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A money saving challenge makes saving fun again.

The Biweekly Money saving challenge is a great one to start with. It requires putting away cash for 26 weeks or every other week for one year. The amount you choose to save can vary based on your goals and comfort level.

Types of Biweekly Money Saving Challenges

If you’re paid bi-weekly, this plan type might suit your lifestyle best. It’s budget friendly, too. So if you have a little or a lot of change after bills, you can adjust this challenge to meet your needs.

26-Week or Biweekly Savings Challenge

There are many versions of this challenge. You can start with a small savings amount, like $3 or $4. If you choose the first amount, put $3 away in savings the first week. Every two weeks, add an extra $3 to the last amount you put away. So, the first week, you’ll put away $3. The second week, $6. The third week, $9. At the end of the 26-week challenge, starting with $3, you’ll have $1,053 in savings.

You might prefer a fixed savings goal, like $5,000 or $10,000. If that’s you, put away between $193 to $385 every two weeks. You’ll end up with $5,018 or $10,010, respectively.

How to Choose a Money-Saving Challenge

Choose a financial challenge that works with your budget and meets your goals. Setting goals and starting small can be a big win in many ways. It lays the building blocks for long-term savings habits that last over time.

Find a challenge that is budget-friendly. The amount you put away can be as little as a nickel on day one. If you have more change to spare — you can put away more money. Some challenges suggest multiple savings accounts or stashing cash. If you choose to open multiple accounts — interest-bearing accounts will earn some returns, are FDIC insured, and can be accessed for emergencies or planned expenses.

You might have specific financial goals, like an emergency or wedding fund. Or you might want to build a habit of saving. Whatever your goal, a challenge can help you commit to saving $500 to $15,000 in a set amount of time — or build a good habit.

Common Money Saving Challenges

Money saving challenges are smart saving strategies or smart spending strategies depending on the process. They can show you how to save up money fast — or how to save money, period.

And there’s no shortage of creativity. Google has about 337,000 pages worth of money saving challenges from Pinterest to blogs like Mama Managing Chaos or Dough Roller. You can even try saving $2,022 in the 2023 money saving challenge. Below is a list of money challenges to get you started.

100 Envelope Challenge

Number 100 envelopes from 1-100. Each day, put in the amount of cash listed on the envelope. By the end of 100 days, you’ll have $5,050 stashed away.

In a variation, 100 days can be broken down into 13 weeks for easier deposits. The last week is four days. Every other week, set aside the week’s total of savings. Below’s chart lays out the amounts:

Week	Amount
1	$28
2	$92
3	$156
4	$220
5	$284
6	$348
7	$412
8	$476
9	$540
10	$604
11	$668
12	$732
13	$490

Holiday Helper Fund

The holidays sneak up on us quicker than we think. If you’re planning your annual budget — try setting up an account or an envelope for gifts. Setting aside an extra fund for gifts, whether holiday, wedding, or general, keeps money out of sight and mind until you need it.

On the week of January 1, set aside $20 every week, or $40 every two weeks. By December 25th, you’ll have $1,040. If you like to shop early — aim for Black Friday! In 2023, Black Friday falls on week 47. That puts you at $940 for gifts.

52-Week Savings Challenge

The concept is simple. You set aside $1 at week one. Then $2 at week two. By the end of 52 weeks, you’ll have saved $1,378. You can also start with $2 or $10 on week one, $4 or $20 on week two, and so on. You’ll end up with $2,756 for the $2 challenge or $13,780 for the $10 challenge.

Another variation keeps the weekly savings contribution a fixed amount — which can be particularly helpful for smaller budgets. For example, you can put away $10 a week to end up with $520 at the end of the challenge.

The No Spend Challenge

Brunching on Sunday? Maybe not if you’re on this plan.

Pick a week or weekend and spend money on only necessities in a timeframe (like a month). Cut out discretionary spending on non-essentials like clothes, entertainment, and eating out. It’ll give you a chance to be creative with your time on limited resources.

Instead of eating out, try a new recipe at home. Instead of grabbing a new pair of shoes — dig deeper into your closet. You set your own time limit, so you can try it until you notice a change in your accounts!

Cash Only for a Month Challenge

An MIT study found that people tend to spend more with plastic, if given the option. It even stimulates the part of your brain associated with reward, pleasure, and addiction.

A cash diet can help stave overspending. Leave your cards at home when you go out and bring the amount of cash you decide to spend. You can look at the categories in your budget where you tend to overspend, like entertainment or clothes, and set aside cash for those categories. You can only spend the cash allotted for those categories.

Recommended: Does Net Worth Include Home Equity

The 365-Day Nickel-Saving Challenge

If you have a nickel to spare, you can do this challenge. On day one, put a nickel in a jar. On day two, put in 10 cents in the jar. On the third day, add 15 cents. By day 365, you’ll be adding $18.40 — to a total of $3,339.75 in your savings. You won’t have to put away more than $20 in a day and $130 in a week for the entire challenge.

30-Day Budget Preparedness Challenge

It helps to have a map for where you’re going. The same is true with spending.

Challenge yourself to a budget. First, download a budget planner like a spreadsheet template or a budget planner app. SoFi’s app is an effective way to track spending. It even has a debt payoff planner to track your progress.

Then, go through each category and add the amount you’d like to or must spend in each (such as housing, groceries, entertainment, etc).

Knowing how much to spend before you go out can help improve your planning and control your spending. For example, if you allocate $400 a month to groceries, you can plan it by spending $100 a week. If you don’t spend it all, you can put it in savings.

Money-Saving Challenge Potential Savings

Taking on one of these challenges can help you boost your savings anywhere from $1,000 to $10,000.

But goal-setting will help you determine how much you want to save. If it’s $20,000 in two years, try the bi-weekly savings challenge. If you want to have $1,000 in your account, shoot for the 52-Week Savings Challenge. It’s a fun, concrete way to start.

If spending less is your goal — a challenge can help you cut bad habits like overspending. Setting up a budget and spending cash (not plastic) can help. Some challenges can help you function as a money tracker if paying off debt is your goal.

Whatever your goal is, these challenges are practical journeys that can pay off.

The Takeaway

A money saving challenge can be a fun way to build a savings account. It can motivate you to spend less and save more. It can be a concrete demonstration of how small change can add up.

One of the more popular ones is the biweekly money saving challenge. You can put away an amount you can afford — like $4 and increase it by $4 each week. Or you can set a goal of $5,000 and aim to set aside about $193 each week. It’s an easy plan that can adapt to many situations.

Best of all, you come away with stronger budgeting skills — like saving and prioritizing debt payoffs. These skills could help you make more fiscally responsible decisions. And when life happens, you’ll be better prepared.

SoFi’s app is one way to flex budgeting skills. It tracks your financial goals, accounts, spending, and more — all in one place. You even get access to your credit score at no cost. Try it today.

FAQ

What is the 100 envelope challenge?

This is a popular 100-day challenge. Number 100 envelopes 1-100. For each day, add the amount of cash to the envelope’s number listed on it. For example, add $1 to the envelope labeled 1, $5 to the envelope labeled $5, and so forth. By the end of the challenge, you’ll end up with $5,050.

What is the most popular money saving challenge in 2023?

There is no top biller for popular money saving challenges, but the 52-Week Savings challenge is mentioned across most, if not all search results in a Google search.

How much money do you save with the 52-week challenge?

If you follow the original plan of starting with $1 on week one, then $2 on week two, $3 on week three, and so forth, you’ll end up with $1,378. Other variations involve changing the starting amount. For instance, you can start with $5 on week one, $10 on week two, until you have $6,890 put away.

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SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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

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

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Credit references are documents that verify your credit history. They can come in the form of a credit check report, asset documentation, or character references.

Limited or adverse credit history can potentially impact your rental application. If you have poor payment history, a low score, or little to no history — your chances of getting approved may go down. Landlords or property management companies can approve or deny rental applications based on these references. If this description fits you — don’t fret. There are ways to get a little more creative with credit references.

Rentals are in healthy demand today. So being prepared could give you a leg up if you’re in a competitive market.

General Definition of a Credit Reference

Credit references paint a picture of your borrowing and payment habits and history. Property managers and landlords use it to help determine whether you’re able and willing to pay rent on time and in full.

Documents of financial agreements can be used as a credit reference. They come in the form of credit reports, character references, asset documentation, and credit reference letters. In some cases, letters from personal lenders or documents from a car loan can be used. Be sure to clarify what the landlord needs when applying for an apartment. It’s also helpful to pull together the documents ahead of time, so you can pull together references for multiple apartments at once.

When You Need Credit References

At the end of the day, landlords want to know if you’re able to pay rent. Getting an apartment rental is a business transaction — between two strangers. Credit needed for an apartment plays a key role in rental applications.

Why Landlords Want Credit References

A credit reference is proof of your financial history. They detail how much debt you have, how timely your payments are, and your credit score, among other factors.

For instance, if your credit references show that you’ve been able to pay off your debts in full in a timely manner, a landlord will likely approve your rental forms.

Applicants with less than stellar credit scores or poor payment histories have lower chances of being approved.

Recommended: Does Net Worth Include Home Equity

Types of Credit References

As mentioned, credit references come in different forms, like credit reports, character references, or formal letters from bank loan officers.

Credit Report

The most available type is a credit report. Three major credit boroughs provide credit reports: Equifax, Experian and TransUnion. They are the most used credit bureaus and are required to give a free credit report every 12 months. The credit scoring system, FICO, is used in all three, and differs minorly.

Credit reports contain information like your credit history, current debt, bankruptcies and foreclosures. It can also include the age of your debt and how many credit inquiries you’ve had. Importantly, it’ll also contain your credit score, ranging from 350 to 850.

Landlords will look at this report to determine the financial risk of each applicant. Generally speaking, a credit score of 680 or higher is considered acceptable, though requirements may vary based on the lender or circumstances. Another factor that can impact your credit score and report is the number of inquiries into your credit history. If there are a lot of inquiries it can be perceived as a negative detail by lenders because it has the potential to indicate that you may be struggling financially. Some rental applications will include a fee for running the credit check.

Bad or no credit may give a landlord pause — but it may be possible to strengthen your case.

Recommended: What is The Difference Between Transunion and Equifax

Asset Documentation

Asset documentation is proof of income, liquid cash, or investments. It shows landlords that you are financially stable and able to handle unforeseen circumstances, like a job loss.

Your landlord may request a verification letter from your employer, pay stubs, or an offer letter to prove income. You may also have to provide documentation of your savings or investment funds like mutual funds or retirement plans. Reach out to your financial institution or brokerage to provide you with documents of your accounts.

The more assets you have, the stronger your application will be.

Recommended: What Credit Score is Needed to Buy a Car

Character and Credit Reference Letters

Credit reports and asset documentation only tell part of the story. A character or credit reference letter may give context to a spotty part of your credit history. Someone who you’ve had financial transactions with, such as an employer, previous landlord, or business partner — can write a letter confirming your character and values. For example, if you went through hardship, such as a medical illness, but still met your financial obligations, someone such as a landlord can vouch for you.

If you have bad credit, for example, an institution can demonstrate if you have taken courses, been given resources such as a debt payoff planner, or worked out a new payment plan to successfully pay off your debt. It demonstrates a commitment to improving personal finance.

Don’t be afraid to ask for a reference letter — many may be willing to write on your behalf. Remember, however, that these types of letters are not as concrete as credit and asset reports. They work better as supporting documentation.

Financier Support Letters

If you have troubled credit history, a financier support letter from a cosigner on a lease can help. These letters are typically for business owners who need to prove they have the capital to meet rent or buy.

For a lessee, a guarantor would write a letter with context on how they can support your rent if needed. It’s helpful in case you have an adverse credit history. For business owners, the letters would be obtained from financial institutions or financial partners backing a business lease or purchase.

Credit Reference Examples

If a landlord requests written credit reference letters, have a list of people in mind who can type up a quick letter. You could also ask them to type up a generic letter that you can use across multiple applications. Sometimes a property management company or landlord will have their own template — so be sure to clarify which format is acceptable.

A credit reference letter can be brief. But it must include key details such as:

•   Reference full name and contact information

•   Length of relationship

•   Payment history

Additional details may be requested depending on what your landlord requests. Below is a sample template:

   “Dear [Landlord Name]:

   I have known Ben as a tenant for three years. He paid rent ahead of time, was quiet, respectful, and took care of our property. Also, he ended his lease in search of a bigger space. He got his deposit returned in full — so he’s highly recommended as a tenant.”

If you do not have a history of renting, you can ask a financial institution to vouch for you. Here’s an example letter:

   “[ABC Bank] lent $30,000 to Tina Jones in 2004. She made her payments on time and paid off the loan ahead of schedule in 2007.”

If you’re still short a reference, try an employer to vouch for your stability at your current job:

   “Tim has been an employee of ACB Company for 3 years and has been promoted once. Her current salary is $92,000. She’s responsible and puts our clients’ interests first. She will make a great tenant.”

There are even more resources available online such as those offered by Property Club NYC .

How to Secure a Credit or Character Reference Letter

Before you send a mass email to all your contacts…confirm with your landlord what details are needed. If there’s a template letter, that works even better. Once details are confirmed, reach out to your contacts. Be sure to provide them with all the information they need to include in the letter.

There’s no formal process to request a letter from financial institutions. You can go in-person to speak to a banker who can provide you a letter or you can call your bank and ask how to obtain one.

How to Improve the Chances of Getting a Letter

Consider authorizing your institution to release personal information while you are actively applying for rentals. Not doing so could cause delays as the letter goes through the chain of command.

The Takeaway

Landlords want to see that you earn income and honor your debts. Credit references are formal documents that support your claim. They come in the form of concrete records from credit bureaus to character reference letters from employers who esteem your character and prove you have sufficient income.

The ways to obtain these records differ by institution. Credit bureaus are required to provide free reports to individuals yearly. Financial institutions can issue letters — but your best bet is calling or visiting in person to discover next steps. Finally, individual reference letters from former landlords or employers are also valid.

If budgeting is not your strong-suit, a money tracker app can help. SoFi’s Insights app tracks all of your bank accounts and debt accounts in one place. You can see how much you spend in different categories, like restaurants and necessities. And, there is credit score reporting at no cost to you. Best of all, it’s free. Download the app to learn more.

FAQ

What do I put as a credit reference?

That depends. Ask your landlord what documents he or she requires for a reference. It can mean a credit report, bank statements, character reference — or all three.

Who counts as a credit reference?

A credit reference can be someone from a tenant-landlord or business relationship. It can be a representative at a bank who can give a formal written letter of loans or accounts you have with them. It can be a former landlord who can recommend you for being an outstanding tenant. Or, if you have limited or no credit history, a reference can be a current or former employer who can recommend you for strong character.

Why do I need a credit reference?

Most property management agencies or landlords require credit references in order to approve a tenant application. This gives them an idea of your financial history and whether you’ll be able to and willing to pay rent on time.

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Photo credit: iStock/damircudic

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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

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

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.

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The average net worth of Americans is $748,800, according to the Federal Reserve’s most recent Survey of Consumer Finances released in September 2020. Meanwhile the median net worth of American households is $121,700, according to the same Federal Reserve Survey.

Net worth measures the difference between assets (what you own) and liabilities (what you owe). Understanding the average American net worth by age can be useful for comparing your own progress in building wealth.

Recommended: Does Net Worth Include Home Equity

What the Average American Net Worth 2022 Includes

The Federal Reserve collects data on net worth in the U.S. using the Survey of Consumer Finances. This survey is conducted every three years, with the most recent undertaking beginning in March 2022. Findings are typically published in the year following the year the survey was completed.

To understand wealth and economic well-being in the U.S., the Federal Reserve looks at several specific factors:

•   Income

•   Homeownership status and home value

•   Debt (including mortgage debt, credit card debt, vehicle loan debt, and student debt)

•   Assets (including investment accounts, deposit accounts held at banks, vehicles, and business equity)

The Federal Reserve uses net worth as a gauge to measure increases or decreases in overall wealth levels. The Survey also takes into account demographic factors, such as age, race, ethnicity, and level of education.

If you’re interested in calculating your net worth, you’d use similar metrics. For example, you could use an online net worth calculator to enter in your total debts and assets to determine your net worth. When calculating net worth home equity may or may not be included, depending on your preferences. It’s possible to get a positive or negative number, depending on how your liabilities compare to your assets.

Recommended: What Credit Score is Needed to Buy a Car

How the Average American Net Worth Varies By Age

Using the Survey of Consumer Finances as a guide, net worth rises over the average American’s lifetime before gradually beginning to decline. Average net worth is lowest for Americans under age 35; between the ages of 35 and 44, the average net worth makes a sizable leap.

There’s another significant bump that happens between the ages of 45 and 54, then the pace at which net worth increases begin to slow. Once Americans turn 75, their average net worth begins to decline.

This pattern makes sense, however, if you consider what the typical person’s working career and retirement might look like. Someone in their 20s likely isn’t making much money yet. They probably don’t own a home and a lot of what they do make might go to repaying student loans, car loans, or credit cards.

In their 30s and 40s, they may move into higher paying jobs. Their debts may be mostly paid down or paid off so they can afford to buy a home. By the time they reach their mid-40s, they may be in their peak earning years and their home might have appreciated in value since they purchased it.

Net worth growth begins to gradually slow down once they’re in their 50s and 60s. That could be chalked up to moving some of their portfolio into safer investments or beginning to draw down their savings if they’re retired. Once they reach their 70s, they may be spending more of their assets on health care, including long-term care. Or they might have downsized into a home with a lower value.

Age Range	Average Net Worth
Less than 35	$76,300
35-44	$436,200
45-54	$833,200
55-64	$1,175,900
65-74	$1,217,700
75+	$977,600

How the Average American Net Worth Varies Over Time

The Survey of Consumer Finances provides a snapshot of how the average American net worth has changed over time. From 1998 to 2007, for instance, there’s a steady increase in net worth among American households. But between 2007 and 2013, the average American net worth declined. This makes sense, given that the 2008 financial crisis had an impact on millions of American households. Between 2013 and 2019, net worth rebounded sharply.

This begs the question of how much net worth might change again if the economy were to experience another downturn. If home values were to drop or a bear market caused stock prices to dip, it stands to reason that Americans’ might see their net worth fall. There is a silver lining, as economies do recover over time and the impacts may be less for younger investors. But a drop in net worth might not be as welcome for someone who’s close to retirement.

Survey of Consumer Finances Year	Average American Net Worth
2016 – 2019	$748,800
2013 – 2016	$692,100
2010 – 2013	$534,600
2007 – 2010	$498,800
2004 – 2007	$556,300
2001 – 2003	$448,200
1998 – 2001	$395,500

How the Average American Net Worth Varies by State

The Survey of Consumer Finances does not track net worth data by state. But the Census Bureau does compile information on household wealth and debt at the state level.

In terms of what influences the average net worth by state, there are a number of factors that come into play. Some of the things that can influence net worth include:

•   Homeownership rates

•   Property values

•   Employment opportunities

•   Average incomes

•   Access to education and job training

According to the Census Bureau, the median net worth across all states was $118,200 as of 2019. “Median” represents households in the middle of the pack, so to speak, for net worth calculations. Here’s what the median net worth looks like in each state.

State	Median Net Worth	State	Median Net Worth
Alabama	$85,900	Montana	$190,300
Alaska	(B)*	Nebraska	$99,520
Arizona	$126,100	Nevada	$93,920
Arkansas	$49,990	New Hampshire	$243,600
California	$200,300	New Jersey	$195,200
Colorado	$217,900	New Mexico	$56,450
Connecticut	$173,500	New York	$123,900
Delaware	$143,700	North Carolina	$108,400
District of Columbia	$24,000	North Dakota	$241,000
Florida	$95,770	Ohio	$102,800
Georgia	$110,000	Oklahoma	$80,790
Hawaii	$373,200	Oregon	$183,200
Idaho	$182,400	Pennsylvania	$137,800
Illinois	$103,500	Rhode Island	$83,790
Indiana	$84,620	South Carolina	$81,150
Iowa	$152,800	South Dakota	$216,600
Kansas	$77,010	Tennessee	$70,100
Kentucky	$73,150	Texas	$90,390
Louisiana	$84,850	Utah	$170,900
Maine	$107,400	Vermont	(B)*
Maryland	$194,700	Virginia	$148,400
Massachusetts	$251,000	Washington	$170,400
Michigan	$117,600	West Virginia	$65,920
Minnesota	$228,500	Wisconsin	$110,400
Mississippi	$40,280	Wyoming	$171,600
Missouri	$70,220

^*Note: Where a (B) is entered, that means the base was less than 200,000 households or a sample size of less than 50 so the Census Bureau did not record net worth information for those states.

Recommended: What is The Difference Between Transunion and Equifax

The Takeaway

As discussed, net worth captures the difference between an individual’s assets and their debts. In the U.S. the average net worth varies by location and age. Tracking net worth is something you may want to do monthly if you’re paying off debt. You can use a money tracker app to figure out how long it will take you to become debt-free based on what you can afford to pay. As your income increases you may be able to pay down debt in larger amounts to increase your net worth faster.

You can also use a budget planner app to track net worth, spending, credit scores, and saving in one place. That’s something you can do with SoFi. This free money management tool delivers a snapshot of your finances to your mobile device whenever you need it.

Get started with SoFi today.

FAQ

What is the average net worth by age for California?

The median net worth for Californians is $200,300, according to the Census Bureau. This figure represents the middle ground between California residents of all ages from the highest net worth to the lowest.

What is the average net worth by age for New York?

The median net worth for New Yorkers of all ages is $123,900, according to the Census Bureau. This figure represents the middle ground between New York residents whose net worth is at the highest and lowest end of the spectrum.

What is the average net worth by age for Florida?

The median net worth for Florida residents of all ages is $95,770, according to the Census Bureau. This amount represents the middle ground between Floridians with the highest and lowest net worth.

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Photo credit: iStock/Prostock-Studio

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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.

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One downside of leaving a traditional 9-to-5 for a life of self-employment is navigating your personal finances as a sole proprietor. From invoicing, to estimating taxes, it’s all on you — because you’re the boss now.

Qualifying for a personal loan while self-employed could also present some challenges. Self-employed individuals may have a need for a personal loan, but may find it difficult to produce traditional documentation, like W-2s or pay stubs, used to verify income. But, there may be options to fit your loan needs after all.

How to Get a Personal Loan if You’re Self-Employed

A brief personal loan explanation — a personal loan is a type of installment loan that can be used for nearly any personal expense, including home improvements, a work sabbatical, or consolidating your credit card debt. If you’re considering making a big purchase, like buying an engagement ring, a personal loan can be an alternative to using a credit card, if you don’t have the means to pay the balance off right away.

Personal loans are typically unsecured, meaning a lender won’t require collateral. Though they can also be secured, usually by the asset purchased with the loan. Unsecured loans are usually approved based on the financial standing of the borrower, and typically include their credit history and current income.

Lenders often evaluate a potential borrower’s income as a major factor in their decision-making process. Those who are self-employed may find this a tad more challenging than someone who works a traditional job with regular payments.

Self-Employed Loan Requirements

Loan requirements for self-employed individuals will be similar to the typical loan requirements as determined by the lender. In addition to evaluating factors like the applicant’s credit score, many lenders will require proof of income.

Traditional documentation used to verify income includes pay stubs and W2s. However, self-employed people may have some difficulty producing these documents, because they often aren’t W2 employees. It is possible for self-employed individuals to show proof of income, but it may require a little more legwork.

In general, lenders are looking for borrowers who have income stability and it can help if the borrower has been working in a single industry for at least two years. A short employment history could indicate that you are a borrowing risk.

Recommended: Typical Personal Loan Requirements Needed for Approval

Showing Proof of Income When Self Employed

Those who are self-employed have a couple of options for showing a lender they have sufficient and reliable income. Here are a few options that self-employed individuals could provide as documentation to prove their income.

Tax Statements. Self-employed individuals can use tax statements, like their 1099 to offer proof of income. This form should outline your wages and taxes from the previous year. Lenders often view tax documents as a reliable source of income proof because they are legal documents.

Bank Statements. Bank statements could be used if there is a regular history of deposits that illustrate consistent income.

Profit and Loss Statement. This document provides an overview of your costs, expenses, and revenue.

Court-ordered agreements. These may include things like alimony or child support.

Keep in mind that each lender will likely have their own application requirements, so be sure to read those too. Contact the individual lender if you have specific questions on the types of documentation they’ll accept.

Consider Having a Cosigner

In the event that you are still struggling to gain approval for a personal loan with your self-employed proof of income, one option is to consider adding a cosigner. A cosigner is someone who agrees to pay back the loan should you, the primary borrower, have any trouble making payments.

A cosigner can be a close friend or family member, ideally one who has a strong credit history who will strengthen your loan application.

Ready to Improve Your Financial Life?

Personal loans can be useful for those who are looking to consolidate debt, cover the cost of an emergency expense, or pay for other personal expenses like a home renovation or wedding costs. The personal loan average interest rate is lower than the average credit card interest rate.

If you’re interested in a personal loan be sure to shop around to compare the interest rates and terms available to you at various lenders. Look into any fees, especiallying prepayment penalties if you are interested in paying your personal loan off early. As you browse, consider SoFi’s Personal Loans, which have no fees required and offer competitive interest rates to qualifying borrowers.

Why It’s Difficult for the Self-Employed to Get a Personal Loan

It can be more challenging for self-employed individuals to provide proof of income to lenders, which can make it more challenging for them to get approved for a personal loan. But it’s important to note that each loan application is unique, and employment status is just one consideration.

For example, a self-employed individual who has a stellar credit history and who has been self-employed for a few years may be in a better position to apply for a personal loan than someone who has just transitioned into managing their own business.

The Income Challenge

Proving consistent and stable income is the biggest challenge for self-employed individuals. Because you are not guaranteed the same payment each pay period, lenders may request specific documentation in order to verify the fact that you have enough cash coming in to pay for the personal loan. Some lenders may request tax returns for several years in order to verify your income.

Consistency Matters

Consistency in income is another major hurdle for the self-employed. It’s not uncommon for self-employed people to experience fluctuation in their income. While some slight fluctuation may be acceptable to a lender, for the most part they are looking for consistent payments and it’s even better if there is an increasing trend over time.

Personal Loan Alternatives When Self-Employed

Personal loans aren’t the only option for self-employed individuals looking to borrow money to pay for expenses. Other options to consider a credit card, cash advance, or a home equity loan.

Credit Cards With 0% APR Promotions

Credit cards can have high-interest rates, but with a 0% APR promotion, a credit card could be a great tool to pay for an upcoming expense. Just be sure to pay off the credit card before the promotional period ends and interest starts accruing.

Recommended: Average Credit Card Interest Rates

Cash Advances

A cash advance is a short-term loan generally offered by your credit card which allows you to borrow cash against your existing line of credit. Cash advances can provide an avenue for you to get quick access to cash, but there may be additional fees and a high-interest rate for borrowing. Be sure to read all the terms and conditions outlined by your credit card company before borrowing a cash advance.

Home Equity Loans or HELOCs

If you are a homeowner, you can tap into the equity you’ve built in your home using a home equity loan or home equity line of credit (HELOC). A home equity loan is an installment loan where the borrower receives a lump sum payment and repays it in regular payments with interest.

A HELOC is a revolving line of credit that the borrower can draw from, and once it is repaid, continue drawing from during a specified period of time.

Recommended: Different Types Of Home Equity Loans

Business Loans

Small business loans can be used to pay for business expenses. Self-employed individuals may be able to qualify for loans from small business administration, banks, or even some business credit cards.

It is important to keep your personal and business expenses separate as a self-employed person. If you are using the money for a personal expense, however, avoid borrowing a business loan and vice versa.

The Takeaway

The challenge for self-employed individuals applying for a personal loan will generally be providing proof of income. Alternatives to traditional proof of income documents include tax or bank statements.

SoFi understands that a full-time job isn’t the only qualifier of financial stability. SoFi will also consider factors like your credit score, education, and whether you have a cosigner. Loan eligibility depends on a number of additional factors, including your financial history, career experience, and monthly income versus expenses.

Getting a personal loan when you’re self-employed doesn’t have to be a huge headache. Check out SoFi personal loans today.

FAQ

Can you get any loans if you’re self-employed with no proof of income?

It is possible to get a loan if you are self-employed, however with zero proof of income it may be challenging to gain approval for a loan. To improve your odds of approval, you may consider adding collateral to the loan or applying with a cosigner.

Are there any loans for self-employed people with bad credit?

While a strong credit history can help strengthen a loan application, it’s not impossible to qualify for a loan with bad credit. If you can show a consistent and stable income history, that could help improve your application. If that’s not enough, another option may be to add a cosigner.

Can self-employed freelance workers get personal loans?

Yes, self-employed freelance workers can qualify for a personal loan. Instead of providing W-2 documents to verify their income, they will need to provide alternatives such as tax documents or bank statements. Applicants who have been working in a specific industry as a freelancer for two years or more may be viewed more favorably by lenders. Those with a strong credit score and history may qualify for more competitive rates and terms.

If a self-employed freelancer is struggling to get approved for a personal loan they could consider adding a cosigner to help strengthen their application.

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

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

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

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

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At some point, there may come a time when you need to ask the question: Does filing for unemployment benefits affect your credit score? The answer is no, fortunately.

Losing your job can be like a kick in the stomach — it can deflate you, and leave you scrambling to figure out what to do next. That last thing that many people need, in addition to firing up a job search, is a hit to their credit score, too. If you do lose your job, many financial professionals will tell you that the first thing you should do, if you qualify, is to file for unemployment so that you still have some income as you revise your resume and start interviewing.

The good news, again, is that you don’t need to worry about a potential ding to your credit, though. More information below!

Recommended: What Credit Score is Needed to Buy a Car

Why Your Credit Score Matters

Your credit score is, in a sense, your financial reputation. It can give lenders or creditors a quick and easy summary of your creditworthiness — or, how likely it is you are to pay back a loan on time and in full. Everyone has a credit report, and you can think of your credit score as a truncated version, or sort of like a Cliff Notes, to your credit score.

So, why does your credit score matter, then? Because it’s used by lenders to gauge how risky you are as a borrower. It’s used to measure not only whether a lender would be willing to give you a loan, but how much they’d charge you for the privilege; or, what the effective interest rate would be for borrowing.

When it comes to some of life’s bigger purchases, such as a car or a home, that can be very important. A couple of percentage points can mean that a borrower ends up paying tens, or even hundreds of thousands of dollars more in interest over the years. As such, when a lender sizes up your credit application and takes a look at your credit score, the higher, the better.

As for what factors affect your credit score? It’s a mixture of things: Your payment history, total debt balances, credit utilization, credit history (how long you’ve had accounts), credit mix, and inquiries from lenders.

Recommended: Should I Sell My House Now or Wait

Unemployment Won’t Appear on Your Credit Report

Again — you may be concerned that if you lose your job, filing for unemployment may affect your credit score. And, again, there’s no cause for concern. Not only will filing for unemployment not affect your credit score, it also won’t appear on your credit report. Your credit report contains information relating to your past borrowing activity, not your employment status.

So, unless there’s been a change in your credit history — say, you apply for a new line of credit, or close an old credit card — your credit report won’t change. That said, your credit report may contain information relating to past employers, but the only thing that should have an effect on your credit score will be items relating to financial accounts.

That may become an issue if, say, you were issued a company credit card at a previous job. But for most people, your employment status, or past employers, aren’t likely to have an impact on your credit report or credit score.

Remember: Your credit score is a snapshot of your financial reputation, not your employment status!

How Unemployment Can Affect Credit Scores Indirectly

With all of that in mind, your employment status — or filing for unemployment — may have an effect on your credit score in an indirect way.

As mentioned, your employment status isn’t a part of your credit score’s calculation, and neither is whether or not you received unemployment assistance. It’s really all about paying back or down your debts, on time, and on schedule. As such, if you do lose your job and file for unemployment, you may find yourself in an income crunch; your unemployment check is most likely going to be smaller than the paycheck you’re accustomed to receiving, and that may make it difficult to keep up with your payments.

You may also be tempted to start using your lines of credit more while unemployed as a way of making ends meet. For example, you might start using your credit card at the grocery store as a way of keeping money in your bank account, with the thought that you’ll pay off your balance once you get another job and a regular paycheck again. Some individuals may also look into personal loans for unemployed persons, too.

That logic may not be faulty, but doing so, you will increase your credit utilization and overall debt, which can lower your credit score.

Finally, if you find that you can’t keep up with your minimum payments due to the resulting cash crunch of losing your job, that, too, will ding your credit score. That’s why it’s important to maintain a line of communication with lenders. If you can’t make your payment, let them know, and they may be willing to work with you.

And, remember, if you do have a company credit card or some other type of financial account with an employer, and you lose your job, that credit line could be severed. That, too, could affect your credit score, as it ultimately lowers your total available credit.

Recommended: What is The Difference Between Transunion and Equifax

How to Protect Your Credit Score When Unemployed

As for protecting your credit score while unemployed, the most important things you can do are to try and keep your debt balances low and to keep an open line of communication with your creditors. Of course, a loss in income will probably spur you to change your spending habits (by cutting back in certain areas), but in terms of maintaining your credit score, the best course of action is to keep doing what you’re doing: making your payments.

That means continuing to make your payments (at least the minimum) as scheduled. And, since it bears repeating, if you’re going to struggle to make those minimum payments, call your lender and let them know. Some will be willing to make accommodations (forbearance, extensions, etc), perhaps by deferring payments, although there’s no guarantee.

If you feel that you need more help, you can also work with a credit counselor to help you evaluate your options, and even negotiate with your lenders. You may also want to set up free credit monitoring, too, so that you can see any changes to your score. A money tracker app may be helpful as well.

The Takeaway

If you lose your job and file for unemployment, there shouldn’t be a direct effect on your credit score. That said, there may be indirect factors that could lower your score, but the most important thing you can do to maintain a strong credit score is to keep making your payments, and try to keep your debt balances (or credit utilization) to a reasonable level.

And remember that if you’re really struggling, it may be worth it to reach out to a professional for personalized advice. SoFi can help. Track your money, monitor your credit, get a breakdown of your spending, and more all in one place.

FAQ

Can I apply for a credit card when I’m unemployed?

It’s possible to get a credit card while unemployed, but keep in mind that a creditor’s main concern is whether or not you can make your payments. As such, your approval for a credit card may hinge on your income and other debts or financial obligations.

What If my credit score goes down?

Credit scores go up and down all the time, but if you do experience a fall in your credit score while unemployed, you’ll likely know why — and it’s probably because you missed payments or saw your credit utilization go up. The good news is that you can always work on increasing it again!

What personal information does your credit report include?

The short answer? A lot of it. That includes your name, aliases, birth date, Social Security number, address (and former addresses), phone number, and possibly your employment history, among other things.

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Photo credit: iStock/sorrapong

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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

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

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.

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