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If you’re a consumer in the United States who has a credit history, then you probably have a credit score. More than one, in fact.

FICO® Scores are far and away the most widely used, as 90% of lenders rely on them to assess a borrower’s creditworthiness. That said, there’s no single credit score that matters the most. Lenders can and do use a variety of credit scores to determine whether to approve your application for credit and what terms to offer you. Whether you’re looking to make a major purchase or focused on building up your credit profile, it’s a good idea to understand the different types of credit scores out there and how to keep tabs on yours.

Types of Credit Scores

You may have noticed that your credit score varies depending on which website you visit. That’s perfectly normal. As mentioned, anyone with a credit history probably has more than one score.

One reason for this is that the three main credit bureaus — Equifax®, Experian®, and TransUnion® — may each receive slightly different information from lenders. As a result, your score could vary by bureau.

In addition, there are multiple different ways to calculate a credit score based on the information available. That’s why there’s sometimes a gap between your VantageScore vs. FICO scores.

This can be an important difference to understand, since VantageScores are often the credit scores available for free through online platforms. You may sometimes see one credit score (your VantageScore) when you get a free credit report but then be surprised to learn when you apply for a credit card or loan that your FICO Score is different.

Recommended: FICO Score vs. Your Credit Score

How FICO Works

Generally speaking, your FICO Score is calculated based on the following factors and their relative weights:

•   Payment history (35%): This reflects how often you’ve made on-time payments on your debt. Late or missed payments or accounts sent to collections can negatively impact your score.

•   Amounts owed (30%): This is your credit utilization ratio, or the amount of available credit that you’re using. Ideally, the lower the better, but aim to keep this ratio below 30%, which is when it can start to significantly impact your score.

•   Length of credit history (15%): This looks at the average length of your credit accounts. Typically, a longer history is a sign to lenders that you have more experience successfully managing your debt.

•   New credit requests (10%): When you open a credit account, the lender may do a “hard” credit inquiry, which could cause your score to temporarily drop.

•   Credit mix (10%): This refers to the mix of credit types in your portfolio, which may include credit cards, car loans, or other types of credit.

How Experian Works

As one of the three main credit reporting bureaus in the U.S., Experian collects information about your credit accounts and payment history and includes those details in your Experian credit report.

The bureau does make it possible for you to access your FICO Score for free, though it also offers a paid membership that provides credit score monitoring for all three bureaus.

How Equifax Works

Equifax is another U.S. credit reporting agency that offers similar services to Experian.

Again, while you’ll likely have a credit report from both Equifax and Experian, the scores may differ slightly based on the information each bureau has collected. It’s worth noting that Equifax also allows you monthly access to your VantageScore credit score based on the agency’s data.

Which Credit Score Bureau Is Best?

There’s no one “best” credit score bureau. All three bureaus collect consumer information and produce credit scores.

When you want to look at your credit report, it’s a good idea to request a copy from each of the bureaus. That’s because lenders may choose to pull your credit report from any one — or all — of them. By checking all three scores, you can be aware of negative information that affects your credit score and have a chance to correct any inaccuracies you see.

Recommended: Why Does Creditworthiness Matter?

How Can You Obtain Your Credit Score?

You have several options when it comes to accessing your credit score. You may be able to see it on your credit card statements or when you bank online. You can use free credit score websites or purchase your score from a credit bureau.

MyFICO offers a free service that allows you to check your FICO Score and receive your Equifax credit report each month. You can also pay for a plan that includes three-bureau credit report access, identity theft insurance, and more.

Another avenue to consider: A spending app, which often offers credit scores. Unless otherwise indicated, you’ll likely be seeing your VantageScore credit score.

Remember, credit scores update about once a month, or roughly every 30-45 days for FICO Scores, so it’s a good idea to check yours every so often.

How Can You Obtain Your Credit Reports?

While your three-digit score is a great way to see how your credit is faring, the best way to fully understand everything in your credit history is to read the full credit report. If you see any information that looks suspicious or incorrect, you can file a dispute directly with the credit bureau to have it removed.

Every American is entitled by law to pull their credit reports from all three bureaus for free once a week via AnnualCreditReport.

What Is a Good Credit Score Range?

FICO Scores range from a low of 300 to a maximum of 850. (That’s right: The starting credit score is not zero.) Here’s how FICO categorizes scores:

•   300-579: Poor

•   580-669: Fair

•   670-739: Good

•   740-799: Very good

•   800-850: Exceptional

If your score is lower than you’d like, be aware that it can take some time to build credit.

One great way to build your credit is to try to lower your overall credit card utilization. This means paying down your debt, particularly balances on revolving debt. And because on-time payments count for such a heavy part of the score, keeping up with your bills each and every month can also be a big help.

Finally, try not to sweat every fluctuation. Sometimes, filing a dispute or multiple hard inquiries in a short time frame can ding your score, but those dips tend to be temporary.

The Takeaway

If you have a credit history, then you likely have more than one credit score. So which credit score matters the most? Short answer: whatever score the lender uses when considering your application for credit. Generally, FICO Scores are used in most decisions, though each lender has its own policies around which scoring model and version to use.

Regardless of the scoring model, staying on top of your bills, paying down debt, and regularly reviewing your credit report can help ensure you’re on firm financial footing.

Take control of your finances with SoFi Coach. You can easily view all of your accounts in one convenient dashboard: bank and investment balances, current debts, spending breakdowns, and credit score. Easily set up budgets and spot upcoming bills. And get personalized insights on everyday money questions and take action with Coach chat, the AI guide that’s powered by the playbooks of SoFi Financial Planners, so its guidance comes from expert knowledge.

FAQ

Is FICO or TransUnion more accurate?

FICO and TransUnion serve different purposes. FICO is a credit scoring model that uses a proprietary algorithm to calculate credit scores. TransUnion is one of the three major credit reporting bureaus in the United States that collects credit information about consumers from lenders and creates credit reports.

Do lenders look at FICO or TransUnion?

What a lender reviews — whether it’s just your credit score (like your FICO Score) or your complete credit report (like one from TransUnion) — usually depends on the type of credit you’re applying for. For smaller lines of credit, such as a credit card, they may only check your score. But for larger loans, such as a mortgage, they’re more likely to dig into your full credit history.

Why is my FICO score 100 points lower than Credit Karma?

Credit Karma provides its users free access to their VantageScore, which is calculated using a different algorithm than the FICO Score. If your score on Credit Karma is different from your FICO Score, it’s likely because of the different calculations.

What is a good FICO score?

According to FICO, a “good” credit score falls between 670 and 739. Credit between 740 and 799 is considered “very good,” while credit scores of 800 and above are considered “exceptional.”

Do lenders use FICO or Vantage?

The majority of U.S. lenders use FICO Scores to assess a potential borrower’s creditworthiness. However, a VantageScore is what you’re more likely to see on many web platforms that offer free credit scores.

Photo credit: iStock/tolgart

This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

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

SORL-Q426-031

According to 2025 data from Experian®, the average credit score for a 24-year-old is 678. That’s three points lower than the 2024 average, but it’s still considered a “good” FICO® Score.

Here, this article will walk you through the ins and outs of how your age can impact your credit score, how a 678 stacks up against the average score in the U.S., and ways to build your score over time.

Average Credit Score for a 24-Year-Old

As mentioned, the average credit score for a 24-year-old is 678, which the credit scoring model FICO classifies as “good.” With that score, you’re likely to qualify for an array of loans and credit cards, though you may not get the best interest rates and terms.

But take heart: Credit scores tend to build with age. According to Experian data, the average credit score for millennials (ages 29-44) is 689. Gen X (ages 45-60) has an average score of 709, while members of the Silent Generation (ages 80+) boast a 760 score.

What Is a Credit Score?

A credit score is a three-digit number that ranges from 300-850. It helps lenders and creditors gauge your creditworthiness, or the likelihood that you’ll pay back the money you borrowed. Generally speaking, the higher your score, the greater your chances of being approved for a credit card or loan.

Two common credit scoring models are FICO and VantageScore®. Most lenders use FICO. Though both models create scores based on similar key factors, the breakdown of scores is slightly different.

FICO Score

•   Exceptional (or excellent): 800-850

•   Very good: 740-799

•   Good: 670-739

•   Fair: 580-669

•   Poor: 300-579

VantageScore

•   Superprime: 781-850

•   Prime: 661-780

•   Near prime: 601-660

•   Subprime: 300-600

Recommended: FICO Score vs. Credit Score

What Is the Average Credit Score?

According to the latest Experian data, the average FICO credit score in the U.S. is 714 — 36 points higher than the average 24-year-old’s score. And as of August 2026, the average VantageScore is 701. Both scores are well within the “good” or “prime” range and could help borrowers qualify for favorable loan and line of credit terms.

Average Credit Score by Age

Age doesn’t necessarily determine your credit score. But as the chart below shows, the older you are, the more likely you are to have a higher score.

This makes sense. When you’re just starting out — as many 24-year-olds are — you may not have a long credit history. Plus, you might experience greater financial ups and downs as you find your professional footing, and this could impact your ability to pay off debts.

What’s a Good Credit Score for Your Age?

As mentioned, the average credit score for a 24-year-old is 678. But remember, that’s just an average. No matter how old you are, FICO defines a “good” credit score as anywhere between 670 and 739. If your score falls within that range, your finances are likely in a sound place.

It’s worth noting that when you’re starting out, you may not have a credit score. Your credit history typically starts when you take out your first line of credit, and it normally takes around six months or so for credit bureaus to collect enough information for your starting credit to be calculated.

Though it can vary, a starting credit score may be anywhere from 500-700. You can gradually see it rise as you continue to bolster your credit.

How Are Credit Scores Used?

Credit scores are used in several ways. Lenders and creditors review your credit when you apply for a card or loan to help determine whether you qualify for financing. As you might expect, the higher your score, the greater your odds of getting approved for a credit card or loan with more favorable terms and rates.

But credit scores can also play a role in unexpected ways. For instance, this three-digit number could help determine how much you pay for insurance premiums or whether you’re approved to rent a home. And some potential employers might review your score during a routine background check.

Factors Influencing the Average Credit Score

To steadily build your credit score, it helps to understand the five key factors that influence it the most. Here’s a closer look at each component and how much it counts toward your overall score:

•   Payment history (35%): Your track record of bill paying has the biggest impact on your FICO Score, so aim to pay your bills on time, every time. A spending app can help budget for the payments.

•   Credit utilization (30%): Also known as credit usage, this is how much credit you’re tapping into against the total amount available. Try to keep your credit card utilization low, as ringing up a too-high balance might signal to lenders and creditors that you’re spread thin financially.

•   Length of credit history (15%): A longer credit history shows lenders that you have a solid track record of using credit. Generally, the older the average age of your credit accounts, the higher your score tends to be.

•   Credit mix (10%): Having a diverse mix of credit can signal that you can responsibly manage different forms of debt. That said, you’ll want to only apply for the financing you need.

•   New credit (10%): When you apply for credit, a lender performs a hard credit pull, which can ding your credit score by a few points. Though the dip is temporary, it could stay on your credit report for up to a year.

How to Strengthen Your Credit Score

If you’re in your 20s, you might be in the early phases of understanding how long it takes to build credit. Here are a few things you can do to gradually build your credit score.

Stay on Top of Payments

As discussed, your payment history has a major impact on your credit score. Consider setting up automatic payments or changing your due dates to a time of the month that works better for you. For example, if the main cluster of bills is due at the top of the month, schedule your monthly credit card payments so they fall after your second paycheck. A money tracker app can help you keep track of payments so you won’t miss a due date.

Keep Credit Usage Low

If you have a credit card balance, try to ensure your credit utilization doesn’t exceed 30%. For instance, say your credit limit on all your cards is $2,000. To maintain a 30% credit usage, you’ll want to carry a balance no larger than $600.

If you want to see whether your hard work is paying off, you can check your credit score for free.

Limit New Credit Applications

There are reasons why you should avoid applying for unnecessary credit. For starters, a lender will likely do a hard inquiry with each application, which can temporarily ding your score. Also, applying for multiple lines of credit within an extremely short time frame could signal to lenders that you’re financially strapped.

There is an exception: If you shop for an installment loan, such as a car loan or mortgage, lenders give you anywhere from 14-45 days to shop for rates. The hard pulls generally count as a single inquiry when you are rate shopping.

How Does My Age Affect My Credit Score?

While age doesn’t factor into your credit score, you may notice that your three-digit number may increase as you get older. This is because, as you age, you’ve had more time to establish an account history and may have an easier time managing your debt obligations.

What Factors Affect My Credit Score?

As discussed, the top factors impacting your credit score are payment history, credit usage, length of credit history, credit mix, and new credit.

If you’ve made some financial blunders and want to build your credit, work on fixing the areas that have negatively impacted your score the most. So for example, if you’ve fallen behind or missed payments, you’ll want to start paying bills on time.

Keep in mind that boosting credit doesn’t happen overnight. Your credit score updates every 30-45 days, so resist the urge to constantly check on your score. Instead, you’d be better off focusing on strategies that build up your credit.

At What Age Does Your Credit Score Improve the Most?

According to Experian data, the biggest jump in credit scores tends to happen in your 60s. But again, the longer you’ve been responsibly managing an account, the higher your score will likely be.

How to Build Credit

There are several ways to build your credit. Here are a few simple strategies to explore.

Become an Authorized User

If you have a family member or trusted friend with a solid credit history, ask if they can add you as an authorized user on their card. You’ll be able to make purchases with the card, but the primary cardholder is responsible for making payments.

Report Rent and Utility Payments

Alternative credit reporting, such as reporting your rent, cell phone bill, and utility payments, can be another way to build your score when you’re just starting out. You usually need to sign up with a third-party platform that reports your on-time payments to the credit bureaus, and you may be required to pay a monthly subscription fee.

Open a Secured Credit Card

A secured credit card is usually easier to get than an unsecured one, though it requires you to put down a security deposit that typically matches your credit limit. Otherwise, a secured card works just like any other credit card. Making timely payments and using credit responsibly can help build your score.

Credit Score Tips

Besides being mindful of best practices to build your credit, you’ll want to check your credit score every so often and note any changes. You may be able to do this with credit score monitoring tools or through your bank or credit card company.

It’s also a good idea to regularly review your credit report for mistakes or inaccuracies. You can receive a free copy of your report each week via AnnualCreditReport.com.

Recommended: Why Did My Credit Score Drop After a Dispute?

The Takeaway

To recap, what’s the average credit score for a 24-year-old? According to Experian, it’s 678, which falls into the “good” category. When you practice sound financial behaviors, your score could build even more over time. For instance, staying on top of payments, paying down debt, and keeping credit accounts open can all help build your score.

Take control of your finances with SoFi Coach. You can easily view all of your accounts in one convenient dashboard: bank and investment balances, current debts, spending breakdowns, and credit score. Easily set up budgets and spot upcoming bills. And get personalized insights on everyday money questions and take action with Coach chat, the AI guide that’s powered by the playbooks of SoFi Financial Planners, so its guidance comes from expert knowledge.

FAQ

What is a good credit score for a 24-year-old?

The average credit score for someone who is 24 is 678, which is technically considered a “good” FICO score. Younger consumers who are starting out on their credit-building journey may have a harder time achieving an excellent score.

What is a good credit limit for a 24-year-old?

The average credit limit for 24-year-olds in the U.S. is $16,139, according to Experian. However, what’s considered good depends on your finances, spending habits, and ability to pay down the balance.

How rare is an 800 credit score?

According to Experian data, 22.9% of Americans have a credit score of 800 or higher, which is considered excellent. Achieving this score typically requires a strong payment history, low credit utilization, and a well-established credit history.

Is a 900 credit score possible?

Consumer credit scores range from 300 to 850, so a 900 credit score isn’t feasible. The highest possible score under the FICO and VantageScore models is 850.

Is 650 a good credit score?

A 650 credit score falls in the “fair” range. With a fair credit score, you can get approved for some forms of financing, but you’ll likely get higher interest rates and less favorable terms.

What credit score is needed to buy a $300K house?

If you’re buying a home with a conventional loan, you’ll need a minimum credit score of 620. Lenders may accept a credit score as low as 500 if you’re taking out an FHA loan, but you’ll need a down payment of at least 10%.

Photo credit: iStock/blackCAT

This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

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

SORL-Q426-005

The credit score you’ll need to buy a car will vary depending on your financial circumstances, the type of car you want to buy, and whether you’re buying used or new. That said, the average score needed to buy a car is 751 for new cars and 688 for used cars, according to the second quarter 2026 State of the Automotive Finance Market report by Experian®.

Looking to buy a car in the near future? Here’s what you need to know about the credit scores lenders may use when deciding whether to approve your auto loan application.

Minimum Credit Score to Buy a Car

Your credit score is a three-digit numerical representation of your credit history. There are two main credit scoring models used in the United States: FICO® and VantageScore®. FICO scores, which generally range between 300-850, are used in the majority of lending decisions.

If your credit score isn’t as high as you’d like, that doesn’t mean there will be no loan options for you. In fact, there isn’t a universal minimum credit score required to buy a car, though some lenders will set minimums of their own.

What’s important to know is that the lower your credit score, the harder it may be to secure a loan — and the more expensive borrowing could get. That’s because if you have poor credit, lenders may charge higher interest rates and fees.

Recommended: How Long Does It Take to Build Credit?

Understanding Auto Loan Credit Scores

Your credit score is based on information from your credit reports, which are maintained by the three major credit reporting bureaus: Equifax®, Experian, and TransUnion®. The report documents how you’ve managed credit in the past. For instance, it records how many credit accounts you’ve had, which accounts are active and for how long, whether you’ve paid your bills on time, and how much of your available credit you’re using.

There are many different credit scoring models out there, which use different parts of your credit report to calculate your score. For example, some models might ignore debt collections for smaller amounts, while others may consider them. Lenders can choose which credit score they wish to look at when considering you for a loan.

What Is a FICO Auto Score?

There are several versions of a FICO Score, including FICO Auto Score, which — you guessed it — is designed specifically for the auto industry. These scores help predict how likely a borrower is to repay an auto loan on time. This means your history of paying off a car loan could play an important role in determining your score.

How to Increase Your Credit Score Before Buying

As mentioned, if you have a low credit score, it may be harder to secure a loan. And the loan you do secure may be more expensive. To make things easier and cheaper for yourself, you may want to look into ways to build your credit before applying for an auto loan.

Chief among the factors that affect your credit score is your payment history, which accounts for 35% of your FICO Score. One of the best things you can do for your credit file is to pay your bills on time, every time.

Tip: A budget tracker app can help you spot upcoming bills, set a budget, and track where your money is going.

But payment history is just one factor that impacts your credit score. Your credit utilization — or the amount you owe versus your available credit — is also important and makes up 30% of your FICO Score. If you use a lot of your available credit, lenders could worry that your finances are overstretched and, as a result, you may not have the resources to take on another loan. To help build your credit, consider lowering your credit utilization by paying down other debts first.

A long credit history can help build your credit file, so you may want to avoid closing older accounts that are in good standing. And, if possible, try to avoid applying for multiple loans or credit cards in a short period of time. That’s because each application may trigger a hard inquiry, which can temporarily lower your credit score.

Your credit score updates generally at least once a month. To keep track of your progress as you work to build your score, you can check your credit score without paying once a week from each of the credit reporting bureaus.

You might also consider signing up for credit score monitoring to help ensure your current credit score is always at hand.

While you’re at it, make it a habit of checking your credit report regularly. If anything is incorrect on the report, you are allowed to file a dispute with the company that reported the information and the credit bureaus that recorded it.

Recommended: How to Check Your Credit Score Without Paying

Where to Get an Auto Loan

When you’re ready to seek a loan, you’ll want to shop around for the best deals among several different lenders. You may consider getting loan offers from banks and credit unions, online lenders, and dealerships that offer financing. Credit scoring companies recognize that people often shop around to multiple lenders when seeking a loan. And in this case, they won’t penalize you for extra hard inquiries.

How Credit Scores Affect Auto Loans

The higher your credit score, the more likely it is that you’ve been responsible with credit in the past. Lenders see borrowers with higher scores as less of a risk, and they typically reward them with lower interest rates and better terms on auto loans.

On the other hand, lenders see borrowers with lower scores as a greater risk. To compensate for this risk, lenders may charge higher interest rates and offer less favorable terms.

Note that while the lowest FICO Score is 300, that is not necessarily your starting credit score. For instance, if you’re just starting to build credit and have no credit history, you may in fact have no score yet.

The Takeaway

While there is no minimum credit score you need to buy a car, a higher score can help you qualify for a loan with lower interest rates and better terms. If you have a lower credit score, consider doing what you can to build it before you apply for an auto loan. This may include paying your bills on time, lowering your credit utilization, and keeping older accounts open.

Take control of your finances with SoFi Coach. You can easily view all of your accounts in one convenient dashboard: bank and investment balances, current debts, spending breakdowns, and credit score. Easily set up budgets and spot upcoming bills. And get personalized insights on everyday money questions and take action with Coach chat, the AI guide that’s powered by the playbooks of SoFi Financial Planners, so its guidance comes from expert knowledge.

FAQ

How to get an 800 credit score from 720?

To build your credit score from 720 to 800, focus on paying your loans on time, reducing the amount of credit you’re using, and possibly increasing your mix of credit. This process takes time, as payment history and low utilization drive most of your score.

What is the average American credit score?

The average credit score in the United States was 713 in 2025, according to Experian, which is a two-point drop from 715 in 2024. Scores vary by age, state, and scoring model.

How common is an 800 credit score?

Per Experian data, 22.8% of all Americans have a credit score of 800-850. This share increased slightly from 22.5% in 2024.

How rare is a 720 credit score?

A credit score of 720 falls within the “good” range, which is 670-739. By that definition, roughly one in five Americans has a good score.

How big of a loan can I get with a 700 credit score?

A credit score of 700 falls within the “good” range. This means that your loan request likely will not be denied. However, the exact amount you qualify for will depend on a number of factors, including your income, the type of loan you’re applying for, and your debt-to-income ratio.

Is a 720 credit score good enough to buy a car?

There’s no minimum credit score required for an auto loan. Still, a credit score of 720 is considered “good” and can help increase the chances you’re approved for a car loan.

Photo credit: iStock/Ridofranz

This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

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

SORL-Q426-007

Taking a break from financial obligations can offer some breathing room, but it’s important to understand how deferred payments may affect your credit score.

A personal line of credit (PLOC) is a type of revolving credit line that can be used to pay for a variety of personal expenses. It works in a similar way to a credit card: A lender approves you for a specific credit limit, and you draw only what you need and pay interest only on the amount you use.

This is different from a personal loan, which is a type of installment loan. With an installment loan, you receive a lump sum of money up front that must be repaid at specified intervals.

If you’re wondering what a personal line of credit loan is, understand that a line of credit and a loan are different, but both mean that you borrow money and will need to repay what you borrow, with interest. While both options allow you to borrow money, each comes with its own benefits and drawbacks. Continue reading for more information on personal lines of credit and when this type of financing may make the most financial sense.

Understanding a Personal Line of Credit

A personal line of credit is a type of revolving credit. It’s similar to a credit card in that:

•   It has a maximum credit limit.

•   A minimum payment is required every month.

•   When the debt on the credit line is repaid, money can be withdrawn again.

Although a personal line of credit isn’t linked to a physical card, you can usually write checks, withdraw cash at an ATM, and transfer money into another account using the line. Generally speaking, the interest rates on personal lines of credit are lower than those on credit cards.

Personal lines of credit may be secured (requiring collateral) or unsecured (not requiring collateral). Whether secured or unsecured, some lines of credit require minimum payments of interest and principal, while others require only interest payments for a period of time, known as the draw period. That means that for a set period, you can draw money from your line of credit and need to make only interest payments during that time. After the draw period is over, the line of credit is no longer revolving (meaning, you can’t borrow against it anymore), and you’re typically required to make interest and principal payments.

Unlike unsecured personal loans (also known as signature loans), which tend to have fixed interest rates, a personal line of credit may have a variable rate during its draw period, then switch to a fixed rate once that period ends.

Recommended: Line of Credit vs. Revolving Credit

Where to Get a Personal Line of Credit

Personal lines of credit can be found at some banks, credit unions, and other financial institutions — the same places you might find unsecured personal loans. However, not every lender offers them.

How to Get a Personal Line of Credit

The process for applying for a personal line of credit is usually similar to applying for other loans or credit cards. Lenders may accept applications online, in person, or over the phone, and specific application requirements may vary by lender.

Before formally applying, it’s a good idea to review your credit score and shop around at different lenders to compare the rates and terms you may qualify for. Many lenders will allow you to see if you prequalify, which may require a soft credit check, which won’t impact your credit score. Also be sure to evaluate any fees associated with the line of credit and review the draw period and repayment periods.

Core Requirements to Qualify

Once you’ve determined which loan you’d like to apply for, you’ll need to gather the required documentation (such as proof of income). Requirements for a personal line of credit are similar to personal loan requirements. You’ll need a solid credit score and proof of income. You’ll be asked to provide the same information you would typically need to provide when applying for a credit card, such as your annual income and Social Security number or other tax ID number.

Your chosen lender will generally have a list of required documents. From there, you’ll fill out the application and wait for approval. At this stage, the lender will usually complete a hard credit inquiry which may temporarily impact your credit score.

When to Use a Personal Line of Credit

Personal lines of credit typically offer greater flexibility when it comes to accessing the loan and repaying it than other types of financing, such as a personal loan. If you are considering a PLOC vs. a personal loan, make sure you understand what a personal loan is and how it works so you can compare the two.

If you’re planning to do a home renovation, for example, you may not need a big chunk of money all at once. A line of credit allows you to access money over time to pay for things in dribs and drabs as you pick out the tile for your kitchen and your contractor finally gets around to installing it. This flexibility can reduce your interest charges because you are only borrowing money you plan to use immediately.

How a Personal Line of Credit Works

As we mentioned, personal lines of credit have a draw period and a repayment period. It’s important to understand how both work.

The draw period begins once you open a personal line of credit, and the funds are available for you to use as needed. You can borrow up to your credit limit, pay off the balance, and draw from it again. Your financial institution will likely send you a monthly bill, and you’ll need to make a minimum payment based on the amount you borrow, plus interest. (If you pay the balance in full each month, you may be able to avoid interest charges.)

Repayment Structures

The repayment period starts when the draw period ends. During this time, you won’t be able to borrow new funds. And you’ll likely be responsible for repaying the total amount you owe by the end of the repayment period. If your interest rate is fixed, your monthly payments will be the same each month. More commonly with a PLOC, the rate is variable, which means your payment amount can go up and down along with interest rates in the market.

Benefits of a Personal Line of Credit

As noted above, the primary benefit of a PLOC is that you can borrow funds as needed during the draw period, versus accepting a large sum all at once. Another benefit of a line of credit is that you can pay it off and then typically borrow from it again. This can make it a good backup to have in case you suddenly experience an expensive emergency that you don’t want to put on your credit cards.

If you choose a line of credit with a draw period that allows you to pay only interest on the money borrowed for a period of time, then you will enjoy a period of time during which your monthly payments may be relatively modest. Payments will increase during the repayment phase, when you pay back the principal as well as interest.

A third benefit of a personal line of credit is that a variable interest rate can allow you to benefit from a rate drop. If rates fall, you’ll pay less interest on what you have borrowed. Of course, the opposite is also true: Rising interest rates can mean an increase in your payment amount.

Drawbacks to a Personal Line of Credit

One drawback is that unsecured lines of credit can be more difficult to qualify for than some other types of loans, such as a home equity line of credit (HELOC). This is because unsecured loans are generally more risky for the lender. Without collateral, the lender needs to be sure that the borrower has the ability to pay back their loan. That’s why for some, it may be easier to qualify for a HELOC (which uses your home as collateral) than a personal credit line. However, keep in mind that with a HELOC, you are taking on some additional risk by putting your house on the line.

Also, the flexibility that comes with a line of credit may be a double-edged sword. The ability to keep borrowing for an extended period of time could lead to feeling tempted to take on more debt or take longer to pay off debt… all of which could mean more interest charges over time.

Using a Personal Loan as a Personal Line of Credit Alternative

When comparing a personal line of credit vs. a personal loan, the major difference is that a personal loan is an installment loan. Like a personal line of credit, personal loans can be used to pay for nearly any personal expense. Borrowers receive a lump sum payment and pay back the loan in installments.

A personal loan may make more sense for borrowers who have a firm idea of their budget or a fixed expense, such as for medical bills, buying an engagement ring, or consolidating debt. Additionally, depending on creditworthiness, the average interest rate on a personal loan may be lower than that of a personal line of credit. Interest rates will vary by lender, so evaluate the options available to you.

Also compare any fees or penalties associated with the personal loan. If a personal loan has a prepayment penalty, you may not be able to benefit from paying off the personal loan early.

Recommended: Alternatives to Personal Loans

Other Personal Line of Credit Alternatives

•   HELOC: With a home equity line of credit, borrowers tap into the equity in their home to borrow a line of credit. This is a secured loan where the home functions as the collateral. This can help borrowers qualify for a more competitive interest rate than with an unsecured personal line of credit, but it also means that if the borrower has issues repaying the HELOC, their home is at risk.

•   Credit Card: In certain situations, a credit card may be used to help pay for emergency expenses. Be aware that credit cards generally have high interest rates — the average credit card interest rate was 20.94%, as of May, 2026.

•   Secured loans for a specific purpose: For example, if you are buying a car, you may be better off with a car loan over a personal line of credit or personal loan. What can you use as collateral for a personal loan? Some lenders will allow you to use investment accounts or other personal property such as jewelry or art.

Personal Line of Credit vs Credit Card

A personal line of credit and a credit card both offer a pool of money you can borrow from and pay back over time. But there are key differences to keep in mind. Let’s take a closer look.

Flexibility and Usage

A credit card is designed for everyday convenience and can be a good fit for making small purchases like groceries, shopping, or dining out. To use, you just swipe or tap the card at a store or online checkout. Some credit cards may also earn cash back, points, or miles, which can be an added benefit.

A personal line of credit works more like a flexible bank loan. When you’re ready to use the funds, you might have the option to write a check, transfer the money to your bank account, or make a cash withdrawal. And unlike credit cards, PLOCs don’t typically earn rewards.

Interest Rate Differences

Credit cards tend to have higher interest rates than personal lines of credit. As mentioned, the average APR on credit cards is around 20.94% as of May 2026.

By comparison, the APR on a personal line of credit could be as low as 9.25%. Note that your credit score can impact the rate you receive for a personal line of credit. As a general rule, the stronger your credit score, the lower the rate you may qualify for.

Recommended: Personal Loan vs Credit Card Debt

The Takeaway

Personal lines of credit offer flexibility for borrowers because they are a revolving line of credit that functions similarly to a credit card. Borrowers can continue drawing on the line of credit for a set period of time to cover the cost of necessary expenses. For a one-time expense, however, you may be better off with a personal loan vs. a personal line of credit.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

What is the difference between a personal loan and a personal line of credit?

The biggest difference between a personal loan and a personal line of credit is that a personal loan is an installment loan. Borrowers receive a lump sum payment and pay back the loan in fixed monthly payments. A personal line of credit, on the other hand, lets you borrow up to a set limit, and you pay interest only on the funds you use.

Does a personal line of credit affect your credit score?

Yes, a personal line of credit impacts your credit score. Opening a PLOC can cause a temporary dip in your credit score, but if managed responsibly, it can help build a borrower’s score over time.

Can you pay off and reuse a personal line of credit?

Yes. During the draw period, you repay the money you borrowed, and those funds become available for you to borrow again, up to your approved credit limit.

What are typical interest rates for personal lines of credit?

For some borrowers, the interest rate for a personal line of credit in October 2026 was as low as 9.25%, and it was not uncommon to see rates below 20.00%. However, the rate you receive will depend largely on your creditworthiness. Remember, too, that PLOCs tend to have variable interest rates which can change over time.

Is a personal line of credit secured or unsecured?

A personal line of credit can be either unsecured or secured, though most are unsecured.

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