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When people talk about a blocked credit card, they can mean a couple different things. The first is a hold placed on your card for a certain amount of money, such as the security deposit when you rent a car. Or, they could be referring to the card being declined at the point of sale, sometimes as the result of a temporary “freeze” placed on the card due suspected fraudulent activities.

Each of these instances has an effect on how much credit you can access for future purchase — or whether you can use your card in the first place. But fortunately, all of them can be fixed once you know how to unblock a credit card.

What Is a Credit Card Block?

As discussed, a “credit card block” can refer to a couple different types of credit card disruptions:

•   A declined credit card transaction, sometimes caused by a temporary freeze.

•   A hold on credit card funds that will be released, but which locks away a certain amount of your credit in the short term.

As a customer, either of these types of credit card blocks can be frustrating and confusing. Learning what’s behind them makes it easier to solve the problem so your credit card works as expected again.

Recommended: Credit Freeze vs. Credit Lock

How Credit Card Blocks Work

Let’s start with credit card “holds,” which are placed by certain merchants as a kind of insurance policy.

For example, if you’ve ever rented a car, you’ve probably experienced this kind of credit card block. Rental car companies put a hold on your car for the total rental charge, and then some extra — a security deposit that can be used to cover accidental damages, late return fees, or fuel charges.

If you don’t encounter any of those contingencies, the company will only charge the rental cost (which is to say, less than the amount that was placed on hold). But still, the hold amount will impact your total available credit until it’s released, which can sometimes take a few days after the final transaction is processed.

You may also encounter a credit card hold when checking into the hotel room, usually for an amount beyond the reservation price to cover incidentals. (Hello, mini bar.) Either way, the good news is that a credit card hold is temporary and will clear on its own once the hold is released.

The other type of credit card block — a declined transaction — may occur for a variety of reasons. Let’s take a closer look at this kind of blocked card next.

Recommended: Apply for a Rewards Credit Card

Common Reasons Your Credit Card May Be Blocked

Having a credit card declined is no fun, no matter the circumstances. But understanding the cause can help you unblock your card as quickly as possible.

Here are some of the most common reasons why credit cards get declined.

Incorrect Card Information

These days, most of us type our credit card information into online systems just as often as — if not more often than — we actually swipe plastic. If you’re buying something online, one of the primary reasons a credit card might get declined is because you’ve put in the wrong information. Always take a second look at your card number, billing address, expiration date, and security code to prevent this occurrence.

Expiration

Another common reason for a declined credit card: it’s past its expiration date! Just as you clean out your cabinets and fridge from time to time, be sure to take a peek through your wallet and ensure all your cards are still “good.” (Usually, card issuers will send a new one just before your card expires. Always take care to dispose of your old card properly.)

Defense Against Fraud

It’s simultaneously frustrating and awesome to find your credit card unexpectedly blocked as a fraud defense mechanism. While the disruption can catch you by surprise, it’s for good reason.

These temporary blocks are placed when issuers suspect fraudulent credit card activity — which can translate to a declined transaction at a critical time. (These blocks often happen when you’re making a larger-than-usual purchase or traveling overseas.)

The good news? This type of blocked credit card situation can be unblocked with a simple phone call — or for some issuers, even by text message. You may also be able to avoid the problem in the first place by letting your card issuer know your travel plans ahead of time.

Hitting Your Credit Limit

For all but the luckiest and most credit-worthy borrowers, credit cards come with a credit limit, which is the maximum amount of money you can borrow using the card. If you’re close to the limit and attempt a transaction that surpasses it, you shouldn’t be surprised if the credit card is declined.

It is possible, however, to ask your credit card issuer for a higher credit limit, especially if you have a good, strong credit history and score to bring to the negotiation.

Card Damage

If your card is physically damaged, a card reader may not be able to read it correctly. The good news is that most point-of-sale systems can use either the magnetic strip or the EMV chip, so even if one part of your card is damaged, you may be able to rely on another. And as long as all the information on your credit card is legible, you’ll still be able to use it to make online purchases.

Closed Account

Sometimes, if you don’t use your credit card very often, the issuer may close the account due to inactivity — and it’s very easy to overlook the letter they send to let you know. It’s possible to see a declined transaction if you miss the memo and attempt to use a card that’s attached to a closed account.

Slow Payments

Being behind on payments doesn’t just lead to late fees and knocks to your credit — it can also lead to your card being blocked from further usage. Paying on time is important for keeping a healthy credit score, as well as for keeping your card usable in the first place.

Recommended: When Are Credit Card Payments Due?

Pros and Cons of Credit Card Blocks

They might seem purely like an annoyance, but hear us out: there are some benefits of credit card blocks!

Pros	Cons
Reduces the risk of fraudulent credit card activity and helps ensure you’re not liable for any money spent fraudulently	A declined transaction can be embarrassing and inconvenient
Can alert you to important financial information like an expired card, closed account, or surpassed credit limit	Credit card holds can temporarily tie up money you’d otherwise be able to spend elsewhere
Many types of credit card blocks are temporary — and credit card holds automatically clear	A credit card block may indicate a negative financial scenario, such as a maxed-out credit card

Preventing a Credit Card Block From Your Issuer

Even better than fixing a credit card block after the fact? Preventing it in the first place. Here are a few tips for avoiding this inconvenient scenario:

•   Ensure your credit accounts are open, under their limit, and that your cards have not expired. All of these reasons for blocked credit cards can be avoided by doing some regular financial housekeeping.

•   Make credit card payments on time. Along with keeping your card usable, this step is critical for ensuring the health of your credit score.

•   If you’re planning to travel overseas or make a big purchase, let your card issuer know ahead of time. Many credit card issuers make it easy to set travel dates and locations online, sometimes without even placing a phone call. But even waiting through a phone tree is better than facing a declined card in a foreign country.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

Tips for Unblocking a Blocked Credit Card

Already experiencing a credit card block? Here’s how to get it sorted as quickly as possible.

•   Communicate with your credit card issuer. If you’re still not sure exactly what’s causing the credit card block, calling the card company is the best way to get the scoop — and fast.

•   Make a payment. If your card is being blocked because of late payments, you’ll need to catch up with what you already owe before borrowing more.

•   Double-check your card information. If you’re having issues getting a card to go through online, ensure you’ve typed all of your card information and personal contact information correctly.

Recommended: Apply for an Unlimited Cash Back Credit Card

The Takeaway

There are a few different types of credit card blocks to look out for — but many of them are temporary, and all of them can be fixed with the right attention and effort. You can also often avoid a credit card block in the first place by communicating with your card issuer ahead of travel or major purchases.

Looking for a new addition to your wallet? The SoFi credit card offers cash-back rewards as well as sign-up bonuses. Plus, after 12 monthly on-time payments of at least the minimum due, your annual percentage rate (APR) will go down by 1%.The application just takes a few minutes.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

Can I stop a payment on my blocked credit card?

If you need to stop a payment on your credit card, whether it’s blocked or not, the first step is to reach out to the issuer. Let them know which transaction you want to stop and why. You may also be able to ask the vendor itself to stop or reverse the transaction.

How long is a credit card blocked for?

The length of a credit card block will depend on why it’s blocked in the first place. For example, if your issuer has locked your card due to late payments, you likely won’t be able to make any more transactions until you pay the minimum due. But if your credit card is locked due to suspected fraudulent activity, you may be able to get it unlocked as soon as you respond to the issuer’s email or text message.

Can charges be deducted from a blocked credit card?

If a temporary hold is placed on your credit card, you should still be able to make additional charges up to the credit limit. If you’re close to the limit, however, a hold may lead to a declined transaction.

Do payments stop when a credit card is blocked?

Unless you are otherwise informed by your credit card issuer, you should always make payments on time and in at least the minimum amount due — whether or not you’re experiencing a credit card block.

How long does it take to reactivate a blocked card?

Once you’ve resolved the issue that caused the card block in the first place, your credit card should be reactivated quickly.

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Photo credit: iStock/Daniel de la Hoz

¹ When you elect to redeem rewards points as cash deposited into your SoFi Checking and Savings account, as a statement credit to a SoFi Credit Card account, as fractional shares into your SoFi Invest account, or as a payment toward your SoFi Personal Loan or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

¹See Rewards Details at SoFi.com/card/rewards.

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

SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, or pay down eligible SoFi debt. ¹
The SoFi Credit Card is issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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Both FICO and VantageScore, two of the most commonly used credit scoring models, set the maximum credit score at 850. Essentially, your credit score is an attempt to place a numeric value on how likely you are to repay any debt obligations that you have. While there are a few different credit scoring models, they generally measure the same sorts of things, like payment history and credit utilization.

A higher credit score is generally better than a low credit score, though there are diminishing returns the higher your score is. In other words, while there may be a real financial impact to raising your credit score from 650 to 700, you won’t see as much of an impact by boosting your score from 800 to 850. Even though it’s not the highest credit score possible, a credit score of 800 is likely high enough that you stand a good shot at qualifying for most loans at the lowest available interest rate.

Recommended: When Are Credit Card Payments Due?

How Do Credit Ratings Work?

The different companies that calculate credit scores have different minimum credit score and credit rating scales. These scales generally divide credit scores into five different categories: poor, fair, good, very good, and excellent. Each of these ranges spans a number of different credit scores, and can be a good way to understand your credit at a glance.

What Factors Affect Credit Scores?

Different companies use different factors (and in different proportions) when calculating credit scores, which is why you have different credit scores. Generally, the following five factors affect credit scores:

•   Payment history

•   Credit utilization ratio

•   Length of credit history

•   Credit mix

•   Recent credit inquiries

How to Check Your Credit Score

While you can check your credit report for free from the major credit bureaus, your credit report usually won’t contain your actual credit score. Instead, there are a number of different ways to check your FICO score or other types of credit score:

•   Through your credit company or other financial institution, such as on a loan statement

•   By purchasing it from one of the major credit bureaus or other providers

•   On a free credit scoring website or other credit score service

Why Should You Have a High Credit Score?

Having a high credit score can have a positive impact on your overall financial situation. In fact, a good credit score is one of the most important assets you have in life. If you have a bad credit score, you may not be able to get approved for credit cards or other loans. And even if you are approved, you may have to pay higher interest rates than borrowers with better credit scores.

Tips for Trying to Achieve a Perfect Credit Score

Here are a few tips if you want to try to achieve a perfect credit score.

Never Miss Payments

One of the best things you can do to positively affect your credit score is to always pay your bills on time, each and every month. Having delinquent or past-due accounts can have a big negative impact on your credit score.

Keep Your Credit Utilization Rate Low

Your credit utilization ratio is defined as the percentage of your available credit that you are actively using. So if you have a single credit card with a $10,000 limit, and you’re carrying a balance of $1,000, your credit utilization ratio is 10%.

Your credit utilization ratio is one of the largest factors that makes up your credit score. Generally aim to keep it at 30% or lower.

Avoid Applying for Credit Too Often

Another factor that makes up your credit score is how often you apply for new credit. Because of this, you’ll want to be judicious when applying for a new credit card (like the SoFi credit card) or any other form of loan. Too many applications within a short window of time can raise a red flag for lenders.

Review Your Credit Reports

It’s also a good idea to regularly review your credit reports, especially if you have a starting credit score you’re trying to build. That way, you can make sure there isn’t any inaccurate or incorrect information on your report. If you do find missing or inaccurate information, contact the credit bureau to have it corrected.

Get a Secured Credit Card

If you don’t have the minimum credit score for a credit card, you might consider applying for a secured credit card. With a secured credit card, you put down a refundable security deposit upfront, which then serves as your credit limit.

As you use your secured card responsibly, building up to a fair credit score or even a good one, you might be able to later upgrade it to an unsecured credit card.

Become an Authorized User

Another way to work towards a perfect credit score, especially if you are starting out in your credit journey, is to become an authorized user on a credit account of a trusted friend or family member. As long as your friend or family member is responsible with their credit usage, it can help build your credit score as well.

Pay Your Bills Regularly

Again, one of the best things that you can do for your credit score is to pay your bills regularly. This means setting up a budget and making sure that your income exceeds your expenses, with a little left over each month to stash in savings. That way, you can always make sure to pay your bills while having an emergency fund to cover any unexpected financial situations.

Recommended: Apply for a Rewards Credit Card

The Takeaway

There are a few different companies that generate credit scores, and the methodology that each one uses varies slightly. In the most popular credit score models, the highest credit score possible is 850. While it’s generally advisable to work toward improving your credit score, it may not be worth it to overly focus on getting a perfect credit score.

If you already have an excellent credit score, you might consider applying for a credit card that gives you rewards with each purchase. One option you might consider is the SoFi credit card. With the SoFi credit card, you can earn cash-back rewards, which you can then use to invest, save, or pay down eligible SoFi debt.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

What effect does an 850 credit score have?

If you have an 850 credit score, you are much more likely to get approved for any new loans or credit cards that you apply for. You’ll also likely be eligible for the lowest possible interest rates. These are a few of the reasons it’s beneficial to have a good credit score.

Which credit scores are most widely used?

Two of the most popular companies and credit scores are VantageScore and your FICO Score. However, there are several companies that have their own methodologies and credit scores. This is why you have different credit scores.

Which credit score do banks use?

Different banks, lenders, and credit card companies may use different credit scores, depending on their geographic location and other factors. Each different credit score company uses information from the three most popular credit bureaus — Experian, Equifax, and TransUnion. If you’re not sure which credit score your bank uses, you might be able to ask their customer service department or look for an answer online.

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Photo credit: iStock/anyaberkut

¹ When you elect to redeem rewards points as cash deposited into your SoFi Checking and Savings account, as a statement credit to a SoFi Credit Card account, as fractional shares into your SoFi Invest account, or as a payment toward your SoFi Personal Loan or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

¹See Rewards Details at SoFi.com/card/rewards.

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.

The SoFi Credit Card is issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Members earn 2 rewards points for every dollar spent on eligible purchases. If you elect to redeem points for cash deposited into your SoFi Checking or Savings account, SoFi Money® account or fractional shares in your SoFi Active Invest account, or as a payment to your SoFi Personal, Private Student, or Student Loan Refinance, your points will redeem at a rate of 1 cent per every point. If you elect to redeem points as a statement credit to your SoFi Credit Card account, your points will redeem at a rate of 0.5 cents per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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.

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Credit allows you to borrow money to access money, goods, or services, with the expectation that you’ll later pay back the amount you borrowed. This could come in handy if you want to make a purchase that you can’t immediately pay for, such as taking out a mortgage to buy a home or an auto loan to cover your car purchase.

However, credit is only extended based on the lender’s confidence that the borrower will repay them. Those who have good credit are viewed as more likely to fulfill their debt obligations, and thus are more likely to get approved for credit opportunities and secure better terms. This is why building and improving credit is important — it can open up doors in your financial future.

What Is Credit?

The meaning of credit boils down to a contractual agreement: If a lump sum of money or something of value is borrowed, the borrower agrees to pay it back in full at a later date, along with any applicable fees and interest. Credit can take a number of different forms, from a credit card to a mortgage to an auto loan to student loans.

When you have good credit, that means you’ve established a track record of paying your debt on time and within the agreed-upon conditions. If you’re deemed creditworthy, meaning less of a risk to lenders, you’ll have an easier time in the future borrowing money, at more favorable terms and rates.

On the flipside, if you’ve had trouble paying back money you borrowed or staying on top of payments, you’ll have a not-so-great credit score. In turn, lenders, creditors, and merchants will be less inclined to loan you money or extend a line of credit due to your higher perceived credit risk.

Recommended: When Are Credit Card Payments Due?

Why Do You Need Credit?

In an ideal world, you’d have all the cash on hand needed to get those big-ticket items, like a house or a new car, or to fund your child’s college education. But in reality, you might need to borrow money to make those purchases, which is where credit can come into play.

Credit can help you reach your long-term goals and lead to greater opportunities. For instance, a student loan can help you obtain a higher education, which can be your ticket to higher-paying jobs. Or a mortgage could make it possible for you to become a homeowner.

Additionally, credit can offer various protections and perks that you might not get with other payment methods. For instance, with a credit card, you can enjoy benefits like purchase protection and also earn rewards on your purchases. When you apply for a credit card with SoFi and get approved for instance, you can earn cash-back rewards on all eligible purchases.

Recommended: Apply for an Unlimited Cash Back Credit Card

Types of Credit

While not the only types, two of the main types of credit are installment credit and revolving credit. Both installment and revolving credit come with interest rates, potential fees, and repayment terms.

Installment Credit

Installment credit is a type of credit where you receive a lump sum upfront that you then pay back in fixed amounts over time, usually with interest. Examples of installment credit include personal loans, car loans, and mortgages.

Revolving Credit

Revolving credit allows you to borrow as much or as little money as you need up to your credit limit. Once you repay your balance, you can borrow that amount again. While you have to at least make a minimum payment each month, you can carry over your balance onto the next month.

Types of revolving credit include credit cards and home equity lines of credit (HELOC).

Tips for Building Your Credit

When working to build credit from scratch, here are some tips to keep in mind.

Make On-Time Payments

Since payment history makes up 35% of your credit score, you’ll want to prioritize staying on top of your payments. Ideally, you’d pay off your full balance each month, but make sure you’re at least making the minimum payment to avoid a late fee and negative effects on your credit.

Keep Your Balances Low

Keeping your balances low will make them more manageable to pay off. Plus, it will help you to maintain a lower credit utilization, which is a comparison of your credit card balances against the total credit limit across all of your cards. Credit utilization makes up 30% of your credit score, and a lower credit utilization ratio is generally viewed as more favorable.

Don’t Apply for More Credit Than Necessary

When you apply for a credit card, it results in a hard pull of your credit, which will usually negatively impact your score. Further, too many credit applications in a short window of time can raise a red flag for lenders, as you may appear overextended. In turn, you’ll want to apply to cards sparingly, and only those you’re most interested in.

Keep an Eye on Your Credit

Monitoring your credit will help you learn how different financial movements and behaviors affect your credit score. It also will alert you when your score takes a dip, and when it increases. Plus, it can help you detect suspicious activity.

How Credit Scores Work

Credit scores are calculated using dozens of different scoring models. However, the most widely used scoring models for consumer scores are FICO and VantageScore.

These scoring models take into account various data that appears in your credit report. This information is compiled by the three major credit bureaus — Experian, Equifax, and TransUnion — and sourced from various creditors who report your borrowing and payment activity.

That information is then distilled into a three-digit number that’s known as your credit score. Interestingly, while everyone’s credit score is based on five main categories of information, how those categories are weighted can vary from person to person. For instance, if you’re just starting to establish credit, your length of credit history will be weighted differently than it would be for someone with a lengthy credit history.

Factors That Affect Your Credit Score

As mentioned, there are five main factors that are considered when determining your credit score. These are:

•   Payment history: Your history of making payments on-time is considered the most important factor in your credit score by FICO. Even just one missed payment can negatively impact your score. Given the importance of a good credit score, it’s wise to avoid falling behind.

•   Amounts owed: Otherwise known as credit usage, this looks at how much of your total available revolving credit you’re using. It’s recommended to keep this rate at no more than 30% to avoid negative effects, so keep this in mind when using a credit card throughout the month.

•   Length of credit history: How long you’ve had your accounts open is another factor that makes up your credit score. As such, think twice before closing old accounts, even if you’re not using them that often.

•   Credit mix: A diverse mix of credit — credit cards, auto or personal loans, mortgage — can help your score. Lenders want to see how well you can manage a wide range of credit products.

•   New credit: This is the number of new credit accounts you’ve applied for and recently opened. Remember, an application leads to a hard inquiry, which will temporarily lower your credit score. Numerous applications at once can signal increased risk to lenders.

How to Check Your Credit Score

You can check your credit score in a few different ways:

•   By signing up for a free credit monitoring service

•   Through a credit card issuer, lender, or money management app

•   With a nonprofit credit counselor

With any of the above options, just make sure to note the terms before requesting your score — there’s no need to pay for information you can get for free.

Calculating Your Credit Score

Credit scores generally range from 300 to 850, though someone’s starting credit score isn’t necessarily at the lowest end (nor will it be zero). While exact intervals can vary a bit depending on the scoring model, here’s a look at how FICO breaks down the credit score ranges:

•   Poor: 300 to 579

•   Fair: 580 to 669

•   Good: 670 to 739

•   Very good: 740 to 799

•   Exceptional: 800 to 850

As mentioned, five factors are taken into account when calculating your credit score: payment history, amounts owed, length of credit history, credit mix, and new credit.

When it comes to how exactly your score is calculated, it gets a bit complex. Consumer scoring models, such as FICO and VantageScore, use statistical analysis methods to find patterns of behavior that are linked to your perceived ability to pay back your loans.

The Takeaway

Credit is important in your life as a consumer. It can help you make purchases you wouldn’t be able to, opening doors to new financial opportunities. Further, having a strong credit can save you in interest and fees, and make it more likely that you’ll get approved for more competitive credit opportunities.

If you’re in the search for a new credit card, consider a rewards credit card to make your money work for you. With the SoFi Credit Card, you can earn cash-back rewards on all eligible purchases. You can then apply those rewards toward your balance as a statement credit, redeem points for stock in a SoFi Active Invest account, and more.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

What is a simple definition of credit?

Credit is the agreement under which someone borrows money to access goods and services, with the expectation that they’ll then pay back the amount borrowed in full, along with any applicable interest charges or fees.

What is the difference between credit and debit?

With debit, the money spent is deducted from existing funds you have in an account. Credit, on the other hand, allows you to borrow money that you’ll repay at a later date.

How do I get to know my credit score?

You can check your credit score in a number of ways, including a free credit scoring website, through your credit card issuer or lender, or by visiting a nonprofit credit counselor.

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Photo credit: iStock/tommaso79

¹ When you elect to redeem rewards points as cash deposited into your SoFi Checking and Savings account, as a statement credit to a SoFi Credit Card account, as fractional shares into your SoFi Invest account, or as a payment toward your SoFi Personal Loan or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

¹See Rewards Details at SoFi.com/card/rewards.

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.

The SoFi Credit Card is issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Members earn 2 rewards points for every dollar spent on eligible purchases. If you elect to redeem points for cash deposited into your SoFi Checking or Savings account, SoFi Money® account or fractional shares in your SoFi Active Invest account, or as a payment to your SoFi Personal, Private Student, or Student Loan Refinance, your points will redeem at a rate of 1 cent per every point. If you elect to redeem points as a statement credit to your SoFi Credit Card account, your points will redeem at a rate of 0.5 cents per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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.

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A persistent myth is that carrying a credit card balance will improve your credit score. If you’re wondering: do you have to carry a balance to build credit? The answer is no.

That being said, keeping a balance on a card can impact your credit — sometimes in negative ways. For instance, having a large balance can drive up your credit utilization rate, which impacts your credit score. And if you rack up too high of a balance on your credit card, you run the risk of starting to fall behind on payments.

What to Know About Carrying a Balance on Your Credit Card

When you carry a credit card balance, that means you did not pay off your last statement balance in full. Technically, you only have to make the minimum monthly payment by the due date to avoid a late fee. However, when you carry a balance, you’ll start to accrue interest on the unpaid amount.

Interest can add up quickly. For instance, let’s say you have a credit card balance of $5,000 and your credit card’s annual percentage rate (APR) is 24%. If you were to make monthly payments of $200, it would take you about 36 months to pay off the full amount, and you’d pay a grand sum of $2,000 in interest.

What Happens to Your Credit Score When You Carry a Balance?

Carrying a balance will cause your credit utilization to go up. Credit utilization compares your balance against your total credit limit across all of your cards, and it’s expressed as a percentage. For example, let’s say you have a balance of $1,000, and your total credit limit is $10,000. Your credit utilization would be 10%.

This matters because credit utilization is a major factor considered among popular consumer credit scoring models, such as the VantageScore and FICO, where it makes up 30% of your score. Generally, it’s advised to keep your credit utilization below 30% to avoid adverse effects to your score, though the lower, the better.

Situations in Which Carrying a Balance Isn’t Worth It

Sometimes, carrying a balance can give you a bit of breathing room to pay off a large purchase. But often, it’s not worth the potential effects on your credit score.

Your Credit Utilization Is Too High

If your credit utilization is too high because you’re carrying a large balance, it can hurt your score. Aim to pay off your credit card bill as soon as possible, rather than adding to your existing balance. That way, you’ll give your credit card a chance to bounce back.

Your Interest Rate Is High

If your balance is on a credit card with a high APR, you’ll want to think twice before carrying it. In general, credit cards tend to have higher interest rates than other types of debt, which is why credit card debt is hard to pay off. Plus, credit card interest accrues on a daily basis, so it’s easy for a balance to balloon.

You Can’t Keep Up With Payments

If you’re carrying a high balance, it’s probably best to keep your credit card balance to a minimum rather than adding to it and risking falling behind. The consequences of credit card late payment can include paying late fees, having your account sent to collections, and suffering potential impacts to your credit score.

When Will You Be Charged Interest on Your Credit Card Balance?

The majority of credit cards offer a grace period. During this time, you won’t be charged any interest. This grace period usually extends from the date your billing statement is issued to the credit card payment due date, and it’s typically at least 21 days long.

Once the grace period ends, you’ll be charged interest on your balance. Most credit card interest is compounded daily. In other words, each day interest will get charged to your account based on that day’s balance.

Advantages of Paying Off Your Credit Card on Time

Unsure of whether to pay off your credit card or keep a balance? Here’s the case for paying off your credit card on time and in full:

•   Avoid late fees and other consequences: Should you miss making your credit card minimum payment by the due date, you’ll get charged a late fee. Late fees typically range from $25 to $35. Plus, late payments of more than 30 days can get reported to the credit bureaus, affecting your credit score. You could also see an increase in your credit card APR.

•   Skip paying interest: Perhaps one of the biggest advantages of paying off your credit card balance in full is that you’ll avoid paying any interest. Thanks to the grace period, credit card interest only starts to accrue if you carry a remaining balance after the statement due date. Some credit cards even reward you for paying on-time. If you apply for a credit card with SoFi and get approved, for instance, you’ll get a lower APR after making 12 on-time monthly payments of at least the minimum due.

•   Dodge credit card debt: Paying off your statement balance in full will get you into the habit of only charging your credit card how much you can afford to pay. Plus, you’ll avoid the possibility of debt starting to pile up if you stay on top of your payments.

•   Lower your credit utilization: Another perk of paying off your credit card on time and in full is that it will lower your credit utilization rate. A lower credit utilization rate can positively affect your credit score — a rule of thumb to keep in mind if you’re working on building credit.

What Is the Best Way to Pay Off a Credit Card Balance?

The “best” way to pay off a credit card balance is whichever method works best for you and your unique financial situation. Some common ways to go about paying off a credit card balance, or making it easier to pay, include:

•   Paying promptly in full: If possible, pay your credit card balance in full each month. This will prevent you from paying interest, as well as getting hit with potential late fees if you fall behind.

•   Making early or multiple payments: Another option is to make an early payment. Paying off all or part of your balance before the due date lowers your credit utilization, which in turn can positively affect your credit score.

•   Adjusting your payment date: Reach out to your credit card issuer to see if you can move your credit card payment due date so that it’s easier for you to to stay on time with your payments. For instance, you might set your due date for right after you usually get paid.

•   Considering the debt snowball or debt avalanche payoff method: If you’re staring down a mountain of debt, consider one of two popular debt payoff strategies. With the debt snowball method, you pay off the card with the lowest balance first. Once that’s knocked out, you move to paying down the card with the next-highest balance. The debt avalanche method, on the other hand, is where you start with paying down the card with the highest interest rate. Once you get that card paid off, you focus on the card with the next highest interest rate and so on, until all of your debt is paid down.

Recommended: How Credit Card Payments Work

What to Do if You Need to Carry a Balance

Sometimes it’s just not feasible to pay down your credit card balance in a single month. If that’s your situation, here’s what to do to make sure you stay on top of your debt and can pay it off sooner rather than later:

•   Make at least the minimum payment: Falling behind on your payments isn’t good for your credit score, so make sure you’re at least making the minimum payment on time. This will also allow you to avoid getting hit with any late fees, not to mention the potential danger of your credit card issuer increasing your APR or worse, your account getting sent to collections.

•   Consider credit card debt consolidation: If you’re carrying a balance across a handful of high-interest credit cards, you might consider debt consolidation. With this approach, you’d effectively lump together your debts into a new loan. The potential advantages of doing this include paying it off quicker and saving in interest, depending on the terms of your loan.

•   Look into a debt management plan: Another option is to work with a third-party organization to create a debt management plan. You’d then make a single monthly payment to the organization. The organization might be able to negotiate on your behalf with credit card companies for lower monthly payments or a lower interest rate. A potential downside of a debt management plan is that it might require you to close your accounts until your balances are paid off, which could affect your credit score.

•   Research the option of a balance transfer: When you use a balance transfer credit card to move over your outstanding balances, you might be able to take advantage of a promotional APR that’s sometimes as low as 0%. If you can pay off your credit card before the promotional period ends, it could save you in interest fees. Note that you generally need good credit to qualify though (in other words, if you’re still establishing credit, this might not be the right option for you).

Recommended: Apply for an Unlimited Cash Back Credit Card

The Takeaway

Carrying a balance isn’t necessary to help build your credit score, and in some cases, it can hurt your score. If you need to carry a balance, make it a priority to at least make your minimum monthly payments, and aim to pay down your balance in full as soon as you can.

Not only can making your minimum payments on time help you avoid late fees, in some cases, it can reap you rewards. With the SoFi credit card, for instance, cardholders can secure a lower APR after making 12 on-time payments of at least the minimum amount due. And on top of that, cardholders can earn rewards on all eligible purchases with the SoFi credit card.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

Should I carry a balance or pay off credit cards?

Ideally, you should aim to pay off your balance in full each month. That way, you won’t pay any interest. Plus, you’ll lower your credit utilization and improve your history of on-time payments, both of which are factors that determine your credit score.

How much of a balance is ideal for me to keep on my credit card?

The lower the balance, the better. Contrary to popular belief, carrying a balance will not help your credit, so there is no benefit in doing so. You should pay off your credit cards in full as quickly as possible. And if you do need to carry a balance, consider a balance transfer, credit card consolidation, or debt management plan.

Is it advisable to keep a zero balance on a credit card?

Yes, keeping your balance at zero will help you to build your credit or maintain a strong score. Plus, it will keep your credit usage low, and you won’t pay any interest.

What amount is too much of a balance on a credit card?

There’s no specific, one-size-fits-all amount. Rather, a credit card balance becomes too high if it brings up your credit utilization to over 30%, or if you have trouble keeping up with payments.

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Photo credit: iStock/Delmaine Donson

¹ When you elect to redeem rewards points as cash deposited into your SoFi Checking and Savings account, as a statement credit to a SoFi Credit Card account, as fractional shares into your SoFi Invest account, or as a payment toward your SoFi Personal Loan or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

¹See Rewards Details at SoFi.com/card/rewards.

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.

The SoFi Credit Card is issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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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In most cases, lenders send credit information to the major credit bureaus alongside a Social Security number (SSN). However, even if you don’t have a SSN, you still may have a credit report. Typically, Social Security numbers are given to U.S. citizens and non-citizens who are authorized to work in the United States. If you are not eligible for a Social Security number, you may apply for and be issued an Individual Taxpayer Identification Number (ITIN).

An ITIN is not typically used by the major credit bureaus as an identifier for a credit profile. In fact, if you only have an ITIN, you may not be able to access your credit report online — instead, you may have to request it by mail. This can make it challenging to build credit and review your credit profile for inaccuracies.

What Is a Credit Score?

A credit score is a number that attempts to encapsulate how likely you are to meet any outstanding debt obligations that you have. Many lenders use this number when deciding whether or not to extend credit to an applicant. Your credit score is determined based on a number of factors, including your debt repayment history, credit utilization ratio, and the average age of your accounts.

Recommended: Tips for Establishing Credit

What Is an Individual Taxpayer Identification Number (ITIN)?

An Individual Taxpayer Identification Number (ITIN) is an identifying number that can be used in some cases instead of a Social Security number. The IRS will issue an ITIN to individuals who are not eligible for an SSN. An ITIN can be used for tax purposes, but it is not often used for credit purposes.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

Who Should Get an ITIN?

The IRS will issue an ITIN to people who are required to pay taxes but are not eligible for a SSN. The IRS uses these numbers to track and process tax payments for individuals who have a U.S. tax liability. ITINs can be issued to both resident and nonresident aliens.

Additionally, if you are applying for a credit card for the first time but don’t have a Social Security number, you may be able to use an ITIN instead.

Recommended: When Are Credit Card Payments Due?

Steps for Getting an ITIN

You’ll want to get an ITIN if you’re not eligible for a Social Security number and have a tax filing or reporting requirement. Getting an ITIN is a fairly straightforward process. To do so, you’ll need to:

•   Mail your W-7, tax return, proof of identity, and foreign status documents to the IRS, or apply in-person at an IRS-authorized Certifying Acceptance Agent. Alternatively, you can make an appointment at a designated IRS Taxpayer Assistance Center.

•   Wait to receive your ITIN from the IRS. It will usually arrive within seven weeks, assuming you submitted a complete application and are eligible for an ITIN.

Can You Get a Credit Card With an ITIN?

You may be able to get a credit card (such as an international student credit card) with only an ITIN. Different credit card issuers have different rules on whether or not they require a Social Security number or will accept a credit card application with an ITIN. Check the policies of various issuers to find the one that is the best fit for you.

Tips for Building Credit With an ITIN

It can be possible to build credit with only an ITIN, but it may be more difficult. If you’re hoping to build credit with an ITIN number, here are some tips:

•   Apply for and responsibly use credit and loans: One tip for building credit is to apply for and responsibly use debt, including credit cards. While some credit card issuers may not allow you to apply for a credit card without a Social Security number, there are some that do. Review the different options and consider that as one way to build credit with an ITIN.

•   Consider becoming an authorized user: Another way to build credit with an ITIN is by becoming an authorized credit card user on the account of a trusted friend or family member. Being an authorized user on another account can help you to build credit through the good credit of your friend or family member, and you may also get your own card, sometimes called a supplementary credit card, to use. It’s important to understand, however, that if the primary account holder doesn’t use their account responsibly, it may end up hurting your credit as well. Still, unlike with a joint credit card, you’re not responsible for payment.

Recommended: Tips for Using a Credit Card Responsibly

Checking Your Credit Score With an ITIN

Depending on the credit bureau, you may not be able to check your credit score with only an ITIN. Many lenders send information to the credit bureaus along with an individual’s Social Security number.

However, because credit bureaus use a variety of sources of information, you may still have a credit profile and credit score even if you don’t have an SSN. Still, some credit bureaus (such as Experian) will require you to submit any requests to see your credit profile by mail.

Recommended: Apply for an Unlimited Cash Back Credit Card

The Takeaway

If you are required to pay taxes in the United States but are not eligible for a Social Security number, you may be issued an Individual Taxpayer Identification Number (ITIN). It’s possible to apply for a credit card with an ITIN, but whether you can will depend on the rules of the credit issuer, which can vary from issuer to issuer.

Some credit card issuers require that you have a Social Security number, and that includes SoFi. But if you do have a SSN, you might want to consider the SoFi Credit Card. When you get a credit card with SoFi, you can earn cash-back rewards, apply them toward your balance, redeem points into stock in a SoFi Active Invest account, and more.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

What should I put instead of a Social Security number when applying for a credit card?

When filling out a credit card application, it’s important to be truthful and complete. If the application requires a Social Security number and you don’t have one, you may not be able to submit the application for that particular card. Some credit card issuers may allow you to submit an application with an Individual Taxpayer Identification Number (ITIN) instead, though it varies by issuer.

Can I build credit with only an ITIN?

It can be possible to build credit with only an ITIN, but it may be slightly more complicated. One tip for establishing credit is applying for a credit card and using it responsibly, but not all credit card issuers allow you to apply with an ITIN. If you have a lack of credit history, it may also make it more difficult to get approved for a credit card and demonstrate that you can use credit responsibly.

Can I check my credit report with my ITIN?

It may or may not be possible to check your credit report with only an ITIN. Many lenders submit information to the credit bureaus solely based on an individual’s Social Security number. However, some bureaus will allow you to check your credit report without an SSN if you make the request by mail.

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Photo credit: iStock/RgStudio

¹ When you elect to redeem rewards points as cash deposited into your SoFi Checking and Savings account, as a statement credit to a SoFi Credit Card account, as fractional shares into your SoFi Invest account, or as a payment toward your SoFi Personal Loan or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

¹See Rewards Details at SoFi.com/card/rewards.

The SoFi Credit Card is issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, or pay down eligible SoFi debt. ¹
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.

Members earn 2 rewards points for every dollar spent on eligible purchases. If you elect to redeem points for cash deposited into your SoFi Checking or Savings account, SoFi Money® account or fractional shares in your SoFi Active Invest account, or as a payment to your SoFi Personal, Private Student, or Student Loan Refinance, your points will redeem at a rate of 1 cent per every point. If you elect to redeem points as a statement credit to your SoFi Credit Card account, your points will redeem at a rate of 0.5 cents per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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.

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