When you owe a large amount of unpaid debt, you risk becoming a target for untrustworthy creditors and debt collectors.
The Fair Credit Reporting Act (FCRA) and the Fair Debt Collection Practices Act (FDCPA) provide a legal framework for your rights and responsibilities as a borrower in debt.
However, it’s important to fully understand these two federal laws and recognize potential illegal debt collection activities before they affect you.
Re-aging debt can be a confusing process because, in some instances, it’s legal and beneficial to you. However, in other instances, it can be detrimental, not to mention illegal.
We’ll walk you through the ups and downs of re-aged accounts. We’ll also help you identify other common tricks debt collectors may attempt to pull on you.
What is Debt Re-aging?
What does it mean when a debt is re-aged? For credit reporting purposes, a debt is considered re-aged when the date of first delinquency is moved forward. So, for example, a debt that was originally past due in August 2015 may be “re-aged” to show that it was originally past due in August 2016 or even later.
This process can also be known as “curing” or a “rollback.” Occasionally, this can help your credit score, while other times, it’s simply a way for debt collectors to gain more time in collecting payments from you. Let’s break down the details into two different categories: positive re-aging and negative re-aging.
Positive Account Re-aging
Positive re-aging occurs when you work directly with a credit card company or lender to make payments and minimize the damage done to your consumer credit reports. This typically comes as part of a debt repayment plan.
That’s because your unpaid debt can still be reported as late every month, even if you’re making payments and attempting to catch up. In addition, each of these rolling late payments works against your credit score.
“Paid On Time”
As part of a repayment plan, your creditor may agree to re-age the credit account so that it is reported as “paid on time.” They can either bring past payments up to date or re-age all your payments going forward.
This is a helpful way to get yourself out of a cycle of debt. You might also consider enrolling in a debt management plan. A credit counselor can help negotiate the specifics of your agreement.
In many situations, the credit card companies will agree to re-age your accounts once you’ve made a few consecutive months of on-time payments. It’s a good incentive for both parties to actively get your unpaid debt under control.
Negative Account Re-aging
Unfortunately, there is another type of “re-aged” debt. When your past-due bills are charged off by the original creditor, they are oftentimes sold to debt collectors.
These collection agencies pay mere pennies on the dollar to acquire these debts. Then, they attempt to collect and make a profit. Sometimes, unscrupulous debt collectors will “re-age” this newly purchased debt. This is a major problem for two reasons:
Re-aging makes the debt look like a new debt that is delinquent, rather than the same old debt simply owned by a new creditor.
Re-aging gives the debt collector additional time to attempt to collect the debt, even if the debt is too old to legally collect.
The additional delinquent account will cause your credit scores to take another hit, and the revised delinquency date gives them a longer time to pursue the debt.
Illegal Debt Re-aging
While this type of “re-aging” is illegal, there is no simple way for the average consumer to get immediate relief from this type of unfair practice. But you can take steps to prevent further damage to your credit score and avoid reopening the statute of limitations.
If you’ve made a payment on one of these “re-aged” debts, it can be almost impossible to have the matter corrected. This is because the payment automatically renews the time that the debt remains on your credit report!
This means a payment to a debt collector can leave you with a delinquent debt that cannot be removed for another 7 to 10 years if it is not paid off.
It also reopens the statute of limitations on the amount of time they may pursue repayment from you. The timeframe varies from state to state but generally lasts between three and seven years. Clearly, it’s in your best interest to monitor your credit report and fight back against illegally re-aged collection accounts.
How to Dispute Re-aged Accounts
Unscrupulous practices like these are why it is crucial to monitor your credit report and credit score carefully. It’s also important to avoid dealing with any creditor or collection agency that uses high-pressure, unfair tactics to attempt to get you to pay. Most importantly, if the unpaid debt in question is too old to collect based upon the laws of your state, do not offer to pay.
It is in your best interest to state that the debt is past the statute of limitations for collections. You may also want to send them a certified “cease and desist” letter.
Credit Bureau Disputes
You can also file a dispute with the credit bureaus directly. Start by requesting your free credit report from one or all three credit bureaus. According to the FCRA, you are entitled to view any information on your credit report for free once every 12 months.
Once you receive your credit report, you can compare the date of first delinquency from the original creditor to the new delinquency date provided by the collection agency.
Assuming these documents show proof that your collection account has been illegally re-aged, you can open a dispute with the credit bureau. A successful dispute will result in the collection account being completely removed from your credit report.
Hiring a Credit Repair Professional
Credit repair companies can help you challenge inaccurate negative items to potentially get them removed from your credit report. These items can include late payments, collection accounts, charge offs, foreclosures, bankruptcies, and more.
Credit Saint offers credit repair services, and has been working with people on their credit for many years. They have experience dealing with collection agencies, creditors, and the credit bureaus. They also offer a free credit report consultation, which includes a review of your credit report for free. Visit their website to learn more.
Ready to Raise Your Credit Score?
Learn how credit repair professionals can assist you in disputing inaccuracies on your credit report.
Potential Legal Action
If you’re still within your state’s statute of limitations, the collection agency may turn around and sue you for the amount owed.
In addition to disputing the re-aged account with the credit bureau, you should also file a complaint with the Federal Trade Commission (FTC), your state’s attorney general, and the Consumer Financial Protection Bureau.
If the collection agency states that the falsely re-aged debt is legitimate, you may be able to sue in a small claims court for violating your rights. So don’t let “re-aged” debt ruin your credit scores or your chances of having good credit history.
Other Illegal Debt Collection Practices
Account re-aging is definitely a shady tactic to watch out for, but there are many other illegal practices to be aware of. Understand the most common ones so you can avoid being taken advantage of when you’re in debt.
Collection agencies should not contact anyone besides yourself about your amounts owed, with just a few exceptions allowed. Those include your attorney, the credit bureaus, and the original creditor.
They can also contact your spouse and your co-debtors unless you have already sent a letter with a request that they stop contacting you.
If the debt collector does contact another third party, it may only be to attempt to find your whereabouts. But even this comes with several restrictions. Most notably, they cannot state that you owe any debt and may only identify their employer when asked.
There are also legal restrictions on when and where a debt collector may contact you. Usually, any time before 8:00 a.m. or after 9:00 p.m. is off-limits.
They also can’t call you if they know a lawyer is representing you. Calls at your place of work are also forbidden once you tell them your employer prohibits personal phone calls on the job.
Exhibiting Inappropriate Behavior
Some debt collectors are known to get nasty. However, fortunately, there is a legal line drawn in the sand to indicate when they’ve gone too far. They cannot lie to you. For example, they can’t pretend they’re from a law enforcement agency or refuse to say anything about who they are.
Additionally, a debt collector may not use profane language or threaten you with violence. They also can’t publicly list your debt for sale or publish your name in relation to your debt. If you experience any of this type of behavior, it’s time to contact the authorities.
Using Unfair Collection Methods
A collection agency may not add any unauthorized fees or interest that they didn’t include in the original credit agreement.
Moreover, they can’t threaten to take your property if they’re not legally allowed to do so or if they actually have no intention of doing so. They’re also required to handle postdated checks in a very specific manner.
Know your rights and debt collectors’ rights, so you understand when is the time to stand up for yourself. Once you know where the line is drawn and whom to contact, you’ll feel much more empowered as you work your way out of debt.
The average American net worth varies due to many factors, with some people making far more than others. If you’re behind the national average, it may seem difficult to catch up, but whether you have bad credit or a lot of debt, you can still begin building your net worth by learning how to generate passive income.
Passive income is a great way to generate more income, pay down your debt, and start saving and investing for your future. Here you’ll learn what passive income is, as well as different ways to make passive income online and offline. With 25 passive income ideas, there is something for everyone.
25 Passive Income Ideas:
Write an E-Book
Start a YouTube Channel
Try Affiliate Marketing
Create a Blog
Sell Stock Photos and Videos
Create an Online Course
Make Sponsored Content
Invest in Dividend Stocks
Invest in REITs
Invest in Index Funds and ETFs
Try Peer-to-Peer Lending
Stake Cryptocurrency
Utilize High-Yield Savings Accounts
Buy Government Bonds
Invest in Art
Buy Property to Rent
Rent Out a Room in Your Home
Buy Domain Names
License Your Music
Design Custom Products
Rent Out Your Vehicle
Use Your Vehicle as Ad Space
Create an App
Flip Unique Items
Rent Out Your Parking Space
What Is Passive Income?
Passive income is a type of income that comes from sources other than your regular employment, and involves a more hands-off approach. Passive income isn’t a “get rich quick” scheme, though some companies make big claims about generating passive income without any work. Passive income does take work to set up, but the goal is that you can make money without managing it on a day-to-day basis.
You’ll generally do most of the work by setting up your source of passive income. While it may require some upkeep every now and then, like updating a product or maintaining a rental property, you’ll earn the majority of your income while pursuing other endeavors.
Like other sources of additional income, passive income is taxable, but when done correctly, you can make enough passive income to surpass your tax bill.
1. Write an E-Book
Whether you’re a writer or not, an e-book can be a fantastic way to generate passive income. We no longer live in a world where publishers are the gatekeepers of books, so you can self-publish a book that can generate passive income. Various websites let you self-publish books, like Amazon’s Kindle Direct Publishing, Apple Books, and Barnes & Noble. Some of these sites also offer print-on-demand services for customers who want physical copies.
You can write a nonfiction book if you’re knowledgeable about a certain subject, or you can write fiction if you have an interesting story idea. Although this can generate passive income, self-publishing can require a bit of an investment. You’ll need to pay for an editor and book cover designer, and you may also want to pay for advertisements. But if you can do the cover art and marketing on your own, you may be able to save some money.
2. Start a YouTube Channel
There are many ways to make money using social media, but YouTube is one of the best ways to make passive income. YouTube pays content creators to run ads on their videos. In order to qualify for the YouTube Partner Program, you’ll need at least 500 subscribers, three new videos within the last 90 days, and 3,000 watch hours within the last year. Previously, you needed 1,000 subscribers and 4,000 watch hours, but the policy was updated in June 2023 with lower requirements.
Like other sources of passive income, making money from YouTube will require an up-front investment of time and money. You need a stable internet connection, camera, microphone, computer, and editing software. You also need to make consistent videos to qualify for the partner program. You can eventually generate passive income by making evergreen videos, because people will watch old videos that bring in revenue—and the more videos you have on your channel, the more money you can make.
3. Try Affiliate Marketing
Affiliate marketing is when you share a link to a product or service, and the company gives you a percentage of any sales made through that link. You can share these links on your social media pages, blog, newsletter, or anywhere else that allows you to post a link. Affiliate marketing is one of the best online passive income opportunities, and you can combine it with any other online method we mention in this article.
One of the most popular affiliate link programs is Amazon Associates. Let’s say you have a YouTube channel where you review electronics, and you make a video reviewing a new TV or laptop. If you link to that product on Amazon with your affiliate link, you’ll receive a percentage of the sale each time someone uses your link.
This isn’t only limited to Amazon, either. Many companies offer affiliate links, so it can be advantageous to reach out to companies for products and services you use regularly to see if they have an affiliate program.
4. Create a Blog
There are a variety of ways to make money from writing a blog. Like YouTube, old blog posts can generate passive income even if people read the post months or years after you wrote it. If you create your own website to host your blog, you can integrate Google Ads and use affiliate links to make money online.
Platforms like Substack combine blogs and newsletters, so every time you write a new post, subscribers receive an email. You can have paid subscriptions on Substack, so users pay a monthly fee to read your posts, and you can have free posts that go out to non-paying subscribers as well.
5. Sell Stock Photos and Videos
If you’re a photographer or videographer, you can earn money for your photos and videos. There are many different websites that buy stock photos and videos, like Shutterstock, iStock, and Getty Images. One thing to consider is that the website gets exclusive rights to your images or videos, but on some sites you can make between 15% and 45% in royalties.
6. Create an Online Course
Many people have expertise in a certain area, and utilizing your knowledge and skills to create an online course is a great way to make passive income online. For example, you can create a course for how to knit, how to take amazing photos, or how to program an app. Websites like Kajabi and Teachable allow you to host and sell your courses.
You may need to invest some time and possibly money in marketing your course to ensure you find the right audience. Some course-hosting platforms like Skillshare also categorize courses by topic for better discoverability.
If you start gaining a following on social media platforms or through a blog, you may get the opportunity to do sponsored content. Companies want to ensure they target the right audience, so if you have followers who may buy their product or service, they’re more likely to sponsor a piece of content. This typically means you discuss their product in a video or write about it in a caption.
In order to generate passive income from a sponsored opportunity, the company will give you an affiliate link. This allows you to make money up front for the sponsored content as well as passive income from anyone who uses your link to buy the product or service.
This route for passive income may take some time because companies typically want people to have a decent following before sponsoring content.
8. Invest in Dividend Stocks
Stocks can be a great way to make money while also investing in your future. When you buy a stock, you buy a small portion of a company. If the stock price rises and you sell it at a higher price, you make a profit, but the stock can also drop in price and lose you money. Some, but not all, stocks offer dividends, which pay investors a dividend per share if the company has a profitable quarter.
When the stock pays out dividends, you can receive the payment directly from your brokerage or reinvest the dividends by buying more of the stock. Like other investments, this can compound and turn into a lot of money over time if the company continues to profit. As you invest in dividend stocks, keep in mind the companies can raise or lower the dividend percentage at any time.
Use MarketBeat’s dividend calculator to look up specific stocks and estimate dividend returns.
9. Invest in REITs
Real estate investment trusts (REITs) are another investment opportunity. Rather than investing directly in a property, you can invest in a REIT, which is a company that owns and manages real estate.
Similar to other investments, there is risk that comes along with investing in REITs. For example, there’s a possibility your REIT investments will lose money if there’s a drop in the housing market.
10. Invest in Index Funds and ETFs
Index funds and exchange-traded funds (ETFs) are some of the safest investments because they offer diversification. Rather than investing in one company, index funds and ETFs allow you to invest in multiple companies simultaneously.
Legendary investor and founder of Vanguard John Bogle was a major advocate for index fund investing. More specifically, he advised people to invest in the S&P 500, an index of the 500 largest companies in the United States. ETFs are slightly different because there are higher fees, but they allow you to invest in a group of stocks for a specific industry. For example, ARKK is an ETF that holds shares for companies that work on innovative technology.
There is still a risk when investing in index funds and ETFs, but they are often lower risk than other forms of stock investing.
11. Try Peer-to-Peer Lending
Another way to make passive income is to become your own type of “bank” by doing peer-to-peer lending, sometimes called P2P lending. Banks make money on loans by charging interest to customers, and P2P lending allows you to do the same thing. Websites like Prosper and Funding Circle allow everyday people to lend and borrow money with various interest rates.
12. Stake Cryptocurrency
Cryptocurrency investing is a highly volatile form of investing, making it especially high risk. Some cryptocurrency platforms allow you to “stake” your crypto, which is when you allow the platform to hold your crypto and lend it to other people. Similar to P2P lending, you make money off the interest.
Cryptocurrency lending and trading is also high risk because there is little to no regulation. Crypto platforms like Voyager have been known to offer extremely high returns and then go bankrupt, preventing them from paying back their users. In extreme cases, there are stories of fraudulent activity from crypto platforms. But if you have a high risk tolerance, this form of investing can be incredibly lucrative.
13. Utilize High-Yield Savings Accounts
A safer way to make passive income is to open up a high-yield savings account, which allows you to make money simply by holding it in your account. Banks use customer funds to lend out money, but unlike crypto staking, bank funds are backed by the U.S. government via the FDIC. This means that if, for some reason the bank doesn’t have the money when you want your funds, the government would provide the bank with the money to pay you up to $250,000.
Many banks and financial institutions offer high-yield savings accounts, with some offering an annual percentage yield (APY) of over 4%. So if you opened an account with a 4.5% APY and deposited $1,000, you would have $1,045 after a year.
People maximize their passive income by not touching this money because it compounds each year. So using that same example, in the second year, you would then earn 4.5% of the $1,045 rather than the original $1,000. And if you add to the savings account each month, you can make quite a bit of money over time.
14. Buy Government Bonds
Perhaps the safest way to earn passive income from investing is to buy government bonds. A government bond is basically a loan to the federal government that pays you back the original amount with interest over a certain period. The reason government bonds are so safe is because the government backs them. When buying a stock, it’s possible to lose your money if the company goes out of business. Bonds are safer because as long as the government exists, you’ll make your money back.
Although government bonds are very low risk, they also offer low returns. Depending on various factors, government bonds may offer a 3–5% return over two to 30 years. To put that into perspective, S&P 500 index fund investing offers an average return rate of over 7.5%[1] .
15. Invest in Art
Similar to stocks, you can also invest in artwork. One way to do this is to buy works of art that you believe will increase in value later. If you’re knowledgeable about art and can find pieces selling for below their value that you can sell later for a profit, you can make a bit of money. Websites like Masterworks allow you to buy shares of artwork with other investors so you take on less risk.
16. Buy Property to Rent
Many people generate passive income by purchasing properties to rent. If you can afford the initial investment of buying a single-family home or condo, you can then rent them out to tenants for a profit. For example, if you buy a house and your mortgage is only $1,000, you can make a profit by charging any amount over your mortgage cost.
In order to take advantage of the passive income aspect of renting, you may benefit from hiring an individual or company to manage the property. Property managers collect the monthly rent and take care of maintenance issues for a fee. Should you decide to invest in rental properties, it’s helpful to factor in the cost of potential home repairs before, during, and after tenants live there.
17. Rent Out a Room in Your Home
If you don’t have the money for a down payment or don’t want to take on the risk of purchasing a rental home, you can always make some extra income by renting out a room. If you have a spare room in your home, you can rent it out for a monthly fee. This is a great option for families whose children recently moved out.
You can use websites like Airbnb and VRBO to connect you with renters. Although many people use Airbnb for short-term rentals during vacations, you can also offer long-term rentals through the website. These sites also let you vet renters before they move in, so you have control over who rents the room.
18. Buy Domain Names
Buying domain names is a sort of investing, so it does come with some risk. People and businesses buy domain names to host their websites, so you can purchase a variety of inexpensive domain names in hopes of people buying them from you later for more. You can typically buy domain names for less than $10 through websites like GoDaddy, but if they don’t sell, you’ll need to pay the annual cost to keep the name.
While this may be a risky investment, people have made a lot of money flipping domain names. It was a big money-maker during the “dot com boom” in the 1990s, Help.com sold for $3 million and NFTs.com sold for $15 million in 2023. Many domains don’t sell for millions, but you may still be able to make a decent profit off domain names in high demand.
19. License Your Music
If you’re a musician, you can license your music in a similar way to selling stock photos and videos. Some websites like Music Vine pay musicians 30% for nonexclusive deals or more for an exclusive license. There are also websites like Epidemic Sound that market to YouTubers and filmmakers by offering a subscription service for royalty-free music.
20. Design Custom Products
For those who are artistically inclined, you can make money creating designs and selling them on websites that sell custom products. Websites like Redbubble, Teespring, and Society6 offer print-on-demand services for your artwork. These websites sell a wide range of products like T-shirts, coffee mugs, phone cases, and more. You get a percentage of the sale every time a customer goes to the website and chooses your design for any of these products
If you have old artwork you created in the past or simply feel like creating in your spare time, you can generate passive income as long as your art is hosted on these types of websites.
21. Rent Out Your Vehicle
Services like Uber and Lyft are popular side hustles, but you can make passive income by renting out your vehicle instead. When people are traveling or have their car in the repair shop, they often need a vehicle to get around. Rather than going to a rental car company, they can rent a vehicle through other websites like Turo or Getaround.
22. Use Your Vehicle as Ad Space
In addition to renting out your vehicle, you can make passive income by using your vehicle as ad space.
Websites like Wrapify connect businesses and drivers, and depending on how much of your car you’re willing to cover with ads, Wrapify will pay you between $181 and $452 per month. There are also sites like FreeCarMedia.com that pay you for wrapping your vehicle or simply advertising on your rear window.
23. Create an App
If you’re a programmer who can create an app, this may be the best way for you to make passive income. Whether it’s a fun game or an app that provides value and convenience, use your creativity and skills to generate income. Apple and Google allow developers to submit their apps, giving you a percentage of the sale each time someone buys the app.
24. Flip Unique Items
One of the oldest ways to generate passive income is to buy unique items, hold them, and sell them at a later date for a profit. If you’re knowledgeable about a certain type of item or are willing to learn, you can make a decent amount of money by buying and holding items.
This is ideal for people who like shopping at thrift stores or going to garage sales. You may find antique toys, memorabilia, sports trading cards, comic books, or other items for a low price that are either worth a lot of money now or will be in the future.
To sell the items or see how much items are selling for, you can use websites like eBay, OfferUp, Craigslist, or Facebook Marketplace.
25. Rent Out Your Parking Space
Some people are willing to pay for a good parking spot. If you have a space you’re not using or don’t mind giving up, you can make money renting it out—especially if you live in an urban area. Websites like SpotHero allow you to list your space.
What’s the Best Source of Passive Income?
The best source of passive income is unique to each individual. There are many options on this list, and some allow you to capitalize on different skill sets. For example, if you have expertise in certain subjects, the best sources of passive income may be online courses and e-books. If you have knowledge about stocks or are willing to learn, investing may be the best option.
When deciding which passive income sources are right for you, it may be beneficial to weigh out the pros, cons, and risks of each one. Remember that many of these options require an initial investment of money and time to get started. Consider your own risk tolerance and financial situation before going all in on any of these methods.
Do You Need Money to Make Passive Income?
While you’ll need money to get started with many passive income ideas, this isn’t the case for every method. For example, if you own a vehicle or have an extra room in your home, you can start renting them out. If you have a computer and internet connection, you have even more options.
Many people who make passive income succeed because they are willing to learn and can invest time into researching these topics. There’s a wealth of information online where you can learn how to excel at specific passive income opportunities like writing an e-book, succeeding as a YouTuber, or using affiliate links.
The Benefits of Multiple Streams of Income
Depending on your specific situation, you may want more than one source of passive income. Whether you’re already in a healthy financial situation or are trying to build your personal wealth and credit score, more income streams means more financial freedom.
The primary benefit of passive income is that you can make money with minimal effort. This means once you get one source of passive income rolling, you can begin adding others so you have multiple income streams that don’t require too much time or attention.
How Passive Income Can Help Improve Your Credit Score
A poor credit score can lead to many challenges—like making it difficult to get approved for new lines of credit, loans, and rental applications—and cost you a lot of money in interest in the long run. Passive income can help you fix your credit by allowing you to pay off your debts. Lenders also look at your total income, so making additional income can help with approvals for new lines of credit, which can also help improve your score. It’s important to know the current state of your credit health. You can get a free credit report card on Credit.com which breaks down your credit score factors and assigns a letter grade for each area, or sign up for our ExtraCredit® subscription for additional credit tools.
If you’re getting ready to buy your first home, there are probably thousands of questions running through your mind. Questions about location, real estate services, expenses, and more — it’s a huge financial commitment and you probably want to make sure you have the best chance at getting exactly what you want. While it can be a difficult process to navigate, there is help for first-time homebuyers, from resources and advice to first-time homebuyer programs to help you finance a home.
If you’re worried you won’t ever be able to purchase a home, take a deep breath and a good look at your finances. You can start by reviewing your current financial situation and beginning to save for a down payment. (There are investment accounts and savings options that can help you reach your goal of buying a home, too.) Here are 12 helpful tips for first-time homebuyers.
1. Know Your Credit Score
Your credit score is typically very influential in determining what kind of interest rate you can get on a home mortgage loan. You can get one free credit report from each of the three major credit bureaus (Equifax®, Experian®, and TransUnion®) every 12 months, and may also be able to view free reports more frequently online. You can review your credit report to spotlight any errors that may affect what lenders are willing to offer you.
If you find any errors, you can report them and have them removed. This process can sometimes take a while, even if the mistakes are obvious, so consider starting a credit report review early on in your home-buying process.
2. Calculate What You Can Afford
Do you know how to figure out how much house you can afford? While the size of your mortgage is generally determined by an evaluation of your personal finances and debt, there are a few rules of thumb that may be relevant.
One general guideline is that your housing costs, including your mortgage payment, should, ideally, be no more than 28% of your gross monthly income.
If you are paying off student loans, credit card debt, or have a car payment, you may want to adjust your budget accordingly. Some people try to keep their debt to 36% of their gross monthly income, so that they can still prioritize financial goals like saving for retirement. (This is just another rule of thumb and everyone’s financial goals are different.)
And having less debt may make you more appealing to mortgage lenders. Understanding how much money you feel comfortable spending on a house can, in turn, impact the properties you consider. As you build your budget, you can also check out SoFi’s mortgage calculator.
3. Look into First-Time Homebuyers’ Programs
While you are evaluating your options and creating your budget, it could be worth looking into some first-time homebuyers’ programs. Some programs offer down payment and closing cost assistance, or loans with reduced interest rates.
There are a variety of options available for first-time homebuyers looking for assistance. For example, the Federal Housing Administration offers a mortgage insured by the FHA. These loans often come with competitive interest rates and allow for smaller down payments.
The USDA also helps first-time homebuyers with a program focused in rural areas. And the VA loan program provides assistance to active duty military members, veterans, and surviving spouses. There are even more first-time homebuyer programs and loans available from various states as well.
4. Understand the Expenses
There are plenty of other expenses that come with purchasing a home beyond your down payment and closing costs. For example, when you’re renting property, you don’t have to worry about property tax or general maintenance. When you own property, you do.
In addition to property tax, you’ll likely also need insurance to protect your new home. And you’ll be responsible for maintaining the property, of course, which can include painting, replacing windows, updating the roof, replacing appliances, and more regular maintenance and upkeep.
You may also need to factor in additional purchases like a lawn mower or professional landscaping if the property you are looking at has a yard. Will you need to buy a snowblower to clear the driveway during long winters? These are all factors that can come into consideration when figuring out the cost of your new home.
Check out our Home Affordability Calculator to estimate how much house you can afford.
💡 Quick Tip: Jumbo mortgage loans are the answer for borrowers who need to borrow more than the conforming loan limit values set by the Federal Housing Finance Agency ($726,200 in most places, or $1,089,300 in many high-cost areas). If you have your eye on a pricier property, a jumbo loan could be a good solution.
5. Remember that Location Matters
Location is, obviously, important to many buyers. In some cases, you may have to decide if being in the neighborhood you want is more important than having extra square footage or other, similar trade-offs.
If you have kids or are planning to, you will likely be considering the school district each potential property falls in. Even if you aren’t planning to have kids, it could be worth considering the school district since it can have an impact on the value of your property and could make it easier to sell the house down the line.
6. Plan for the Future
Zoning laws and development plans are another factor to consider when house-hunting. If there is undeveloped land nearby, it can’t hurt to do some digging and see if there are any plans for development.
It may also be worth looking into the property value of other homes in the area. Have they been declining in recent years? If so, this could impact the future value of a home you’re considering.
7. Use Your Imagination
When shopping around for houses, you can take the opportunity to look at a property’s potential, as well as its current value. It’s easy to be distracted by the current owner’s décor, paint, carpet, or other factors that are easy to change. You can easily repaint or update the appliances, but you won’t be able to adjust the location, floorplan, or add rooms to the home as easily. 💡 Quick Tip: Backed by the Federal Housing Administration (FHA), FHA loans provide those with a fair credit score the opportunity to buy a home. They’re a great option for first-time homebuyers.
8. Reserve Cash for Home Improvements
When you’re getting ready to put a down payment on a house, it may be tempting to clean out your savings account. And while that’s completely understandable, keeping your emergency fund close at hand may be a good idea when becoming a homeowner.
After closing costs have been sorted out and you’ve moved into your new home, you might find that unexpected repairs pop up. Having a reserve stash of cash can be helpful if the roof in your new home starts leaking, or you need to replace an appliance.
9. Get a Real Estate Agent
With all of the housing apps and free resources available on the internet, it may seem like a real estate agent is unnecessary. But in reality, navigating the housing market can be tricky and hiring an agent up front can save you time and help make your home-buying experience easier.
While you could spend your time going to open houses and scouring real estate listings, an agent can tailor the home search so that you spend less time looking at houses that don’t meet your criteria. They also can have access to new listings that aren’t yet on the market and may be willing to “preview” homes for you. A real estate agent can also help you navigate the intricacies of contract negotiations and paperwork. If you’re wondering how the real estate agent gets paid take heart: They are typically paid from the seller’s proceeds.
10. Know What to Expect from a Home Inspection
Having a home inspection completed is a critical step in buying a home. Inspection procedures vary from state to state, so it can be important to understand what is included in the home inspection in your state, since this is a great chance to truly examine the property and uncover any issues—before they become your issues.
Inspectors should have access to every part of the house including the roof and crawl spaces, and you should be able to attend the inspection yourself.
Don’t be afraid to ask the inspector questions; the more information you have, the better prepared you can be to decide if this is the right house for you.
11. Negotiate the Offer
You’ll have an opportunity to negotiate when you’re making an offer on a house. A lot of factors can influence an offer and negotiating terms in your favor could result in serious savings, especially if you are in a buyer’s market.
If you are working with a real estate agent, they can help give you a good idea of what is considered a reasonable purchase bid by providing comparable sales. A “comparable” is a home similar to the one you are considering (and in the same condition and location) that has sold in the last three months. An agent can help give you an estimated price range and manage your expectations.
12. Find the Right Mortgage
Before committing to a mortgage, it’s smart to shop around and see what various lenders are willing to offer you. A few things to consider include the interest rates, loan terms, application process (Is it lengthy? Online only?), and any hidden fees included in applying for or repaying the mortgage. Familiarize yourself with the different types of mortgage loans available during this shopping process.
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.
SoFi Mortgages: simple, smart, and so affordable.
Photo credit: iStock/PeopleImages
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Not only are SUVs spacious, but many are also family vehicles, so they come with high-end safety features. These features make some SUVs cheaper to insure than other popular vehicles on the market. The Subaru Outback takes the top spot on this list, and it’s also rated one of the safest midsize vehicles by the Insurance Institute for Highway Safety.
SUV
Average Annual Premium
Subaru Outback
$1,603
Honda CR-V
$1,635
Honda Pilot
$1,726
Ford Escape
$1,734
Honda Odyssey
$1,735
What Factors Make a Vehicle Expensive to Insure?
The primary factor that makes a vehicle more expensive to insure than another is the risk. Insurance companies calculate the risk for different vehicles based on how many claims people file for those vehicles, plus the cost of the repairs. While this data can’t predict the likelihood of someone getting into an accident, the data gives insurers a rough idea.
Insurance providers look at how much a vehicle costs to repair and the likelihood of the vehicle being in an accident. For example, insurance rates are higher for sports cars because people who buy sports cars are more likely to speed and drive recklessly, based on the data.
Some of the most common factors that make vehicles more expensive to insure include:
Vehicle age: An older vehicle may not have the newest safety features, but premiums may be lower on some older vehicles if the average repairs cost less.
Vehicle value: When cars are more expensive, they’re often more expensive to insure as well.
Cost of parts: Some vehicles have more expensive and specialty parts, which cost more to replace if the vehicle is in an accident. Various trim features in a vehicle can also raise the price of premiums.
Safety rating: Many insurance policies also cover physical injuries to you or another driver, which is why safety ratings play a major role in determining the cost of insurance.
Size: Although a larger vehicle may be safer, it can also cause more damage if it’s involved in an accident.
Most Expensive Cars to Insure
If you’re thinking about purchasing a new or used vehicle, it’s helpful to know which types of vehicles typically have the highest rates. They include:
Sports cars
High-end luxury vehicles
Electric vehicles
Cars that attract thieves
These vehicles are more expensive than others primarily due to the overall cost of repairs. For example, while electric vehicles may save you money on fuel, the cost of the battery can range from $4,000 to $20,000. There are also certain vehicles that thieves commonly target. A recent article from MoneyGeek[1] listed the following as the top 10 most stolen vehicles in America:
Chevrolet trucks
Ford trucks
Honda Civic
Honda Accord
Toyota Camry
GMC trucks
Nissan Altima
Honda CR-V
Jeep Cherokee and Grand Cherokee
Toyota Corolla
5 Tips to Get Cheaper Car Insurance
Whether you want cheap insurance for your new vehicle or to lower the rate for your current vehicle, these five tips may help.
Be a good driver. This sounds obvious, but it’s a must. When you’re a good driver, you save money on insurance. This means avoiding car accidents, DUIs, and other major violations.
Consider the insurance cost when buying a new vehicle. A vehicle’s make and model alone can make car insurance more expensive. Remember this when you’re buying a new vehicle, because not only will you have monthly car payments when financing a car, but you’ll also have insurance premiums.
Shop around. Like many other expenses and purchases, it’s a good idea to get multiple quotes before settling on an insurance company.
Look for discounts. Some insurance providers offer discounts, so be sure to ask. You may also receive discounts for bundling your auto and home insurance through one provider.
Improve your credit score. Your credit score may impact your car insurance rate, so make sure you watch for derogatory marks on your credit report that can lower your score.
FAQ
Here, we go over some of the most common questions people have about car insurance rates.
What Type of Car is the Least Expensive to Insure?
Subaru holds the top two spots for the cheapest cars to insure: the Subaru Outback and the Subaru Crosstrek.
Why Are Some Cars Cheaper to Insure?
Some cars are cheaper to insure because they’re cheaper to repair, have better safety features, and are a low-risk for insurance providers based on their data.
Is Insurance Cheaper for Older Cars?
Insurance for older cars is not necessarily cheaper than newer cars. If an older vehicle is more expensive to repair or has poor safety features, it may have higher rates. on the other hand, older vehicles that meet current safety standards and are inexpensive to repair may have lower rates than some newer vehicles.
What’s the Most Expensive Car to Insure?
Out of the top 25 most popular vehicles in the United States, the Tesla Model Y is the most expensive car to insure, and the Tesla Model 3 is the second most expensive.
How Your Credit Score Affects Your Car Insurance Rate
Many people don’t realize that not only does your credit score affect the cost of your vehicle, but it can also affect your insurance rates. If you have derogatory marks on your credit report from late payments, missed payments, or collections, you may face higher insurance premiums.
Before you shop for auto insurance, it’s helpful to know your credit score. You can receive a free credit report card at Credit.com, and our ExtraCredit® subscription offers even more credit management tools.
Methodology
Data was sourced from Quadrant Information Services and provided to NerdWallet[1] and Bankrate[2] . Both studies analyze data from ZIP codes throughout all 50 states and Washington, D.C., and are weighted based on geographic region and population.
NerdWallet’s research used data from Kelley Blue Book for the top 25 best-selling models, along with rates from different ZIP codes in the United States. NerdWallet based its data on both male and female drivers 35 years old with good credit and clean driving records using the following coverage limits:
$100,000 bodily injury liability coverage per person
$300,000 bodily injury liability coverage per crash
$100,000 property damage liability coverage per crash
$100,000 uninsured motorist bodily injury coverage per person
$300,000 uninsured motorist bodily injury coverage per crash
Collision coverage with $1,000 deductible
Comprehensive coverage with $1,000 deductible
The Bankrate study analyzed rates for a 40-year-old female and male who have clean driving records and good credit. Rates are for full coverage and are based on the following limits for a 2021 Toyota Camry that drives five days per week and roughly 12,000 miles per year:
$100,000 bodily injury liability per person
$300,000 bodily injury liability per accident
$50,000 property damage liability per accident
$100,000 uninsured motorist bodily injury per person
$300,000 uninsured motorist bodily injury per accident
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.
Having no credit or bad credit both present different challenges. Bad credit can prompt frequent collection calls and take a long time to repair, while no credit can reduce your eligibility for most loans.
Whether you’re new to credit or you have years of activity (and a few blemishes on your report), you may wonder, “Is no credit better than bad credit?” No credit and bad credit can both hold you back in their own ways. No credit means that lenders can’t easily review your credit history, while bad credit means you’ve earned derogatory marks on your credit profile.
We’ll explore the nuances of both situations and share ways you can bolster your credit.
Key Takeaways
Everyone starts with no credit until we take an action that must be reported to a credit bureau.
It takes time to increase your credit, whether you have bad or no credit.
There are certain loans that you can apply for with bad credit.
What Are the Impacts of Each?
Credit scores, alongside a person’s employment status and annual income, help lenders decide if they’ll approve an applicant for loans, credit cards, and low interest rates. Borrowers with no or bad credit can still secure loans despite their current credit status, but it helps to know how their prospects might be affected.
The Impact of No Credit
People start to build credit when they make financial decisions that can be reported to a credit bureau. Applying for a credit card, paying down a student loan, or paying rent for a property you’ve leased are just a few actions that would fall under this umbrella.
Lenders may have a harder time getting a sense of a no-credit borrower’s credit risk since the borrower won’t have a credit report. Some effects of having no credit score include:
Ineligibility for most loans: It’s still possible to acquire bad credit loans, but it’s generally much harder to gain substantial funding with no credit history.
Reduced credit card options: Borrowers with no credit history may only be eligible for cards with low limits or higher interest rates.
Renting restrictions: Landlords often ask that renters meet or exceed a specific credit score range.
The effects of bad credit
A person’s credit score can fall for multiple reasons. While certain actions, like applying for new credit cards, can temporarily cause one’s score to dip, long-term financial habits determine credit scores the most.
Consistently making late payments, exceeding your credit limit, and neglecting your oldest accounts can lead to a bad credit score. Bad credit can present some of the same challenges that no credit can, as well as unique hurdles, including:
Collection agencies: If you owe a significant amount of debt, a collection agency may repeatedly call and ask you to pay your outstanding debt. Knowing your debt collection rights can help if an agency threatens to seize your assets or ask for more money than you owe.
Credit limit decreases: A bank can reduce a borrower’s credit limit if their score drastically decreases. These terms are usually outlined in the cardholder agreement you sign when first acquiring a credit card.
Stress: Bad credit can decrease morale and raise stress by making it much harder to secure loans and decrease your interest rates. Depending on the severity of your debt, improving your credit can take a long time.
5 Ways to Build Credit
Whether you have bad credit or no credit history whatsoever, you have the power to improve your scores—and your financial opportunities as a result. The following five recommendations can bolster your credit over time.
Make Payments on Time
Payment history influences 35% of your FICO® credit score, which is the model most lenders rely on. Consistent, on-time payments will demonstrate financial responsibility and gradually raise your credit.
Limit Applications for New Credit
Each time you apply for new credit cards or loans, your profile receives a hard inquiry that temporarily lowers your score. Applying for too much credit all at once can significantly hurt your score.
Regularly Check Your Credit Report
Reviewing your credit report grants you insight into your financial habits, as well as errors or inconsistencies. Credit.com offers a free credit report card that reviews your financial habits in five categories, including the number of inquiries on your account and the diversity of your credit mix.
Apply for a Credit Builder Loan
A credit builder loan helps no- or poor-credit borrowers improve their credit by paying down a small amount of debt. These loans usually cap out at $1,000 and have 6- to 24-month repayment terms. Check if a loan’s interest rate or repayment terms will fit within your budget before you sign any agreements.
Maintain Your Oldest Accounts
Keeping your oldest credit card accounts open will typically benefit your credit, even if you don’t use them anymore. This is because your oldest accounts help boost your credit age, and they can also help you keep your credit utilization ratio lower, both of which have a positive effect on your overall credit health.
How to Find Credit Cards for Bad Credit
With a bit of effort and the right know-how, you’ll find multiple avenues to get credit cards for bad credit. Signing up for a credit monitoring service is a great first step. You’ll get strategies for handling debt and recommendations for credit cards and loans based on your current circumstances.
Many commercial banks offer at least one credit card for low-credit applicants. These cards often have low credit limits and may not have premium features like cashback or reward points. Nevertheless, responsibly using and paying down these cards will help display your creditworthiness over time.
The best credit cards and loan options become available with a higher credit score. As you take positive steps to build your credit, you’ll be eligible for more favorable offers—which can further enhance your credit profile. Resources like Credit.com can help you better understand your overall credit profile.
Work on Your Credit With Credit.com
Challenges are par for the course on any person’s credit journey, whether they have excellent credit or no credit history whatsoever.
Credit.com’s free credit report card can help you navigate those challenges by reviewing your credit age, payment history, and account mix—then offer advice that you can implement when managing your credit.
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.
A 680 credit score is in the “good” range based on the most common scoring model, FICO®. With a 680 credit score, you can get approved for credit cards as well as personal, auto, and home loans.
Having a low credit score not only makes it difficult to secure lines of credit and loans, but it can also cost you quite a bit of money. Low credit scores mean you need to put down larger deposits on rental homes and services, and you also get charged higher interest rates.
According to the recent credit score statistics, the national credit score average is 716. While a score in the 700s is good, having a 680 credit score may be all you need to improve your financial well-being.
Today, you’ll learn what a 680 credit score means and how to achieve one. Most importantly, you will learn how to maintain a good score and continue improving your credit with helpful tips.
What Does a 680 Credit Score Mean?
The meaning of a 680 credit score depends on what credit scoring model is being used. FICO® has the most commonly used scoring model, and it ranges from 300 to 850. If you have a 680 FICO score, you have a “good” credit score. According to the FICO scoring model, the following are the typical ranges:
Exceptional: 800–850
Very Good: 740–799
Good: 670–739
Fair: 580–669
Poor: 300–579
Your credit score is a simple way for financial institutions to gauge risk. Lower credit scores are often a red flag and signal to lenders that a person may not pay back a loan. Typically, low credit scores are due to late payments, a short credit history, and overspending. In some cases, low credit scores are due to errors on your credit report that you may need to dispute.
Can You Get a Credit Card With a 680 Credit Score?
Whether or not you get approval for a credit card depends on the type of card and the company, but in many cases, a 680 credit score should get you approved for a credit card. You can get a credit card with bad credit, but these cards often come with high fees and interest rates. Having a 680 credit score can get you a good credit card with typical fees, and it may even have additional perks like cashback rewards.
Note that your credit score is only one aspect of the credit approval process. When you apply for a credit card, lenders look at your credit report. The report shows additional details like other debts you have as well as your payment history. When you apply, there will also be questions about your current income and expenses.
Can You Get a Car With a 680 Credit Score?
Much like with credit cards, a car loan approval may vary by lender, but a 680 is often good enough to qualify for a car loan. When it comes to car loans, in addition to the price, one of the most important factors is the car loan interest rate. Paying off a car loan takes years, which means an interest rate can potentially add thousands of dollars to the loan.
According to recent data, the average car loan interest rate with a 680 credit score for new cars is 5.82% and 7.83% for a used car. By improving your credit score, you can get average interest rates as low as 4.75% for a new car or 5.99% for a used car. It may also be beneficial to use a loan calculator to see how much a loan will cost you over time.
Can You Get a Mortgage With a 680 Credit Score?
It shouldn’t be a problem to qualify for a mortgage loan with a 680 credit score. Like other loans, there’s much more that goes into the mortgage than just your credit score. When applying for a home loan, the mortgage lender takes a much more detailed look into your finances. They’ll want to see your debt-to-income ratio, employment status, assets, bank statements, and more.
It’s also helpful to remember that a major aspect of purchasing a home is the down payment. Knowing how much you should put down on a house can help you plan for the future and discover how much you need to buy a home in addition to having a good credit score.
Can You Get a Personal Loan With a 680 Credit Score?
Yes, you should be able to get a personal loan from many lenders with a 680 credit score. Some lenders may require a higher score in the 700s, and these lenders may also give you a better interest rate. Having a 680 credit score may get you a loan with a higher interest rate, so it’s always helpful to improve your credit score before taking out a personal loan.
5 Tips to Improve Your 680 Credit Score
As you now know, a 680 credit score is good, but improving your credit score to 740 or higher can help you get even lower interest rates and more lines of credit. Here, we go over five ways you can improve your credit.
Make your payments on time: Your payment history makes up 35% of your FICO score, so making all of your payments on time can help boost your credit score.
Keep your spending low: After payment history, credit utilization is the most significant factor in determining your credit score. This is how much you owe compared to your total credit limit. It’s recommended to keep this ratio below 30%.
Don’t close old credit cards: It’s common for people to close credit cards they don’t use, but it’s better to keep them open. In addition to helping with your credit age, keeping a credit card open can help you keep your credit utilization ratio low, which is good for your score.
Check your score regularly: Checking your credit score regularly can motivate you to stay on the right track as well as let you know if you need to make changes. There are services to get your credit score for free as well.
Dispute any errors: Sometimes, there are errors on your credit report, and you can dispute them on your own with the credit bureaus or work with a credit professional.
Not only are these good habits to help improve your credit, but they’ll help you maintain a high score as well.
Get Help With Your Credit Score
If you have a 680 credit score, you’re off to a good start, but improving your credit score can help save you money and get approved for better loans. For those who have bad credit, striving for a 680 credit score is a good goal to have. To see where you stand with your credit, sign up for Credit.com’s free credit report card for a full picture of your credit situation.
The average credit score for those aged 18 to 25 is 679. This average credit score is the lowest on our list because this age group is just beginning to build their credit scores Lower earnings, student loans, and higher credit card usage can impact credit scores.
Average Credit Score by 30
The average credit score for those aged 26 to 41 is 687. This age group is building their credit along with higher salaries. This age group may be paying off education loans or large investments like cars and homes.
Average Credit Score by 40 – 50
The average credit score for those aged 42 to 57 is 706. This age group is investing more in retirement finances and working to reduce debt and large investments like mortgages.
Average Credit Score by 60 and Higher
The average credit score for those aged 58 to 76 is 742. For those older than 77, the average credit score is 760. These groups are either stepping into retirement or enjoying the rewards of retirement life. These groups may be working off a debt to have minimal debt going into retirement or avoiding accumulating debt altogether. These groups have the highest credit scores due to their ability to pay off debts and build credit scores over the years.
Average Credit Score by State
As of September 2022, Minnesota had the highest average credit score at 742, whereas Mississippi had the lowest average credit score at 680. Overall, the southern states produced lower credit scores than the northwestern and midwestern states.
How to Build Credit at 18
Building credit sooner than later will provide you with more loan options and lower interest rates. There are many ways to start building credit and improving your credit.
1. Improve Your Financial Literacy
Before building credit, it’s important to learn about credit management and personal finance. Spend some time researching how credit works and how to make the best financial decisions for your circumstances. Take a look at Credit.com’s extensive tips and guides for further help and information.
2. Get a Starter Credit Card
Your first option to start building your credit is with a secured credit card. A secured credit card is much easier to apply for. However, it requires a security deposit. This security deposit acts as collateral in case you can’t make your credit card payments. Be sure the credit card company you choose reports to the three major credit reporting agencies.
From here, begin using your starter credit to build your credit and submit your monthly payments on time.
3. Become an Authorized User
If you have a family member or friend with a credit card and a good credit score, you can ask them to add you as an authorized user. Just double-check that their credit card company reports authorized user information to the credit bureaus, or this won’t work.
As an authorized user, you don’t need to access the account owner’s credit card or even use the account to reap its credit benefits. When you’re an authorized user, the on-time credit payments made by the account owner are automatically reflected on your credit report. Becoming an authorized user is a great way to quickly start building your credit. However, if the account owner doesn’t submit payments on time, this can negatively impact you.
4. Submit Payments on Time
This may be the most important way to build credit, as payment history makes up 35% of your FICO® credit score. It’s crucial to make credit card payments on time, so it’s best to only take on debt if you can pay it off by the time it’s due. If your payment is 30 days past due, your credit card company can report it, which would likely hurt your credit score.
5. Check Your Credit Report
Monitor your credit report regularly. Although uncommon, payment inaccuracies and misinformation found on your credit report can drop your credit score. You are legally entitled to one free credit report each year from the three major credit reporting agencies. If you see an error on your credit report, you can dispute it with the agency.
FAQ
Below are frequently asked questions about your credit score and how to improve it.
What Is the Average U.S. Credit Score?
In September 2022, the average U.S. credit score was 714, which is unchanged from 2021.
When Does Your Credit Score Build the Most?
Your credit score builds the most when you’re actively contributing to improving your credit score. Establishing initial credit in a good range (around 670 – 700 or higher) can take at least six months, but building your credit up to a good credit score can take several years. Practicing good credit management, like submitting payments on time, will make the biggest difference in how fast your credit builds up.
How Do You Find Your Credit Score?
It’s important to check your credit score regularly. There are a few ways to get your credit score, such as:
Look at your credit card or loan statement: Most credit card, loan, and bank institutions provide credit scores for customers. You may be able to find an up-to-date credit score on your most recent bank statement.
Use a credit score service: Use a free or subscription-based credit score service to see your credit score. Some credit scoring sites provide a free trial for new users to test out their site, during which you can check your credit score.
Apply for a free credit report: The three major credit reporting agencies must legally provide you with a free credit report every year upon request. You may request your credit report from Experian®, Equifax®, or TransUnion®.
You should also check your credit report regularly to verify your credit report is free of any inaccuracies or misinformation.
Review Your Next Credit Report With Credit.com
Now that you know the average credit score by 18 (679), it’s time to start building your credit. Setting up financial goals and practicing good credit management will help you build credit.
Curious about your financial health? Get graded with our free credit report card to see what is affecting your credit score.
Your student loan statement gives you all the important information about your student loan. If you took out one or more student loans to help pay for college, knowing how to read your student loan statements can help you manage your student debt and repayment.
What Are Student Loan Statements?
Student loan statements are detailed summaries of your student loan. They provide information such as the last payment received, the current amount due, and where to send payments.
You’ll typically receive your student loan statement from your loan servicer three weeks before payment is due each month. If you have multiple student loans with more than one servicer, you’ll receive a student loan statement from each servicer every month.
Why Is It Important to Know How Much You Owe?
Keeping track of any debt is essential. You’re responsible for your student loan debt and making monthly payments on time until it’s paid off. Even missing one payment could cause you to fall behind.
A missed or late payment on your student loan debt could also hurt your credit. Your payment history makes up 35% of your FICO® credit score, so having late payments in your recent credit history could make it more difficult to be approved for credit cards or other loans.
Missed student loan payments may also incur late fees. Private lenders have their own rules when it comes to late fees and consequences, but they may start adding late fees after a grace period. Private student loans usually go into default as soon as you miss three monthly payments, but some go into default after one missed payment.
If you default on a federal student loan, usually after payment is 270 days past due, the government can collect your debt by withholding money from your wages and your income tax refund and other federal payments. But a temporary “on-ramp” protection will generally prevent most federal student loans from entering defaulted loan status from the 12-month period of October 2023 through September 2024.
Where Do I Find My Student Loan Statement?
Your student loan statement will typically come by mail from your student loan servicer unless you’ve opted to receive statements online.
Borrowers are generally expected to make required loan payments when due. The 2023 debt ceiling bill officially ended the three-year Covid-19 forbearance, requiring federal student loan interest accrual to resume on Sept. 1, 2023, and payments to resume in October 2023.
If you haven’t received any student loan statements or if you’re not sure, there are ways to find your student loan balance, such as requesting and reading your credit report.
Private Student Loans
If you have private student loans, you can contact your lender directly and ask them how to get your student loan statements. You can also try contacting your school’s financial aid office for information about your private student loan and the company that originated your loan.
Another option is to get a free credit report from each of the three credit bureaus, Equifax®, Experian®, and TransUnion®. This may give you basic information on any active student loan accounts you have opened in your name.
Recommended: Guide to Private Student Loans
Federal Student Loans
If you have federal student loans, there are a few ways to find your student loan statement. One way is to go to studentaid.gov and log in with your Federal Student Aid (FSA) ID. You can find your student loan balances, loan servicers, and interest rates on the site.
As with private student loans, you can also contact your school’s financial aid office for more information on your federal student loans.
Recommended: FAFSA Guide
Student Loan Statements
Not all student loan statements look the same, but they generally provide the same key details about your student loan. Knowing how to read your student loan statement is an important step in helping you manage your student loan debt.
Payment Summary
The payment summary shows the current amount due if payment is made by the due date. If you have other amounts due in addition to the current payment, like fees or a past due amount, those will also be shown in the payment summary.
Monthly Payment
The monthly payment will tell you what you are expected to pay, which includes the principal and interest, by the due date. The principal is the amount you borrowed, and the interest is what you’re paying to borrow the money.
Your required payment will be the same each month for the life of your loan unless you’ve chosen a variable rate for a private student loan or you’re enrolled in a federal income-driven repayment (IDR) plan.
Recommended: 7 Tips to Lower Your Student Loan Payments
Amortization Schedule
Your student loan repayment follows a student loan amortization schedule. Amortization is the process of paying back an installment loan through regular payments. When a student loan is amortized, it means that your monthly payment is divided into principal and interest payments.
Current Balance
Your current balance is what you owe on the date of the student loan statement. This is the total amount, including principal, interest, and any fees.
Original Balance
Your original balance is the amount that you borrowed before you made any payments toward your student loan.
Interest Rate
The interest rate on your student loan is how much you pay to borrow the funds. Federal loans issued since July 2006 have fixed interest rates, meaning they don’t change over the life of the loan.
The fixed rate for federal student loans depends on the type of loan. Federal student loans for graduate or professional school typically charge higher rates than federal loans for undergraduate study.
Private lenders determine rates for borrowers based on their creditworthiness. They offer undergraduate loans and graduate student loan options.
Negative amortization — having your loan balance grow over time if your monthly payment amount is less than the interest accruing — generally won’t occur if you make payments on the Saving on a Valuable Education (SAVE) Plan. That’s because the SAVE Plan offers a permanent interest subsidy that helps prevent your federal loan balance from growing if you qualify for a $0 (or very low) monthly payment.
Managing Your Student Loans
After you know your lender or loan servicer, you can easily manage your student loans. Student loan management may be different depending on whether you have a federal student loan or a student loan from a private lender.
Federal student loans allow you to select a repayment plan. Repayment plans are typically divided into traditional plans and IDR plans, such as the SAVE Plan. This allows you a choice: quickly paying off student loan debt to minimize interest charges or lower monthly payments for greater affordability.
You can also consolidate your federal student loans or refinance federal and private student loans, resulting in one monthly payment. You may pay more interest over the life of the loan if you refinance with an extended term.
Private lenders may have their own flexible repayment plans. They may offer you the choice of deferring payments, paying interest only, paying your full monthly payment, or making a low fixed payment while you’re still in school. 💡 Quick Tip: Ready to refinance your student loan? You could save thousands.
Should You Refinance or Consolidate to Simplify Repayment?
Combining multiple student loans into a single loan with one monthly bill can simplify your student loan repayment. However, the choice to consolidate student loans vs. refinance depends on your personal situation and your end game.
Federal student loan consolidation combines multiple federal loans into a single loan through the U.S. Department of Education. Federal consolidation generally won’t lower your total interest costs but can lower your monthly payments by extending the repayment period. (A longer repayment period means more total interest paid over the life of the loan.)
Private lenders offer student loan refinancing — some refinance both federal and private student loans — which means paying off your current loans with one new private student loan, ideally with a lower interest rate. 💡 Quick Tip: When rates are low, refinancing student loans could make a lot of sense. How much could you save? Find out using our student loan refi calculator.
The Takeaway
Your student loan statements give all the details of your debt. Federal student loan borrowers can expect to receive billing statements now that the pandemic-related payment pause has ended.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
FAQ
What is a student loan statement?
A student loan statement gives you a detailed breakdown of your loan, including the last payment received, the current amount due, and where to send your payments.
How do I get to my student loan statement?
Federal student loan borrowers can get their student loan statements from their loan servicer. If you don’t know who your loan servicer is, visit your Federal Student Aid account dashboard.
Private student loan borrowers can contact their lender directly to ask for student loan statements. If you’re unsure who your lender is, you can get a free credit report from each of the three credit reporting agencies or contact your school’s financial aid office.
How do I read student loan statements?
Not all student loan statements look the same, but they generally provide the same information. Your student loan statement should give you a payment summary and tell you your monthly payment amount, due date, current and original balance, and interest rate.
Student Loan Refinancing If you are a federal student loan borrower you should take time now to prepare for your payments to restart, including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. (You may pay more interest over the life of the loan if you refinance with an extended term.) Please note that once you refinance federal student loans, you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans, such as the SAVE Plan, or extended repayment plans.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
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.
SoFi Private Student Loans Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
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.
You may think that because you have bad credit, buying a house is out of reach for you. But, there are plenty of trustworthy mortgage lenders with good offers willing to loan to people with poor credit.
So, you might just have to start packing sooner than you thought.
Best Mortgage Lenders for People with Bad Credit
LendingTree
For flexible mortgage options with less stringent credit score requirements, check out LendingTree. Instead of serving as a direct lender, LendingTree aggregates multiple mortgage offers after you fill out a single application.
The process is completed entirely online, and you could potentially see up to five different offers from various mortgage lenders. From there, you can compare the interest rates and terms to see if any fit your needs.
LendingTree also offers mortgages from lenders that provide a broad range of home loan types.
In addition to conventional loans, you can also access loans from the Federal Housing Administration (FHA loans) and VA loans. These come with lower credit requirements and lower down payment requirements.
With an FHA loan, for example, you could qualify with a minimum credit score of just 580 and a 3.5% minimum down payment on your new home’s purchase price. Even if your credit score is lower than 580, an FHA loan is still possible if you increase your down payment to 10%.
For multiple home loan options with a quick and easy application process, be sure to consider applying through LendingTree.
Read our full review of LendingTree
CitiMortgage
CitiMortgage has a range of home loan products for people with various credit scores. A unique feature of CitiMortgage is that they consider nontraditional credit situations, such as paying rent and child support on time.
They only approve loans for houses in good condition. This means all construction must be finished, and the roof and windows must be intact.
So, no fixer-uppers, HGTV fans. In addition, there is a $100 application fee and an origination fee, but this is not unusual.
If you can’t put much of a down payment down, CitiMortgage offers what they call a HomeRun loan program. This program allows you to only pay 3% down. Plus, they don’t even require you to pay for private mortgage insurance.
So, a $200,000 house would only require you to put $6,000 down. Applicants must make 80% or less than the neighborhood’s average income. However, it’s available to anyone in low-income areas.
CitiMortgage also offers a conventional loan geared toward those with low income and low credit scores. It comes with no mortgage insurance requirements and highly competitive interest rates. However, origination fees are typically a bit higher.
Read our full review of CitiMortgage
Rocket Mortgage
For those seeking a user-friendly online experience alongside a variety of loan options, Rocket Mortgage is worth considering. As one of the pioneers in the digital mortgage industry, their process is streamlined, allowing you to get pre-qualified in mere minutes.
They offer an array of loan types including Conventional, FHA, VA, and Jumbo loans. Terms range from 8 to 30 years, which includes popular 15-year and 30-year terms.
Those with a credit score of 620 will find themselves comfortably eligible, but Rocket Mortgage also caters to those with scores as low as 580, as long as other criteria are met.
One of the highlights of Rocket Mortgage is their flexibility in property types. Whether you’re looking to buy or refinance a single-family home, a second home, an investment property, or even a condo, they’ve got you covered.
Their user-centric approach is further exemplified by their dedicated Rocket Mortgage app, ensuring easy access to your account.
A potential downside is the hard inquiry they conduct to offer a personalized interest rate, which could have a minor impact on your credit score.
Additionally, they do not provide USDA loans, HELOCs, construction loans, or mortgages for mobile homes. For those eyeing jumbo loans, it’s worth noting that Rocket Mortgage does not manage these accounts post-closure.
However, if a swift online process coupled with diverse loan options appeals to you, Rocket Mortgage stands out as an excellent choice.
Read our full review of Rocket Mortgage
Navy Federal Credit Union
Serving military members and their families, Navy Federal Credit Union makes first-time home buyers their number one priority.
They help would-be homeowners by offering a wide variety of loans. Some of their loans include:
Adjustable-rate mortgages
VA Loans
FHA Loans
Interest-only loans
30-year and 15-year fixed-rate loans
Their standout loan is the HomeBuyers Choice. It’s a fixed interest rate 15 or 30-year loan with 100% financing and no mortgage insurance.
There is a 1.75% funding fee that you can get waived if you’re willing to pay a higher interest rate. This is a great option at closing if you need to save some cash.
Like CitiMortgage, Navy Federal evaluates a range of payments for borrowers with poor credit scores, such as rent, cell phone, and utility payments. There is no minimum credit score requirement for VA loans, but it’s 620 for others.
The only real downside is that some borrowers report that it takes longer to close on houses than other mortgage lenders.
This is not incompetency by any means. On the contrary, with such popular mortgage options, they likely have more volume to get through than other lenders.
Read our full review of Navy Federal Credit Union
Best Refinance Lender for Borrowers with Bad Credit
For borrowers with bad credit scores who are considering refinancing their mortgages, we recommend Connexus.
Connexus
By no means just a refinancing company, Connexus is an all-around great credit union with nothing but positive feedback online. With a super strong and user-intuitive web presence, they’re easily one of the trailblazers for next-generation banking.
Connexus offers great mortgage interest rates for anyone, but they do something a little special regarding refinancing. Any homeowner can go to their website and fill out an online form detailing what they currently have.
After only two business days, a loan officer from Connexus Credit Union will call you to discuss every option available. They call this their “No-hassle mortgage comparison.”
If you’re worried about low credit scores, Connexus also considers alternative methods to determine your ability to repay a loan. This includes utility bills, rent, monthly cell phone payments, and child support.
Read our full review of Connexus
Best Mortgage Lenders for Customer Support
Decent customer support seems to be what companies struggle with the most these days. People want 24/7 support, but they don’t want to speak with robots. Two companies that have figured out how to meet customer expectations are HomeBridge and Network Capital.
HomeBridge
At HomeBridge, you can initiate your mortgage application online, where they have various home loan programs to choose from.
You can also learn about the pros and cons of each loan and refinance option through their extensive library of educational content.
Where they really receive their accolades, however, is through their customer support. It’s not something they really boast about, but they are constantly tweaking the process of getting a loan or refinance more user-friendly.
Here’s how.
Any negative feedback a customer provides is addressed as soon as possible by HomeBridge so that every customer can walk away happy. Look for this kind of dedication elsewhere, and you’re going to have a tough time.
Most companies who perform customer feedback questionnaires analyze the results and ask themselves how to resolve the problem moving forward.
HomeBridge not only resolves the problem moving forward but will actually go back to the initial complaint and address that specific issue, too.
Read our full review of HomeBridge
Network Capital
Be advised: Network Capital does have its faults. For example, it only does business in the following states:
Alabama
Arkansas
Arizona
California
Colorado
Delaware
Florida
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maryland
Minnesota
New Jersey
New Mexico
New York
North Carolina
Ohio
Oklahoma
Oregon
Pennsylvania
Tennessee
Texas
Virginia
Washington
Washington, D.C.
Wisconsin
It also doesn’t have an online prequalification tool. So if you’re interested, you’ve got to go through the whole process to see if this mortgage lender is even interested in working with you.
Even with these complaints, we still love Network Capital. Why? They’re doing many things right.
For starters, they don’t charge any lender fees.
Secondly, they offer support to you while you’re applying and want you to call and ask questions. Even if it’s just for a small question that will take them three seconds to answer, they want you to call.
Tri Nguyen, the founder, believes that no matter how digital we become, everyone wants to hear a human’s voice during such a significant life decision. So, they are there to answer questions and help you gather documentation.
And they do this all before they even know if they want your business. But don’t worry: the minimum credit score they require is only 600.
Read our full review of Network Capital
Best All-Around Mortgage Lenders for Borrowers with Bad Credit
Taking into account the entire user experience, there are two bad credit mortgage lenders that stand out:
New American Funding
New American Funding is just about everywhere and doing everything right. They have 150 branch locations across the U.S. (except New York and Hawaii) and have a solid web presence.
The loan application can be completed online. You can also get rate quotes, and you can track your loan status remotely.
New American Funding works with down payment assistance programs in numerous states. They also have a vast array of loan products.
Here’s a list of everything they offer:
Adjustable-rate loans (5/1, 7/1, 10/1)
Bank Statement Loans
Conventional and FHA Loans for Renovation
Fixed-rate Loans of 10, 15, 20, and 30 years
FHA loans, VA loans, and USDA loans
Loan refinancing
Manufactured home loans
Unlike other mortgage lenders, they still do everything old-school — they evaluate each application individually with (gasp!) a real live human. No algorithms here.
In other words, they’ll look at you holistically despite your bad credit score because they understand that cultures handle money differently.
For example, Latinos tend to pull money from family members when making a large purchase and prefer cash to credit cards.
With a no-debt mindset, of course, you may have a low credit score, but that doesn’t mean you don’t know how to handle money.
A person’s ability to be a responsible homeowner goes beyond what the three major credit bureaus consider. And New American understands that.
Read our full review of New American Funding
Carrington Mortgage Services
Carrington Mortgage Services seems to bend over backward to help people with poor credit become homeowners. They’re even willing to work with you if your FICO score is as low as 550.
Carrington also requires all homeowners to go through a mortgage education program before purchasing, which some people consider a negative.
They do this to make sure all borrowers understand everything that revolves around a home loan so that they’ll be more likely to make better financial decisions in the future.
Carrington considers the typical factors that play into your credit score, like payment history and money owed. However, they also consider job history, job stability, gross income, and down payment size for approval.
Need assistance with a down payment?
Depending on where you live, Carrington may be able to help you. However, the program isn’t available nationwide because some states would require Carrington to sell the servicing rights to the associated loans if they helped with the down payment.
If they did this, it would impact their ability to work with low-income, bad credit borrowers.
It should come as no surprise that Carrington has a solid digital infrastructure, and offers competitive refinance rates. Their customer service is also among the best of the best.
The only cons we can come up with for this company is that it’s not in every state (Alaska, Massachusetts, North Dakota, and Vermont.) Additionally, Carrington can’t offer down payment assistance nationwide.
Bottom line: Carrington Mortgage Services is awesome.
Read our full review of Carrington Mortgage Services
Tips for Applying for a Home Loan With Bad Credit
Many of the mortgage lenders listed in this article are ideal for borrowers with high credit scores. But if you have a lower credit score, know that it’s still possible for you to qualify for a home loan.
Many bad credit mortgage lenders are willing to work with borrowers that have lower credit scores. Here are five steps you can take to get started.
1. Take steps to begin improving your credit score
The first place to start is to request a free credit report from each of the credit bureaus. Your credit reports will give you an idea of where you are currently and the steps you can take to improve your credit score.
Make sure you check your credit report for any inaccuracies or derogatory marks. You can request to have any incorrect information removed. If you have any negative marks on your credit report, you can write your lender a goodwill letter and ask to have them removed as well.
The best way to improve your credit score is by paying down credit card debt and making monthly payments on time. Just taking these two action steps alone should help your credit score, since they account for most of your FICO score.
2. Be realistic about what you can afford
You can still apply for a mortgage with a bad credit score. But be realistic about what you can afford with your current budget.
With a low credit score, most lenders will see you as more of a risk of defaulting on your mortgage, so you will have a higher interest rate. However, if you only request the maximum loan amount you need, you’ll have a better chance of getting approved for your loan.
3. Check out alternative loans
Borrowers with imperfect credit may qualify for a bad credit mortgage loan with alternative homebuyer programs. For example, borrowers can get an FHA loan with credit scores as low as 580. The required minimum down payment is 3.5%.
Veterans with less than perfect credit should look into getting a VA loan. These mortgage loans don’t have a minimum down payment requirement and are easier to qualify for than conventional mortgages.
Finally, USDA loans are designed for low-income homebuyers in rural areas. They typically require a credit score of at least 640.
See also: 14 First-Time Homebuyer Grants and Programs for 2023
4. Save up for a sizable down payment
If you want to increase your odds of approval, then it’s a good idea to save up for a sizable down payment. At least 20% is ideal for convention loans. It will also save you from having to take out private mortgage insurance (PMI).
A down payment won’t compensate for a bad credit score. However, it could help you make your case with some lenders.
5. Consider applying with a qualified cosigner
And finally, you can look into applying with a qualified cosigner. When you apply with a cosigner, that person agrees to take legal responsibility and repay the loan if you can’t. And since that person’s credit score is tied to the loan as well, it increases your odds of approval.
However, cosigning a loan is a risky move. So, you only want to ask someone to do this if you’re confident you can make your monthly mortgage payments. Otherwise, you’re putting that individual’s financial future at risk.
How to Compare Lenders for Bad Credit
Finding the best mortgage lender to fit your financial situation requires careful consideration. You need to be sure about what you need from any bad credit home loan. Along with mortgage rates and loan terms, here are the other major factors to consider when comparing mortgage lenders:
Minimum Credit Score Requirements
Minimum credit scores will vary depending on the mortgage lender and the specific loan product. There are many lenders who will work with a low credit score, including all the lenders we’ve analyzed above.
Debt-to-Income Requirements
In most cases, the maximum debt-to-income ratio that lenders will work with is around 43%. However, with so many online mortgage lenders today, you will still find mortgage companies that have higher than normal debt-to-income limits.
Make sure you’re clear on where your debt-to-income ratio stands. Then, take some time to see if you can improve it before applying for a loan formally.
Down Payment Requirements
The reality is, if you have a bad credit score, you’ll likely be required to save a larger minimum down payment. Generally speaking, those with a lower credit score who still qualify for lending will need a down payment of 10%.
However, regardless of what your credit history looks like, it’s useful to shop around. This is because most mortgage lenders will consider a range of factors when evaluating your loan application.
Home Buyer Assistance Programs
When considering different mortgage products, make sure to look for any home buyer assistance programs. Many companies have their own programs with benefits. They can range from a lower minimum credit score requirement, lower down payment percentages, or credits toward closing costs.
Fees
The most common mortgage fees include origination fees, application fees, underwriting fees, processing fees, and administrative fees. Some lenders don’t charge these fees, but don’t forget to check what they do charge.
Frequently Asked Questions
What is considered ‘bad credit’ for a mortgage?
According toFICO, which is the biggest credit scoring company, anything below 580 is considered poor credit. Here’s a quick run through of the entire credit scoring range:
300 – 579 – Poor credit
580 – 669 – Fair credit
670 – 739 – Good credit
740 – 799 – Very good credit
800 – 850 – Exceptional credit
However, the definition of ‘bad credit’ can vary between lenders, as they won’t all stick rigidly to FICO scoring. So keep this in mind as you look for loan products to apply for, and make use of online loan quotes that don’t run hard credit checks.
Can I get approved for a mortgage with bad credit?
Absolutely, it is possible to qualify for a mortgage even if you’ve got a low credit score. Your credit score is always an important factor for mortgage lenders. However, alternative credit data such as stable employment and saving a large down payment can sometimes help offset a bad credit score.
Some mortgage products, like FHA loans, come with lower minimum credit score requirements than conventional loans. However, if possible, you should always try to build your credit score before taking out a loan. This can help you significantly improve your mortgage options. It can land you a better interest rate and lower monthly payment, potentially saving you thousands of dollars.
What type of mortgage can I qualify for with bad credit?
There are several types of mortgage products available for those with poor credit:
FHA loans
Government backed loan programs, such as Federal Housing Administration (FHA) loans, are among the most popular options for bad credit borrowers. The majority of people will need a minimum credit score of 580 to qualify, as well as a minimum down payment of 3.5%. However, if you can make a 10% down payment, you could be eligible for an FHA mortgage with a credit score as low as 500.
VA loans
While VA loans don’t have any formal credit score requirement, the reality is that the ideal credit minimum varies between lenders. If you do go for a VA loan, keep in mind that many lenders prefer to lend to those with a higher credit score. However, others will be more sympathetic to lower credit scores.
USDA loans
Another of the popular government backed loans, USDA loans typically require a credit score of at least 640. However, that doesn’t mean it’s impossible to qualify for a USDA-backed loan with a low credit score. It just means your application will have to be processed manually, and may require consideration of alternative credit data.
If your score is high enough, you can use a USDA loan to purchase a home with no down payment.
What is the lowest credit score I can get a mortgage with?
The lowest credit score you can get a mortgage with varies depending on the type of loan and the individual lender’s requirements. Conventional loans usually have a minimum credit score of 620, and for jumbo loans it’s 680. However, FHA, VA, and USDA loans allow lower minimum credit scores and might make more sense for you if your credit is poor.
For lenders who offer bad credit mortgages, a credit score of 500 is generally the lowest that lenders will work with. Your interest rate will be high and you’re likely to need a large down payment to get a mortgage with a score this low.
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.
The average household credit card debt in America is $9,654, and the states with the largest amount of credit card debt are Alaska, Hawaii, and New Jersey.
Between the first quarters of 2022 and 2023, The Federal Reserve Bank of New York reported that the credit card debt in America rose by $145 billion. As of June 2023, we saw a 12-month inflation increase of 3%, the smallest year-over-year increase since March 2021.
By understanding American credit card debt statistics, you’ll better understand where you stand and what you can do to potentially lower your debt. Credit card debt increases your credit utilization ratio, which can hurt your credit and ultimately cost you more money in interest.
We surveyed over 1,100 Americans to learn more about credit card debt statistics in the United States. This data covers the average debt by state, average interest rates, and more. While many of the statistics from our other sources look at the situation as a whole, our data helps us see what’s happening on an individual level.
Despite the national average of Americans having over $9,000 in credit card debt per household, only 14% say they’re “very worried” about their debt.
67% of respondents said they have less than $2,000 in debt, which may indicate that only a concentrated number of people have high amounts of credit card debt.
20% of respondents don’t know how long they’ve been in debt.
The majority of respondents (56%) say their credit card debt is due to unexpected expenses.
74% of respondents said at least one collection agency has contacted them about a past due debt.
In this article, we’ll also provide tips on how to get out of debt and work toward better credit.
Table of contents:
Key Credit Card Debt Statistics
Many factors play into credit card debt, such as the average interest rates, which cards have the best offers, and the balance people carry on their card. These statistics will help you compare your own credit card balance to the national average and see if you’re getting a good deal with your current cards.
Here are the standout findings of various debt statistics:
The average American household has over $9,000 in credit card debt. (WalletHub)
Mississippi has the least credit card debt at $5,259 per person. (Credit Karma)
Alaska has the most credit card debt on average at $8,139. (Credit Karma)
Credit cards 90 days or more past due rose to 4.57% in 2023. (FRBNY)
Individuals making $184,000 or more per year have the most credit card debt at an average of $12,600. (Federal Reserve)
The total credit card debt in America as of Q3 2022 was $910 billion. (Experian®)
How Many Credit Cards Carry a Balance
The American Bankers Association releases a quarterly report for consumer credit conditions, and the most recent data comes from the third quarter of 2022.
In America, approximately 43% of credit cards carried a balance, 23% were dormant, and 34% were used but paid off each month. Those who pay off their credit card balance are able to keep a low credit utilization ratio and prevent the accumulation of debt.
Tip: Use our credit card payoff calculator to estimate when you’ll be debt free.
Average Interest Rates for New Credit Card Offers
LendingTree analyzed the terms and conditions of 200 credit cards from upwards of 50 different credit card companies, banks, and credit unions. With this data, they were able to gather an assortment of information involving annual percentage rates (APR).
The APR is the amount of interest consumers pay for their purchases, and the following table is broken down by credit card type.
The following table is based on data from July 2023.
Average Credit Card Debt by State
In February 2023, Credit Karma gathered data from 74 million of their members to see which states had the most and least amount of credit card debt. Below, we’ve compiled a complete list based on Credit Karma’s data that contains the average credit card debt for each of the 50 states alphabetically.
Top 10 States With the Most Credit Card Debt
The following states had the most credit card debt, with Alaska having the highest average credit card debt in America at $8,139 per person.
State
Average credit card debt
1.
Alaska
$8,139
2.
Hawaii
$7,444
3.
New Jersey
$7,306
4.
Maryland
$7,248
5.
Virginia
$7,174
6.
Connecticut
$7,032
7.
New York
$7,029
8.
California
$6,952
9.
Washington
$6,869
10.
Florida
$6,783
Top 10 States With the Least Credit Card Debt
The major credit bureau, Experian, tracks credit card debt data as well and found that between 2021 and 2022, overall credit card debt in the U.S. increased from $785 billion to $910 billion—a 16% increase. The average debt also increased in many states, according to Credit Karma’s report.
State
Average credit card debt
1.
Mississippi
$5,259
2.
Kentucky
$5,455
3.
Wisconsin
$5,593
4.
Arkansas
$5,600
5.
Indiana
$5,601
6.
Alabama
$5,647
7.
West Virginia
$5,674
8.
Iowa
$5,732
9.
Idaho
$5,737
10.
Maine
$5,788
Average Credit Card Debt by Age
Credit Karma’s report with the state-by-state data also broke down credit card debt by age group. Currently, Generation X carries the most credit card debt, while Generation Z carries the least.
Age group
Average credit card debt
11-26 (Generation Z)
$2,781
27-42 (Millennials)
$5,898
41-58 (Generation X)
$8,266
59-77 (Baby Boomers)
$7,464
78-95 (Silent Generation)
$5,649
Average Credit Card Debt by Income
The following data comes from the Federal Reserve’s Survey of Consumer Finances (SCF) and was most recently updated in 2019. The Federal Reserve completed a new survey at the end of 2022 and will have updated data later in 2023.
As you’ll see, higher-income individuals have much more credit card debt than those who make less. This makes sense because high-income individuals are able to get much larger credit lines. But when you look at the debt-to-income ratio, lower-income households have much more consumer debt compared to the amount of money they make.
Percentile of Income
Average credit card debt
Less than 20%
$3,800
20%-39%
$4,700
40%-59%
$4,900
60%-79%
$7,000
80%-89%
$9,800
90%-100%
$12,600
Average Household Credit Card Debt
A recent study from WalletHub found that while total credit card debt in the United States rose 14.1% between 2022 and 2023, household credit card debt only rose by 8.39%.
Their data shows that the average household credit card debt at the end of the first quarter in 2023 was $9,654 adjusted for inflation, which is $738 higher than the same time the previous year. WalletHub’s chart goes back to 1986, and the highest household credit card debt was in 2007 when it was $12,221 on average per household.
Average Credit Card Debt by Race or Ethnicity
Research from Annuity.org shows that Black and Hispanic Americans are less likely to feel financially stable and less likely to have a bank account. This information can help us better understand what’s happening in the financial lives of different communities.
This data comes from the Federal Reserve’s 2019 SCF.
Race
Average credit card debt
White (non-Hispanic)
$6,940
Black or African American (non-Hispanic)
$3,940
Hispanic or Latino
$5,510
Other or multiple races
$6,320
Credit Card Delinquency Rates in America
When someone is at least 30 days past due on their credit card payment, their status becomes delinquent. The number of delinquencies in the United States can be a measure of people’s ability to pay down their credit card debt.
To track this data, Experian conducted a study between 2021 and 2022:
Accounts 30 to 59 days past due increased from 1.04% of total accounts to 1.67%.
The delinquency rate of accounts 60 to 89 days past due increased to 1.01%.
Accounts 90 to 180 days past due rose to 0.63%.
How to Get Out of Credit Card Debt and Improve Your Credit
Credit card debt in America is something many individuals struggle with, and when your debt isn’t under control, it can affect your credit. A lower credit score leads to higher interest rates, which means you’re paying more for your purchases. It can also lead to being denied new credit lines.
Here are some simple steps you can take to start getting out of debt sooner rather than later:
Reduce additional credit card spending: You don’t want to add to your current debt if you don’t have to.
Create a budget: Cutting your spending can help you save additional funds to pay down your debt.
Use the snowball method: Each month, pay off your smallest debt in full. This can help you build momentum as you chip away at your overall debt.
Try debt consolidation: Consolidating your debt may help reduce the interest rate and keep your debt in one place rather than with different creditors.
Get a balance transfer card: Balance transfer cards allow you to transfer credit card debt to a different account, which may have a lower interest rate and will also help you consolidate your debt.
If you need help getting your debt under control and improving your credit, Credit.com has resources to help you learn to better manage your finances. To begin managing your credit, sign up for a free credit report card and check out ExtraCredit®. Our services can help you learn how to work on your credit and educate you about managing your finances so you know how to work toward the life you want.
Methodology for Credit.com data: This survey was conducted for Credit.com using Suzy. The sample consisted of a total of 1,154 responses per question and is statistically representative of the general population. This survey was conducted in December 2022.