default payment option. That card will be the one that is used to process a purchase. If you want to use a different card, you may need to change the default card before you make the transaction.
• Beyond credit and debit cards, the app may also walk you through configuring peer-to-peer payments like Apple Cash or Google Pay fund exchanges. You may also be able to link your PayPal account.
• You may be able to import retail-store rewards cards, as well as museum or library memberships cards, event tickets, and airline boarding passes. This may involve scanning a QR code or selecting the “add to wallet” button in an email or a text message from the issuer.
• When you are ready to pay for purchases using your mobile wallet, you’ll want to make sure the merchant accepts mobile money. These businesses can typically be identified through a contactless payment indicator (usually a sideways Wi-Fi symbol).
• To pay, open your digital wallet app if necessary, hold the phone near the wireless reader or tap your device against the terminal. This will authorize the payment. Your phone’s screen will typically confirm the transaction.
Are Mobile Wallets Safe?
Overall, mobile wallets are considered to be safe. Here’s why:
• Unlike cash, which can be stolen, and credit cards, which can be copied, the card information you load into a mobile wallet is encrypted. That means that your actual card or account numbers are never shared with the merchant.
• In order to make a payment, you typically have to unlock your device and also type the passcode or use your fingerprint or face recognition to unlock the mobile wallet. Or you may be able to unlock an iPhone with a double-click of a button and then authenticate with Touch ID or Face ID.These steps may be simple but they add layers of security.
• In the case of theft, it’s not possible for anyone to use a mobile device to make a payment without providing the required security credentials.
These safeguards actually make mobile wallets more secure than carrying physical credit cards and cash, which can easily be compromised.
Pros and Cons of Using Mobile Wallets
Is a mobile wallet right for you? Here are some key pros and cons you may want to consider.
Mobile Wallet Pros
Here are some of the upsides of using a mobile wallet.
They’re convenient. If you’re out and about without your wallet or bag, you can still make purchases, as well as use your coupons and rewards cards. You may also be able to get cash at an ATM or check a book out of the library, all from your mobile device. What’s more, they’re often allow for a contactless payment, meaning they can be extra quick and easy.
They’re secure. Mobile wallets provide a layer of security you don’t get with cash or using a debit or credit card. Your payment information is saved in one protected, central location. Card numbers are never stored in the app itself but are instead assigned a unique virtual number. This protects your money even if your smartphone is lost or stolen.
They can help you track your spending. A mobile wallet can help you track and better manage your spending. All of your transaction information is stored in the app so it’s easy to see how much you’re spending and where each week. You might even wind up using a credit card more responsibly.
Mobile Wallet Cons
There are also some downsides to mobile wallets to be aware of.
They’re not accepted everywhere. There are still some industries where cash is the only currency accepted. Even in businesses that do take credit, not all of them accept mobile wallets. To accept a mobile wallet, businesses need to have payment readers that take NFC payments, and not all of them have these terminals. This can cause a problem if a mobile wallet is all you have on hand.
Your phone could die. Cell phones often run out of battery life, and if you’re without a charger, that handy mobile wallet will no longer exist. That can put a crimp in your shopping plans or become a major problem if you have important documents such as train passes or concert tickets stored in your mobile wallet.
You may end up overspending. The use of mobile wallets can be similar to that of using a credit card. Because cash isn’t physically leaving your hands, spending can feel less real, which can be a cause of overspending. If you have spending issues, a mobile wallet can make it easy to spend mindlessly and swipe or tap too often.
The Takeaway
A mobile wallet is a digital way to store credit, debit, ID, and gift cards so that purchases can be made using a mobile smart device rather than a physical card.
Mobile wallets can help simplify your financial life. They allow users to make in-store payments without having to carry cash or physical credit cards. They’re easy to use and have hefty safeguards.
However, they aren’t universally accepted. It’s worth your while to determine whether the retailers you frequent accept them to help determine if a mobile wallet is a good option for you.
Looking for more convenient ways to manage your money? With a SoFi Checking and Savings bank account, you can spend and save in one convenient place, earn a competitive annual percentage yield (APY), and pay no account fees. You can also track your weekly spending, pay bills, and send money to friends right from your smartphone using the SoFi app.
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4 Tips for Using Your Mobile Wallet
To keep your mobile wallet safe and smooth transactions, keep these tips in mind:
Do your research before downloading payment apps. Look for reliable brands/companies, many positive reviews, and a significant number of downloads. Avoid untested apps; they could be a kind of scam and contain spyware or malware.
Know how to remotely lock and locate your phone in case it gets lost or stolen. Check your phone’s device manager capabilities before you find yourself in an emergency situation.
Always have appropriate locking technology. Carrying around a phone that doesn’t lock means you could be risking loss.
Review your credit and debit card statements. Make sure those purchases are yours. While mobile wallets are secure, problems can occasionally arise, and you want to be alert.
FAQ
How many places support mobile wallets?
While there isn’t a precise tally of how many retailers and other businesses support mobile wallets, a recent study found that there are 1.35 billion registered mobile money accounts globally, indicating significant adoption of and acceptance of this technology.
Do mobile wallets support all debit/credit cards?
Each mobile wallet will have its own policies, but most credit cards from major banks are supported by, say, Google Pay. Small business credit cards may also be added, and possibly some debit cards, especially those from established banks. You may find, though, that prepaid cards are not supported.
Will mobile payments replace cash?
According to a 2022 study by GSMA, the global mobile money industry saw a 31% increase in processing transactions, up to $1 trillion in value. While this might indicate that mobile payments are on track to replace cash completely, that may not happen soon or perhaps even ever: Some sources say cash still accounts for 85% of all consumer payments around the world.
Photo credit: iStock/hiphotos35
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.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
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.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
It’s a chicken-and-egg scenario: You want to build credit, but most lenders won’t approve you for an account to help you build your score without a solid credit history. The good news is there are financial products available for those who are building their credit from scratch — a secured credit card being one of them.
Wondering how long does it take to build credit with a secured credit card? It depends on your situation. But if you’re worried about how fast a secured credit can build credit, we have some tips for how to get the most out of a secured card.
A secured 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.
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 card holder 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.
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 $400, don’t carry a balance of more than $120 on your card. A high credit utilization may signal to lenders that you’re not as responsible with debt, which could hurt your score.
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 will 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.
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, where you can borrow a small amount for the purposes 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 and monitor your credit regularly to see where you stand.
If you’re responsible with your secured credit card, you can someday upgrade to an unsecured credit card, like the SoFi Credit Card. These cards tend to offer higher credit limits and more generous perks. With the SoFi credit card, for instance, cardholders can earn generous cash-back rewards on all eligible purchases.
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.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
They say that diamonds are a girl’s best friend, but did you know that you can also build credit with jewelry purchases? If you make your jewelry purchase using a payment plan or with a jewelry store credit card, then buying that watch, engagement ring, or diamond bracelet could help you build your credit score from scratch.
We’ll go through how to build credit by buying jewelry, including what options there are for buying jewelry on credit and what to consider before using a jewelry store credit card.
By purchasing jewelry on credit, it’s possible to build your credit score. Here are a couple of ways that you can do so.
Jewelry Store Financing
Most major jewelry stores offer payment plans, where you pay for your jewelry purchase in installments. You might be able to take advantage of a promotional offer, which could offer interest-free financing for six to 12 months.
While an installment plan can help you build credit, you could end up paying interest on your purchase even with a promotional offer. If you’re late on payments or don’t pay off your balance in time, expect to pay significantly more. Further, to qualify for financing through a retailer, you’ll need stellar credit, which is a tall order if you’re building credit from scratch.
Alternatively, some retailers might allow you to finance your purchase with a buy now, pay later (BNPL) plan. A type of installment plan, a BNPL plan requires you to make an initial payment upfront, then divides the remaining balance into equal installments. You’ll then get billed to your credit card until you’ve paid off the amount owed in full.
As an example of how this works, let’s say you’re planning to propose and agree to engagement ring financing under a BNPL plan. Many plans offer a “pay-in-four” model, where your purchase is divided into four installments, each of which is due every two weeks. If the engagement ring costs $5,500 — which is the average engagement ring cost — you would pay $1,375 initially, then $1,375 every two weeks over the course of six weeks. The pay-in-four setup means you likely wouldn’t owe interest, though longer term plans may charge an annual percentage rate (APR).
If you’re building credit from scratch or have credit that’s poor or fair, then a retailer credit card from a jewelry store might be a solid route to take. Many jewelry store credit cards only require fair credit in order to open an account.
You can also try getting a credit card from a department store that sells jewelry. Typically, retailer credit cards are easier to get approved for when you have less-than-great credit. However, note that they also typically come with higher interest, low credit limits, and some constraints, such as only being able to use the card with the retailer.
As mentioned, building credit with jewelry purchases is possible if you tap into a financing option that reports your payment activity to the major credit bureaus. Options that do so include financing through a jewelry store, using a jewelry or retailer credit card, or signing up for a buy now, pay later (BNPL) plan.
Of course, for any of those options to help you with establishing credit, you’ll need to stay on top of making your payments on time and in full. Also make sure you’re adhering to other responsible credit behaviors, such as avoiding maxing out your credit limit if you opt for a jewelry store credit card.
How Jewelry Store Credit Cards Can Impact Your Credit Score
When you use a jewelry store credit card, your payments are reported to the credit bureaus. If you’re using your card responsibly and making payments on time, that activity can help to build your credit score. On the flipside, if you fall behind on payments or miss a due date, your credit score could suffer.
Payment history isn’t the only factor that will impact your credit score though. Applying for the credit card will result in a hard inquiry, which usually temporarily lowers your credit score by a bit. And you’ll want to think twice about canceling your card after making your jewelry purchase and paying it off — doing so could affect the length of your credit history, another factor that helps determine your credit score.
Retailers can earn money on interest charges from financing, and potentially get you to make a more expensive purchase than you otherwise would have if you didn’t finance. As such, they have good reason to persuade you to finance that stunning piece of jewelry you’ve had your eye on.
Here are some tactics they might employ to get you to agree to a payment plan or use a retailer credit card:
• Zero-interest promotional offers: By offering a no-interest promotional period on a payment plan or credit card, a jewelry store may lure you in.
• In-store promotions: You might see a poster or flier while perusing the jewelry cases. This might motivate you to make your purchase now — as opposed to treating it as an item worth saving for — and therefore agreeing to financing.
• Several financing options: The sales representative at the store might offer a few ways for you to finance that piece of jewelry, such as an installment plan, BNPL program, or by opening a jewelry store credit card.
Before agreeing to anything, make sure to ask questions to ensure you fully understand what you’d be getting into. You might even consider leaving the store and then coming back later, to give yourself time to think about your purchase and assess the financing options.
What to Ask Before Using a Jewelry Store Credit Card
If you’re considering opening a jewelry store credit card, here are some questions to ask yourself before submitting your application:
• Can I afford to pay it off? While using a jewelry store credit card can help you build credit and make that large purchase affordable, do some simple math before moving ahead. Determine how long it will take to pay off the balance on the card and whether those payments realistically work within your current budget.
• What’s the APR? If you’re using a credit card to cover your jewelry purchase, you might not be in a position to pay off your full balance when the due date hits. As such, you’ll want to be aware of the credit card’s annual percentage rate (APR) to determine how much interest will add to the total cost of your jewelry purchase.
• Is there a promotional period? If you qualify for a no-interest promotional period, it’s important to know how long it will last and when the standard interest rate will kick in. Aim to pay off your purchase before that happens to avoid paying interest.
What to Avoid When Buying Jewelry With Credit
When financing jewelry to build credit, there are a few big things to keep in mind that can help you steer clear of financial trouble.
For starters, you’ll want to avoid putting too much on your card. Doing so can drive up your credit utilization ratio, which compares how much of your overall credit you’re using and plays a role in determining your credit score. For example, if you have one credit card with a credit limit of $1,000 and you’re buying a $600 piece of jewelry, that would push your credit utilization to 60%. It’s typically recommended to keep your credit utilization ratio below 30%.
Second, you’ll want to avoid opening a credit card with a promotional offer that’s too short for you to comfortably pay off your balance before it ends. If you’re still making payments when the standard interest rate kicks in, you could end up paying a lot in interest — and making your jewelry purchase that much more expensive.
You also want to be aware of whether you’re splurging on something that you might not have bought otherwise. While investing in precious metals might seem like a good move, putting something on credit creates the illusion that you can afford it. But in reality, the purchase could end up costing you even more in the long run, thanks to the addition of interest charges.
Besides buying jewelry to build credit, here are a few other ways that you can do so:
• Get a secured card.
• Take out a credit-builder loan.
• Become an authorized user on someone else’s credit card.
• Take out a personal loan.
• Use an auto loan to finance your next car purchase.
• Sign up to report your rent and utilities payments to the credit bureaus.
• Open a credit card and then use it responsibly.
The Takeaway
If you’re curious about how to build credit with jewelry, consider financing your jewelry purchase by taking out a payment plan or by opening a jewelry store credit card. Before doing so, however, know that store payment plans usually require that you have strong or excellent credit.
Rest assured, buying jewelry isn’t the only way to build credit. Another option is to open a crest card that suits your spending habits and then use it responsibly. One option to consider is the SoFi Credit Card, which rewards on-time payments by lowering your APR when you make 12 monthly on-time payments of at least the minimum due. Plus, cardholders can earn generous cash-back rewards on all eligible purchases.
FAQ
Do you need good credit to finance jewelry?
If you’d like in-store financing for jewelry, such as an installment plan, then you typically need excellent credit. However, retail credit cards usually only require a fair credit score.
Are there jewelry stores that give credit?
Yes, major jewelry stores usually offer installment plans, and some might have a branded retail credit card that you can apply for.
Is it easy to get credit at jewelry stores?
Retail credit cards are usually easier to qualify for than other types of credit cards, even if you have fair credit. However, while they’re often easier to get approved for, they often come with higher APRs, low credit limits, and various restrictions.
Photo credit: iStock/pixelfit
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.
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 .
