Guide to Overdraft Lines of Credit

An overdraft line of credit is a pre-approved loan attached to your checking account. If you don’t have enough money in your account to cover a transaction (such as a debit card transaction or automatic bill payment), the line of credit kicks in and covers the overdraft. This prevents denied and failed transactions, overdraft fees, non-sufficient fund fees, and potentially other fees and headaches. However, these credit lines come with costs of their own. Are they worth it? Here are key things to know about overdraft protection lines of credit.

🛈 Currently, SoFi does not provide members an overdraft line of credit.

What Is an Overdraft Line of Credit?

An overdraft line of credit is a feature offered by banks and credit unions that links your checking account to an established line of credit. If you sign up for this type of overdraft protection, you can borrow against that line of credit to cover shortfalls when (or if) you overdraw your checking account.

For example, let’s say your checking account is low on cash due to some unexpected expenses, then an automated payment goes through or a check you wrote a while ago (and forgot about) gets cashed. With an overdraft line of credit, the bank or credit union will cover that overage by drawing from your credit line. The payments will go through and you won’t get hit with a non-sufficient funds (NSF) or bounced check fee.

However, there are still costs involved. Credit unions and banks that offer an overdraft line of credit will typically charge a transfer fee each time you draw from the credit line. On top of that, you’ll pay interest on the borrowed balance until you pay it off.

How Overdraft Lines of Credit Work

Typically, if your checking account doesn’t have enough money to cover a debit card purchase, check, or online bill payment, the bank will either cover the pending transaction and charge you overdraft fee, or they will reject the transaction and charge you a fee for insufficient funds (you may also get hit with a fee from the party that was expecting payment).

If you have a checking account with an overdraft line of credit, on the other hand, any overdraft is automatically withdrawn from your line of credit and deposited into your account. You will typically be charged a small fee for each overdraft that is covered. You’ll also pay interest on the money you borrow from your credit line.

An overdraft protection line of credit has a preset amount it can cover on your behalf, which can range from $500 to $7500 or more. As with other lines of credit, you only pay a transfer fee or interest if you actually borrow money from the credit line.

Banks and credit unions often have requirements for customers to qualify for an overdraft line of credit, such as maintaining a specific account balance for a certain period of time, depositing money regularly into the account, having a positive credit history, and having minimal overdrafts in your recent banking history.

What Happens if You Use Your Overdraft Line of Credit?

If you use your overdraft line of credit, the bank or credit union will typically charge a transfer fee and interest on the balance provided for your purchase. For example, say you spend $100 at the grocery store using your debit card but only have $60 in your account. The transaction will go through and your overdraft line of protection kicks in, putting $40 in your account.

You’ll pay a small fee for the cash transfer (usually around $12) and the $40 balance will start accruing interest until it’s paid back in full. You’ll need to repay the amount you borrowed according to the terms set by your bank. Typically, you need to make monthly payments, either manually or by having them automatically deducted from your checking account.

Keep in mind that once you use an overdraft line of credit, it can have an impact on your credit, since it qualifies as a loan. Paying off the balance in a timely fashion can have a positive impact on your credit, while carrying a high balance and/or making late payments can have a negative impact on your credit.

Recommended: Can You Overdraft a Credit Card?

Pros and Cons of Overdraft Lines of Credit

An overdraft line of credit can save you in a pinch but can also cause unwanted financial consequences. Here are some benefits and potential pitfalls to consider.

Pros of Overdraft Lines of Credit

•   Provides a safety net. Overdraft credit lines (which often come with high limits) can help you afford necessary expenses and handle emergencies without taking out a loan.

•   Transactions won’t fail. With an overdraft line of credit, debit card purchases, online bill payments, and checks will go through successfully, even if you don’t have the funds in your account to cover them.

•   May be cheaper than other options. The transfer fee plus the interest charges can end up costing less than overdraft fees and the penalties for returned payments and checks.

•   Can help you build credit. Drawing from your credit line and then paying off your balance responsibly can have a positive impact on your credit.

Cons of Overdraft Lines of Credit

•   Not everyone qualifies. Approval for the line of credit may involve passing lender requirements, such as keeping a certain average account balance, signing up for direct deposit, and having a strong credit history.

•   Fees can add up. Typically, you incur a transfer fee for every advance. Some lenders also charge annual fees and account fees for overdraft lines of credit.

•   Interest rates tend to be high. Overdraft lines of credit tend to have high interest rates because there’s no collateral from the borrower, which increases risk to the lender.

•   Could negatively impact your credit. If you carry a high balance and/or don’t make your payments on time, an overdraft credit line could have a negative impact on your credit.

Alternatives to Overdraft Lines of Credit

While overdraft lines of credit offer convenience and might help you save money, other options might be more beneficial depending on your situation. Here’s a breakdown of the alternatives to overdraft lines of credit.

Effective Account Management

Effectively managing your checking account and finances can help you avoid overdrafts altogether. This entails regularly monitoring your account balance, signing up for “low balance” alerts, and always keeping a cushion of cash in your checking account.

Link Another Account to Your Checking Account

Linking your checking account to another financial account, such as a savings account, can provide a safety net in case of insufficient funds. If a transaction will overdraft your checking account, funds will automatically transfer from the linked account to cover the shortfall.

This option avoids overdraft fees and ensures that your transactions are not declined due to insufficient funds. However, you may pay a transfer fee when the protection is triggered, and you’ll need sufficient funds in your linked deposit account to cover the overdrawn amount to use this service.

Opt Out of Overdraft Coverage

If all of your bank’s overdraft protection options involve costs, you might consider going without overdraft coverage. If you go this route, your bank will decline any transactions that would bring your account into the negative. This could put you in a difficult situation if you can’t make a needed purchase, but you’ll avoid overdraft fees and/or running up interest.

Consider Switching Banks

You may be able to find a bank with generous overdraft protections for checking accounts. For example, some banks offer grace periods after overdrafts, such as one business day to cover the overage without incurring any penalties. In addition, many financial institutions have reduced or eliminated their overdraft fees.

Recommended: Switching Bank Accounts When in Overdraft

The Takeaway

Overdraft lines of credit give bank and credit union customers immediate access to funds to cover transactions and avoid costly overdraft and non-sufficient fund fees.

While they can cover emergency expenses and prevent transactions from failing when your account balance is low, high interest rates and credit implications can lead to other challenges. Alternatives to using an overdraft line of credit include: effective account management, linking accounts, and/or finding a bank with favorable overdraft policies.

FAQ

Does tapping into your overdraft line of credit affect your credit score?

Tapping into your overdraft line of credit means taking on debt, which can impact your credit. If you consistently make timely payments and manage that debt responsibly, it can have a positive impact on your credit history. Conversely, if you fail to repay the borrowed amount on time, it could lead to negative marks on your credit report.

How does an overdraft protection line of credit work?

An overdraft line of credit is a safety net for checking accounts, providing funds to cover transactions that exceed available balances. When faced with insufficient funds, the bank or credit union extends a predetermined line of credit, allowing the transaction to proceed without incurring overdraft fees. The customer then repays the borrowed amount, along with any applicable fees and interest.

Can you overdraw your credit limit?

No, you cannot overdraw beyond the credit limit set for your overdraft line of credit. Your bank establishes a maximum limit based on your creditworthiness and financial history. If a transaction exceeds this limit, it will typically be declined, and you may still face fees for insufficient funds. It’s important to be aware of your credit limit and monitor your account to avoid transactions that might exceed it.


About the author

Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.



Photo credit: iStock/gzorgz

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Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

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SoFi Bank reserves the right to grant a grace period to account holders following a change in Eligible Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

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Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

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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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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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Why Did My Credit Score Drop When My Credit Card Balance Decreased?

Paying down your credit card debt is a huge win for your finances, but you might see your credit score go down even after you lower your balance. While this can be confusing, the drop is often due to other factors, like the types of credit you have and the length of your credit history.

Read on to learn why your credit score may have dropped after paying off debt and how you can boost it.

Why Your Credit Score May Drop When a Credit Card Balance Decreased

While you might expect your credit score to go up after paying off debt, there are a few reasons why it could dip instead. 

Worst case scenario: If someone uses your personal information to open a new credit account, or makes charges on your cards without your approval, your credit score may take a hit. The longer the fraud goes unnoticed, the harder it becomes to fix the issue.

More likely, closing your account after paying off a credit card balance can affect your credit score. This changes the overall picture of your credit usage and history, which might cause a small, temporary drop.

Remember that credit scores can fluctuate for many reasons, and a drop isn’t always a bad sign. You can keep track of your score with credit score monitoring.

Track your credit score with SoFi

Check your credit score for free. Sign up and get $10.*


Credit Score Factors

Let’s dive deeper into the factors that can affect your credit score. We’re focusing on the FICO credit scoring model, which most lenders use to make their decisions.

Payment History

A history of on-time payments has the biggest impact on your credit score, making up 35% of it. If you’ve recently missed a payment or two, your credit score might be negatively affected. On the flip side, staying on top of due dates, whether with a money tracker app or a calendar, can help you keep your credit score healthy.

Credit Utilization

Paying off your credit card balance and then closing the account could cause your credit score to drop. That’s because it increases the percentage of credit you’re using compared to the total amount available — also known as credit utilization. Lenders typically want you to have a credit utilization ratio under 30%. If yours is higher than that, rest assured there are ways to lower your credit card utilization.

Length of Your Credit History

Length of credit history refers to the average amount of time your credit accounts have been open. In general, the longer your credit history, the better your credit score may be. Closing a credit card account, especially one you’ve had for a long time, can bring that average down, and you may see a drop in your credit score as a result. So think carefully before you decide to close an account.

Credit Mix

Paying off certain types of debt might also lower your credit score because it reduces the variety of your credit types. Lenders like to see that you can responsibly handle different kinds of debt, such as installment loans and mortgages. When you pay off a car loan or other type of debt, it can decrease the diversity of your credit mix, which could lead to a drop in your credit score.

If you paid off both your credit card debt and a loan simultaneously, this might explain the drop in your score. Also, if you closed the credit card account after repayment, your credit mix may be impacted.

New Credit Card Applications

When you apply for a new line of credit, like an auto loan or credit card, the issuer usually performs a hard inquiry on your credit report, which can temporarily lower your score. Lenders check your credit to see if you’re a responsible borrower. Even requesting a credit line increase on an existing card can trigger a hard inquiry.

A soft inquiry is different. It just means you or another company looked at your report, but it doesn’t impact your score. If you’ve recently applied for credit, that hard inquiry could be the reason for the dip. It can be helpful to learn more about soft credit inquiries vs. hard credit inquiries.

Recommended: 10 Strategies for Building Credit Over Time

How to Pay Off Debt and Help Your Credit Score

To pay off debt and help your credit score, here are a few steps to follow:

•   Create a budget. By tracking your income and expenses, you can understand where your money is going. This will help you find ways to save money and put more toward paying off debt. A spending app can help automate budgeting.

•   Prioritize debts. Depending on your situation, you may want to focus on paying off high-interest debts first, such as credit cards, while making minimum payments on lower-interest debts. Doing so could help you save money on interest in the long run.

•   Make regular payments. Consistently pay at least the minimum amount due on all your debts. Whenever possible, pay more than the minimum, which can help reduce your debt faster.

•   Consider debt consolidation. If you have multiple high-interest debts, you may want to consider consolidating them into a single loan with a lower interest rate. This can simplify your debt management efforts and potentially reduce overall interest costs.

•   Use credit responsibly. Aim to keep your credit utilization ratio below 30% by not maxing out your credit cards.

How Do I Keep My Credit Score From Dropping?

It can take a while to build up your credit, so you’ll want to take steps to protect it. Here are some tips to help you keep your credit score from dropping after you pay off debt:

•   Pay your bills on time. Sending bill payments on time is important because it’s such a big part of your credit score. If you need a hand, set up autopayments to make sure your lender or creditor gets your payment on or before the due date.

•   Think twice before closing an account. After you pay off a credit card, try not to close it unless you really have to. If you’re worried about spending, you can cut up the card. Keeping older accounts open helps maintain the length of your credit history, which is good for your score.

•   Avoid new credit applications. Every time you apply for new credit, it can result in a hard inquiry on your report, which might temporarily lower your score.Try to avoid opening new lines of credit unless you really need to.

•   Check your credit report. Regularly check your credit report for any errors or signs of fraud. (There are ways to check your credit score without paying.) If you spot something unusual, be sure to dispute any inaccuracies right away.

How Long Does It Take for Your Credit Score to Improve After Paying Off Debt?

Lenders usually update account activity with the three major credit bureaus — Experian, Equifax, and TransUnion — at the end of the billing cycle. This means it can take 30 to 45 days for any changes to impact your credit report.

It’s a good idea to check your credit report at least once a year. You can get a free report from AnnualCreditReport.com. Remember that checking your credit report and score won’t hurt your credit score.

Ways to Increase Your Credit Score After Paying Off a Loan

To help give your credit score a boost after paying off debt, stay on top of your other credit accounts by paying bills on time and using credit wisely. For example, if you have a credit card, use it for small purchases like gas or groceries, and pay off the balance each month. It proves to lenders that you can manage credit well.

Also try to keep the amount of credit you’re using low compared to your total credit limit. Remember, creditors usually like to see a ratio below 30%. This means using less than 30% of your available credit. Paying off smaller debts may help improve your overall debt-to-income ratio.

How to Get Credit Score Monitoring

Credit monitoring can help you keep an eye on your accounts and catch issues early. It tracks your accounts and alerts you to any unusual activity so you can address problems right away. 

Many financial companies offer free credit monitoring, so it’s a good idea to contact your bank or credit card to see if you qualify. If you’ve been part of a data breach, you might get credit monitoring for free. Otherwise, you can sign up for it yourself, typically for a monthly fee of $10 to $30. Alternatively, you can take a DIY approach and monitor your credit for free.

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

The Takeaway

After paying off credit card debt, it’s possible to see your credit score dip. While this drop is usually short-lived, it can be due to changes in your credit mix, history length, utilization ratio, or a combination. To boost your score, focus on responsible credit management. Consider strategies like setting up autopay to ensure you make timely payments, and avoid taking on more debt. These habits can help you maintain a strong credit score.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

Why has my credit score gone down when nothing has changed?

Your credit score might change even if everything seems the same. Certain factors like report updates, identity theft, variations in credit usage, and new information from creditors can impact your score. By regularly reviewing your credit report, you can catch and address changes and errors.

Is a decrease in credit balance good?

It’s usually best to pay your credit card bill in full instead of carrying a balance, as carrying a balance doesn’t help your credit score. Aim to keep your balances below 30% of your total credit limit to maintain a healthy credit score.

Why is my credit score going down if I pay everything on time?

Even if you pay everything on time, your credit score might still go down because of things like using more of your available credit or applying for new credit. Closing old accounts or having a short credit history can impact your score, too.


About the author

Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.



Photo credit: iStock/milan2099

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.

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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Why Did My Credit Score Drop 40 Points After Paying Off Debt?

It may come as a surprise, but sometimes your credit score drops after you pay off a loan or credit card debt. This happens because paying off debt can impact several factors that make up your credit score. For example, it might change your credit mix, shorten your credit history, or impact your credit utilization ratio.

If you’re wondering why your credit score dropped 40 points after paying off debt, here are some potential reasons to consider. 

Track your credit score with SoFi

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Why Would My Credit Score Drop 40 Points After Paying Off Debt?

Paying off your debt is a big win and usually boosts your credit score. But sometimes, you might see a dip. To understand why, it’s important to know how your score is calculated.

Information from the three major credit bureaus — Equifax, TransUnion, and Experian — comes together to create your credit score. The bureaus gather details about your loans, credit cards, and other debts. Your credit score is calculated using a formula that measures how reliable you are at making payments. Lenders use this score to decide if they should give you credit.

Recommended: How Long Does It Take to Build Credit?

Credit Score Factors

Although there are many ways to calculate your creditworthiness, here are some common factors that may affect your credit score after you pay off your debt. 

Payment History

Payment history makes up 35% of your FICO credit score and is the most important factor. So while late or missing credit card payments might not seem significant at the time, they could bring down your overall score. 

If you need help keeping track of bills, consider a tool like a money tracker app. It allows you to spot upcoming bills, create budgets, and monitor your credit score.

Credit Utilization

Your credit card utilization ratio — or the amount of available credit you’re using — makes up 30% of your credit score, so it’s worth monitoring. 

Here’s how it works: If you have $10,000 in available credit and a $5,000 credit card balance, your credit utilization ratio is 50%. Usually, credit bureaus and lenders want to see a utilization ratio under 30%.

When you pay off your debt and close the account, your total available credit decreases and your credit utilization ratio increases. This, in turn, can cause your credit score to dip. 

Length of Your Credit History

Your credit reports show how long your credit accounts have been open. Having a longer credit history can improve your credit score, albeit not to the extent other factors can. (It makes up 15% of your credit score.) On the flip side, if you close an old account, you shorten your credit history — which can potentially lower your score.

Credit Mix

The variety of your credit accounts — like personal loans, credit cards, and mortgages — is 10% of your credit score. And managing different kinds of credit can help improve it. Paying off a specific type of credit, such as a car loan or mortgage, can have the opposite effect, as it reduces the diversity of your credit mix. 

New Credit Applications

When you apply for a new line of credit, lenders check your credit report to determine the risk of lending you money. This check, known as a hard inquiry or “hard pull,” can drop your credit score by a few points for a short time, though it stays on your report for two years. 

But keep in mind, when calculating your score, FICO, the scoring model most lenders use, only looks at credit pulls from the past 12 months. And new credit only makes up 10% of your credit score.

Recommended: What Is a FICO Score?

How to Pay Off Debt and Help Your Credit Score

Paying off debt may lead to a temporary dip in your credit score, but its benefits far outweigh any drawbacks. In fact, there are steps you can take build your credit as you whittle down your debt load:

•   Make on-time payments: Always make payments on time, whether it’s your credit card balance or mortgage. Punctual payments positively impact your score the most.

•   Prioritize high-interest debt: Pay off credit cards with the highest interest rates first to reduce debt risk.

•   Pay off cards with a low credit limit: This can help keep your debt-to-credit ratio in check.

•   Keep credit utilization low: Aim to use less than 10% — and no more than 30% — of your available credit.

•   Clear small balances on multiple cards: Having zero balances on more cards is better for your score.

•   Pay off past-due bills: Prioritize the most recent ones. This shows new lenders that you’ve settled your debts.

How Long Does It Take for Your Credit Score to Improve After Paying Off Debt?

Luckily, a drop in your credit score is generally brief. After you pay off your debt, your score should bounce back within a month or two because credit bureaus typically update your credit information every 30 to 45 days.

You can check your credit score without paying. If it doesn’t improve right away, don’t worry. The paid-off debt will stay on your credit report for up to 10 years. If you made payments on time, this positive history can help boost your credit score in the long run. 

Ways to Increase Your Credit Score After Paying Off a Loan

Once your debt is settled, you may want to turn your focus to boosting your credit score. Some steps you may have taken as you paid down the debt will serve you well at this point, such as making on-time payments and keeping credit utilization low. But there are other strategies that can help:

•   Build a long credit history: Keep older accounts open so you can build a long history of responsible credit use. The longer your history of on-time payments, the better your score may be. 

•   Apply for credit sparingly: Only apply for new lines of credit when needed. Too many applications in a short period can negatively impact your score.

•   Review your credit reports: Regularly review your credit reports for any errors or inaccuracies. If you spot anything out of the normal, make sure to dispute any mistakes. This way, you can ensure your score reflects accurate information.

How to Get Credit Score Monitoring

Using a credit monitoring service can help you keep tabs on your credit score. These services notify you when there are changes to your credit reports, which can help you catch any suspicious activity. While comprehensive monitoring services are available, there are ways to monitor it yourself:

•   Ask for a free copy of your credit report: You’re entitled to a free credit report every year from each of the three credit bureaus. Visit AnnualCreditReport.com to get started. 

•   Check for complimentary credit monitoring: Some accounts offer free credit score monitoring. Call your bank or credit card company to see if you qualify.

•   Freeze your credit reports: If you suspect a data breach or theft of your Social Security number, consider freezing your credit report. This restricts access to your credit information, stopping thieves from opening new accounts in your name. Note that freezing or unfreezing your credit is free and doesn’t affect your credit score.

•   Set up fraud alerts: You can place a fraud alert on your credit report if you think you’re a fraud or identity theft victim. Creditors will verify your identity by calling you when a credit application is made. It’s free to request and lasts for one year without affecting your credit score.

The Takeaway

There are many reasons why your credit score dropped 40 points after paying off debt. You may see a temporary dip in your credit score due to changes in your credit mix, history length, and utilization ratio. 

To help boost your score, make on-time payments, use less credit, maintain old accounts, apply for new credit sparingly, and regularly check for errors in your credit reports. These habits can help you maintain a strong credit score. And if you need help managing your finances as you pay off debt, consider enlisting the help of a spending app.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

How long does it take for a credit score to update after paying off debt?

You can expect your credit score to update within a month or two as long as you continue practicing good credit habits like making on-time payments. Credit bureaus usually refresh your information every 30 to 45 days.

Why is my credit score going down even though I pay on time?

Paying on time is just one part of your credit score. Other factors, like how much credit you’re using or the length of your credit history, can also cause your score to drop, even if you don’t miss any payments.

How to increase credit score after paying off debt?

To keep your credit score strong after paying off debt, follow a few key tips. For example, always make your payments on time, avoid using too much of your available credit, and apply for new credit only when you really need it. Also, review your credit score regularly so you can spot discrepancies.


About the author

Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.



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*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.

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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How Do Student Loans Affect Your Credit Score?

Student loans don’t just help you pay for your college education. They also allow you to build a credit history, which can be useful when it comes time to get a mortgage or take out a car loan. The key, though, is to make regular on-time payment – or you may wind up with the sort of credit history that negatively impacts your ability to borrow money in the future.

Here’s a look at how student loans can affect your credit score.

How Is My Credit Score Calculated?

First, it can be helpful to know how your credit score is calculated. There are several types of credit scores, but FICO scores are the most commonly used by top lenders.

Your FICO score is calculated using five categories of data found in your credit reports, which each category weighted differently.

Category

Weight in Scoring

Payment History 35%
Amounts Owed 30%
Length of Credit History 15%
New Credit 10%
Credit Mix 10%

Based on these calculations, there are a few ways you can build good credit and maintain a good credit score. Paying your bills on time is a big one, since your payment history is the most heavily weighted factor. Paying down existing debt and keeping credit card balances low will also have a big effect. Less impactful, but important strategies, also include diversifying the types of credit you have, avoiding opening too many new accounts at once, and keeping accounts open to lengthen the average age of your credit history.

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What Student Loan Factors Affect My Credit Score?

Now that you know how credit scores generally work, you might be wondering how your student loans specifically impact your score.

Again, one of the biggest ways your student loans can affect your credit is whether or not you pay them on time. If you’re a responsible borrower who continually makes on-time student loan payments, you will see positive shifts in your credit score over time.

But if you fail to repay a loan or continually make late payments, your credit score will likely see a dip. If you default on your student loan, your credit score could drop significantly. The lender may also send your account to a collections agency, and you may have a more difficult time securing credit in the future.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

How Does a Late Student Loan Payment Affect My Credit Score?

Making payments on time is important, but what you might not realize is exactly how damaging late payments can be. Even if your credit history is pristine, it only takes one report of 30 days past due to change your score. Once a late payment is reported to the credit bureaus, it could remain on your credit report for up to seven years.

To help ensure your payments are on time, you might want to set up an automatic payment plan. Most lenders will even give you a small discount on your interest rate for doing so. If you know you can’t make a payment on time, talk to your lender or loan servicer right away. The Department of Education, which is the lender for four types of Direct Loans, and even some private lenders, offer loan deferment or forbearance. These options allow a borrower to temporarily suspend payments, which will minimize the impact on their credit score.

Does It Hurt to Pay Off Student Loans Quickly?

Repaying student loans quickly will always improve your credit score, right? Not necessarily. In fact, you could even see a small, temporary dip in your credit score right after paying off a loan. There are several reasons for this. If student loans are your primary source of open credit, closing those accounts means you’re no longer building payment history. Prematurely paying off a loan can also change your credit mix or credit utilization.

But credit score is just one factor to consider when deciding how quickly to pay off a student loan. You may want to think about how much extra interest you’d pay by leaving the account open. Carrying a high loan balance could also make it harder to qualify for new loans, which is something to keep in mind when it comes time to buy a home or car.

Notorious Big Bad D’s: Delinquent and in Default

Student loans affect credit scores in a variety of ways, but the worst thing you can do is ignore your monthly loan payment. If you’re even one day late with a payment, you’ll be considered delinquent and may be charged a penalty.

Once a missed payment is more than 90 days delinquent, your loan servicer will report it to the three major national credit bureaus. This could lower your credit score and hurt your ability to get a new credit card or qualify for a car loan or mortgage.

After 270 days of a missed student loan payment, your status changes to default and your student loans are due in full along with any accrued interest, fines, and penalties.

(Note that the on-ramp that’s in place for federal student loan repayment from October 2024 through September 2025 temporarily shields borrowers from the most immediate consequences of delinquency and default.)

Will Rate Shopping Different Student Loan Lenders Hurt My Credit?

When you’re shopping around for the best interest rate possible on a private student loan, lenders may pull your credit file. This is called a hard inquiry, and each one could temporarily knock a few points off your credit score.

To help protect your FICO score, try to finish shopping for rates and finalizing your loan within 30 days. Researching rates and getting quotes ahead of time can give you a good idea of whether you’ll qualify for a loan before you formally apply.

You may also want to ask lenders if they can tell you the interest rate you would receive without doing a “hard” credit pull, which might affect your score. You can’t get a loan without an eventual hard inquiry, but getting prequalified allows you to compare interest rates without impacting your credit score.

Will Refinancing Student Loans Help My Credit?

Because refinancing involves taking out a new loan with new terms to pay off existing debt, refinancing student loans affects your credit score—both positively and negatively.

In the short-term, refinancing will involve a hard credit inquiry and may cause a temporary ding to your credit. Again, as long as you keep your loan shopping to a short period, multiple inquiries will be treated as one, and should have a minimal impact on your score.

In the long-run, refinancing student loans at a lower interest rate can have an indirect positive effect on your credit. For example, if refinancing lowers the amount you pay each month, you may be more likely to make payments on time. You may also pay off your loans faster, which can help you reduce your overall debt and improve your score. (Note: You may pay more interest over the life of the loan if you refinance with an extended term.)

If you refinance federal loans with a private lender — in effect, turning your federal loans into a private loan — rest assured that credit bureaus don’t view these two types of loans any differently. However, when you refinance your federal loans, you will lose certain federal protections, such as income-driven repayment plans, deferment or forbearance, and loan forgiveness programs.

Do I Need a Good Credit Score to Take Out a Student Loan?

Your credit score may be a factor when you’re applying for a student loan. It all depends on the type of loan you’re planning to take out. Most federal loans don’t have a minimum credit requirement, which is why nearly every borrower gets the same interest rate regardless of their financial profile. However, federal PLUS loans for parents require that borrowers do not have an adverse credit history.

Credit scores are typically more of a factor with private student loans. Lenders often consider your score when determining student loan approval and interest rate. In general, the better your score, the better your rate will be.


💡 Quick Tip: Refinancing could be a great choice for working graduates who have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans.

Which Credit Scores Do Private Lenders Use?

When considering your student loan application, most private lenders look at your FICO® score. This score, which ranges from 300 to 850, helps lenders determine whether to extend credit and at what interest rate.

Because FICO is used widely throughout the lending industry, including by mortgage lenders and credit card providers, it gives lenders an apples-to-apples comparison of potential borrowers.

The Takeaway

Student loans can help borrowers establish a solid credit history, which can ease the way for future borrowing opportunities and attractive interest rates. The key is to pay what you owe on time, every time.

Paying a loan off early or shopping around for rates could cause a small, temporary dip in credit scores. Being late with a payment — or stopping payment altogether — may lower your credit score and hurt your ability to qualify for another loan.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.


With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Do student loans help build credit?

Student loans are an opportunity for borrowers to build credit and establish a solid credit history, which can help when it’s time to get a mortgage or take out a car loan. The key is to make regular, on-time payments.

How can I improve my credit score if I have student loans?

Payment history is one factor of your overall credit score, so making regular, on-time payments on your student loans can help you build credit.

How is my credit score determined?

Your credit score is calculated using five different categories of data. These include payment history, amounts owed, length of credit history, new credit, and credit mix.


About the author

Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.



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


SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers.
Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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 .

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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 Card Debt Forgiveness: What It Is and How It Works

Credit Card Debt Forgiveness: What It Is and How It Works

If you’re overwhelmed by credit card debt, you might consider credit card debt forgiveness, which can involve paying less than you owe. This type of credit forgiveness is rare, however, and it usually comes with some financial consequences.

Still, if you’re unable to repay your credit card balance, it may be an option worth exploring. Read on to learn how to get credit card debt forgiven and what options there are to credit card forgiveness.

What Is Credit Card Debt Forgiveness?

Credit card debt forgiveness occurs when a portion of your credit card debt is effectively erased. However, this rarely happens. And when it does, it usually comes at a high cost.

As part of the terms and conditions you agreed to when signing up for a credit card, you likely committed to repaying your credit card debt accrued from swiping your card to make purchases. For this reason, it’s unlikely the credit card company will forgive your debt unless you have a compelling reason for why you don’t have to repay it.

(If your identity was stolen and a fraudster ran up your credit card bill, for instance, you’re probably not responsible for repaying the outstanding balance. In this case, you may consider disputing a credit card charge.)

When you don’t pay your credit card bill for an extended time, the credit card company may sell your debt to a debt collector. At this point, the debt collector will reach out to try to get you to repay all or a portion of the debt you owe. However, if you agree to repay a portion of your debt, they may forgive the rest, resulting in credit debt forgiveness.

Recommended: Charge Card Advantages and Disadvantages

How Does Debt Forgiveness Work for Credit Cards?

If a debt collector forgives your debt, you’ll generally still have to pay off a portion of the amount you racked up. Here’s a look at how credit card debt forgiveness works:

•   Say that you owe $10,000 in outstanding credit card debt. If you haven’t paid your bill for the last six months — not even your credit card minimum payment — your credit card company may have sold the debt to a debt collector.

•   At this point, you’ll no longer communicate with your credit card company about debt negotiations since the debt collector is now responsible for recouping the loss.

•   If you agree to repay $5,000 of the debt, your debt collector may require you to make a lump sum payment or installment payments over a set period of time.

•   This means that the other $5,000 of your outstanding credit card balance is now forgiven, meaning you don’t have to pay it.

While this may seem like a relief, here’s one important point to note: You’re still responsible for paying taxes on the amount of credit card forgiveness you receive in most cases. Essentially, you will claim the forgiven debt as taxable income and report it on your tax return.

When Does Credit Card Debt Forgiveness Work Best?

When you’ve fallen behind on your credit card payments and your creditor sells your debt to a debt collector for a fraction of the total balance, this is usually the best time to request credit forgiveness. Typically, debt collectors are more willing to settle some of your debt since they purchased your debt for a portion of what you owe. In other words, any debt you agree to pay back will help the debt collector make a profit from the transaction.

However, if your debt has not yet gone to a debt collector and the creditor is about to charge-off your account, you could still consider credit card forgiveness. A charge-off means that the creditor is accepting your debt as a loss. Therefore, they can recoup the funds by selling your debt to a debt collector. So, before they sell the debt, they might be willing to negotiate credit card debt forgiveness with you.

How Credit Card Debt Forgiveness May Affect Your Credit

The most significant financial implication of credit card debt forgiveness is the negative impact it can have on your credit. When you don’t pay your credit card bill for an extended amount of time, the creditor may report this as a charge-off to the three major credit bureaus (TransUnion, Equifax, and Experian). A charge-off indicates that you didn’t follow through with your financial commitments to a lender, and it can stay on your credit report for up to seven years.

Because credit bureaus use this information to calculate your credit score, a charge-off could lower your score for a while. A lower credit score may make it challenging to qualify for future loans or credit cards. And if you do qualify, you may have to pay a higher than average credit card interest rate, which can make borrowing more expensive.

To avoid this situation, it’s best to contact your credit card issuer as soon as you get behind on payments. Credit card companies may be willing to help you if you’ve fallen on hard times. They may offer a hardship plan, which can lower your monthly payments or reduce your interest for a set amount of time and ultimately help you get back on your feet. This is only a temporary solution though, so if your financial issues are more significant, you may need to explore another solution.

Pros and Cons of Credit Card Debt Forgiveness

If you can’t make your credit card payments, credit card forgiveness might be a viable option. But, while getting your debt forgiven can help alleviate the financial burden, it also can harm your credit and cost you financially.

Here’s a breakdown of the pros and cons of pursuing credit card debt forgiveness.

Pros

Cons

Potentially avoid bankruptcy Can harm your credit score
Repay only a portion of the debt you owe Will remain on your credit report for up to seven years
Pay off debt in a shorter time frame Must pay income tax on forgiven debt

Alternatives to Credit Card Debt Forgiveness

An alternative to credit card debt forgiveness may make more sense for your financial situation. Exploring all of your options in advance can help ensure that you make the best decision for your needs.

Debt Management

Third-party credit counseling agencies offer debt management plans that help you establish a plan for debt repayment. Working with one of these agencies may help you lower the fees you owe as well as your interest rate. However, you usually must agree to repay the total amount of outstanding debt before moving forward.

With a debt management plan, you’ll make one monthly payment to the credit counselor, who will then distribute the funds among the creditors you owe. Most plans help you repay your debt within three to five years. During this time, your account will still accrue interest, though your creditor might be willing to offer a lower rate.

To use one of these plans, you usually have to close your credit card account. This can negatively impact your credit score since it lowers your total credit card limit, thus increasing your credit utilization rate. Your credit utilization ratio is one of the most significant factors credit bureaus use when calculating your credit score.

Also, you will likely have to pay a monthly fee to your credit counselor. If considering this option, carefully vet the counselors you are considering and make sure the one you are working with has a good reputation.

Debt Settlement

Working with a debt settlement company can help you to lower the amount of debt you owe. For example, if you owe $10,000 as your credit card balance, the credit debt settlement company may try to help you settle your debt for $5,000 instead. But, of course, this strategy will only work if the creditor would rather have some of your debt repaid instead of having you default on the account.

Debt settlement also can harm your credit. Usually, debt settlement companies require you to stop making credit card payments while they negotiate with your creditor. At this time, your payments will go toward the debt settlement company so they can offer your creditor a lump sum payment as an incentive to settle your debt. However, pausing payments can negatively impact your debt since payment history is another factor used to calculate your credit score.

While debt settlement may sound good in theory, you should use it as a last resort option before filing bankruptcy. This solution is risky since it doesn’t guarantee that you’ll settle your debt. Your creditor could reject the offer.

Debt Consolidation

If your credit isn’t damaged too much, you might be able to qualify for a debt consolidation loan. While this isn’t technically a debt relief option, it can help you to consolidate your debt and potentially lower your interest rate, allowing you to save money.

To consolidate your debt, you’ll apply for another loan, ideally one with better terms than your existing debt. You’d use the loan to pay off your outstanding credit card debts. Then, you will make installment payments to the lender instead of paying the creditors.

Before you apply for a debt consolidation loan, compare your options to identify the loans with the most competitive terms and interest rates.

Declaring a Chapter 7 or Chapter 13 Bankruptcy

Depending on your situation, declaring Chapter 7 or Chapter 13 bankruptcy may make the most sense. For instance, if you can’t make the payments with a debt management or debt settlement plan, bankruptcy could be an option to avoid going deeper into debt. But before you declare bankruptcy, consider speaking with a bankruptcy attorney to weigh out the pros and cons of this solution.

Bankruptcy should be one of your last resorts since it can drastically harm your credit. Also, it will stay on your credit report for up to 10 years after the filing date. To settle your debts with bankruptcy, you may also be forced to sell some of your assets.

The Takeaway

Credit card debt forgiveness involves paying less than the full amount you owe. While this prospect may sound great in theory, in reality it can harm your credit and end up costing you financially. If you find yourself starting to struggle with debt repayment, contact your credit card company to see if they will offer a hardship plan. If they’re unwilling to help or your financial troubles require a more long-term solution, you can explore credit debt forgiveness and other alternatives.

While credit cards can land you in a heap of debt, they can also be a great financial tool when used responsibly.

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

FAQ

How long does it typically take before a debt is forgiven?

Depending on the route you go, the time frame for debt forgiveness may vary. For example, bankruptcy can take four to six months, while debt settlement can take 36 months or more.

Does debt forgiveness hurt your credit score?

Yes, once you become delinquent on payments, your credit score can be negatively impacted. Then, when your credit card company sells your debt to a debt collector, they may report your balance as a charge-off or a complete loss, which can also impact your credit drastically.

How do you get your credit card balance forgiven?

Usually, once a creditor sells your outstanding debt to a debt collector, the debt collector may agree to forgive some of your credit card debt. But, you must agree to repay a portion of the debt for this to happen.


About the author

Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.



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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.


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.


Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Photo credit: iStock/damircudic
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