Credit card debt can pile up quickly when a person can’t make their payments on time. If you find yourself in that situation, you may wonder if it’s possible to delay credit card payments. In some cases, you may be able to do so. Read on to learn your options.

Credit Card Relief Options

Some credit card companies may provide financial relief programs to their customers who are facing financial hardships and having difficulty paying their bills on time. Below, you’ll learn about some of your options.

Although programs may vary by company, here are some of the relief programs that credit card companies may offer.

💡 Quick Tip: A low-interest personal loan can consolidate your debts, lower your monthly payments, and help you get out of debt sooner.

Decreasing or Deferring Payments

Many credit card companies allow cardholders to reduce or delay credit card payments for a specific amount of time by offering emergency forbearance. Once the forbearance period ends, cardholders will need to make up any skipped or postponed payments.

While the credit card company may not require cardholders to make up payments right away, they will need to begin to make at least the minimum monthly payment. Depending on the new credit card balance, the minimum payment required may have changed.

One other possibility: Many credit card issuers may agree to shifting your due date slightly to, say, better sync with when you get paid. This can be another option to inquire about.

Refunding or Waiving Late Payment Fees

Usually, when a cardholder misses a credit card payment, they are charged a late fee. Some card companies may refund or waive late fees if the customer requests so due to financial hardship.

Lowering the Interest Rate

Some credit card companies may reduce the credit card interest rate on an account if a customer is facing financial hardship. However, this rate may increase after the specified term ends.

Establishing Payment Plans

Some credit card companies help cardholders repay their credit card balance by offering payment plan options. Cardholders may be able to secure a better repayment plan that works for their current financial situation.

Keep in mind that all of these options may vary by creditor.

Consequences of Missing a Credit Card Payment

If you miss a credit card payment vs. entering into a forbearance program with your card issuer, here is what you might expect.

Increase to the Credit Card Balance

Making a late payment may increase a credit card holder’s balance in several ways. First, credit card companies can charge a late fee that can be in the range of $30 or $32, even for the first occurrence. If a cardholder misses a payment after that, the late fee could increase to $41. It’s important to note that this fee may not exceed the minimum balance due.

Another way the credit card company may increase the balance is to increase the account’s interest rate. For example, if the cardholder hasn’t made a payment for 60 days, the credit card company may increase the APR, or annual percentage rate, to a penalty APR.

Increasing the interest rate can also increase the revolving balance on the credit card. However, not all creditors may charge penalty interest.

Credit Scores May Be Impacted

Since payment history and account standing are some of the factors used to determine a cardholder’s credit score, making late payments may negatively impact it. But the amount of time a cardholder’s credit is affected can vary depending on the situation.

In general, creditors send the payment information to credit bureaus. They use codes to identify the standing of the accounts. Typically, once a payment is 30 days late, it is considered a delinquent payment to the credit bureaus.

While missing a payment may not impact a score immediately, it may appear on a cardholder’s score and stay there for several years if it happens regularly. Of course, this depends on the situation and the other factors credit bureaus use to figure the credit score.

The Balance Could Be Charged Off

Another consequence of making a late payment is that the creditor may not allow the cardholder to use it for other purchases until the card is in good standing.

Additionally, if the payment is 180 days late, the creditor may close the account and charge off the balance. If a creditor charges off the balance, it means that the creditor permanently closes the account and writes it off as a loss. However, the cardholder will still owe the outstanding balance remaining on the account.

In some cases, creditors will attempt to recover this debt by using their collections department. In other cases, they may sell the debt to a third-party collection agency that will try to get payments from the cardholder.

Creditors have some flexibility when it comes to working with their customers. For customers who have had financial setbacks such as losing a job, creditors may help them get back on track under FDIC regulations. Usually, this type of flexibility is available for consumers who show a willingness and ability to repay their debt.

Alternative Options

For consumers who find themselves struggling to make their credit card payments and don’t have creditor relief programs available, there are a few other options to consider that may reduce the financial burden of making credit card payments on time.

Balance Transfer Credit Cards

A balance transfer credit card is a credit card that offers a lower interest rate or even a 0% introductory interest rate. This could allow a consumer to transfer a high-interest credit card debt to a card with lower interest — and potentially pay off the debt faster. Usually, balance transfer credit cards have introductory periods that last anywhere between six and 21 months.

Using this method can potentially be a money-saver if the consumer no longer uses the high-interest rate credit card and continues to pay down the transferred debt at the lower interest rate.

In general, consumers need a solid credit history to qualify for a balance transfer credit card. If approved, consumers can use the new credit card to pay down high-interest debt. Therefore, this can be a solution for credit card debt repayment, as long as the cardholder can pay off the debt before the introductory period ends.

However, if the balance isn’t repaid before the introductory period ends, the interest rate typically jumps up. At this point, the balance will begin to accrue interest charges, and the balance will grow.

Home Equity Loans

With fixed-rate home equity loans, some homeowners may qualify for a lower interest rate using their home as collateral rather than using an unsecured loan (a loan that’s not backed by collateral). As with home equity lines of credit, the terms and interest rate a borrower might qualify for is based on a variety of financial factors.

It’s important to note that borrowing against a home doesn’t come without risks, such as leaving the homeowners vulnerable to foreclosure if they don’t pay back the loan.

Credit Card Consolidation

For borrowers who may not want to use their home as collateral but are struggling to pay down debt, debt consolidation with a personal loan may be a better fit for their situation. Essentially, borrowers may be able to use a personal loan with better terms and a lower interest rate to pay off credit card debt.

Using a personal loan to consolidate credit card debt can make monthly payments more manageable and potentially lower payments. Although a credit card debt consolidation loan won’t magically make debt disappear, paying off the balance might make a difference in a person’s overall financial outlook.

However, note that some lenders may charge origination fees, which can add to the total balance you’ll have to repay. You may also have to pay other charges, such as late fees or prepayment penalties, so make sure you understand any fees or penalties before signing the loan agreement.

Recommended: A Guide to Unsecured Personal Loans

The Takeaway

Staying on top of credit card payments can be difficult during times of financial hardship. Fortunately, you might have options when it comes to delaying credit card payments, including forbearance programs with your card issuer. Or, you could explore alternative options for getting out of debt for good. A credit card consolidation loan, which is a kind of personal loan, might be worth exploring.

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

FAQ

Can I delay my credit card payments?

If you are having difficulty making credit card payments on time, it’s wise to contact your credit card issuer as soon as possible to see if they can work with you and possibly allow you to delay a payment. They might be able to waive late fees and change your payment due date going forward to help ease the financial stress.

Does delaying credit card payments affect credit scores?

Delaying credit card payments (or skipping them) can negatively impact your credit score and lead to additional fees and potentially a higher interest rate. Your payment history is the single biggest contributing factor to your credit score, and late or skipped payments can bring your score down.

Can you ask credit card companies to defer payments?

You can ask your credit card if they can defer payments for a period of time or otherwise work with you if it’s challenging to pay what you owe. They are not, however, obligated to agree to do so. You might have to find other ways to manage your debt.

About the author

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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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.

SOPL-Q225-051

Understanding the differences between CreditWise and FICO® Score is essential for managing your credit health. While both tools provide insights into your creditworthiness, they use distinct scoring models and data sources.

FICO scores are produced by the Fair Isaac Corporation and are one of the most popular types of credit scores. CreditWise is a service provided by Capital One that provides you access to your TransUnion® credit report and your VantageScore® 3.0 credit score.

This article will explore how these scores are calculated, their impact on your financial decisions, and which one lenders prefer.

What Is a Credit Report?

Your credit report is a statement that has information about how well you have historically paid loans and used other types of credit. Most consumers have more than one credit report. This is because there are multiple companies that collect and maintain credit information about consumers.

Three of the largest credit reporting bureaus are Equifax®, Experian®, and TransUnion. Each of these credit bureaus collect information about consumers, and many consumers have credit reports from all three. Typically, credit scores are calculated using the information gathered from the three credit bureaus.

Recommended: How Long Does It Take to Build Credit?

How CreditWise Works

CreditWise, a free credit monitoring tool offered by Capital One, empowers users to track their credit health without affecting their credit score. By utilizing data from TransUnion and the VantageScore 3.0 model, CreditWise provides users with a clear snapshot of their credit status.

One of its standout features is the credit simulator, which allows users to explore how financial decisions — such as paying off debt or applying for a new credit card — could impact their score. CreditWise also sends real-time alerts for significant changes in credit activity, helping users detect potential fraud and stay informed about their credit profile.

How FICO Works

FICO, or the Fair Isaac Corporation, is a leading provider of credit scoring models widely used by lenders to assess creditworthiness. The FICO score is calculated using data from the three major credit bureaus — Experian, TransUnion, and Equifax — and evaluates factors such as payment history, credit utilization, length of credit history, new credit inquiries, and credit mix.

By analyzing these factors, FICO generates a score ranging from 300 to 850, helping lenders gauge the risk associated with lending money or extending credit to a borrower.

Recommended: 10 Strategies for Building Credit Over Time

Differences Between CreditWise vs. FICO

The primary difference between CreditWise and FICO lies in their scoring models and purpose. CreditWise uses the VantageScore 3.0 model, which analyzes credit data from TransUnion. It’s a free tool that helps consumers monitor their credit health.

On the other hand, FICO scores are the industry standard, used by over 90% of lenders to assess creditworthiness. FICO scores are based on data from all three major credit bureaus: Experian, TransUnion, and Equifax.

While CreditWise is great for tracking trends and identifying fraud, FICO scores play a crucial role in loan approvals and interest rate determinations.

Recommended: Differences Between VantageScore and FICO Credit Scores

How Credit Scores Are Calculated

Different companies calculate their credit scores in different ways, though most companies use similar information. As mentioned above, the Fair Isaac Corporation lists five factors that affect your FICO score:

•   Payment history (35%)

•   Amounts owed (30%)

•   Length of credit history (15%)

•   Credit mix (10%)

•   New credit (10%)

Paying your bills on time and lowering your credit card utilization are two common ways that you can build your credit score.

Why Are There Different Scores?

There are different credit scores because each scoring model uses unique algorithms to assess creditworthiness. Additionally, scores can vary depending on which credit bureau — Experian, TransUnion, or Equifax — provides the data. Each model weighs factors like payment history and credit utilization differently, leading to score variations.

Generally, though, different credit scores for the same person should be within a few points of each other.

How to Check Your Credit Score and Report

There are a few ways that you can check your credit score and your credit report. You may be able to access your credit score as a perk of certain credit cards that you may already have or spending apps that you subscribe to. You can get a copy of your credit report for free from each of the three major credit reporting bureaus at least once per year.

How to Access Your FICO Score and CreditWise Report

If you want to know your FICO score specifically, here’s how to check it:

•   Check through your bank or credit card issuer: Many financial institutions offer free FICO score access to customers.

•   Visit the official FICO website: Purchase your score directly from myFICO.com.

•   Use credit monitoring services: You can sign up for credit score monitoring. SoFi’s credit monitoring service allows you to track your credit score and receive weekly updates at no cost.

•   Check with credit counseling agencies: Some nonprofit agencies offer free credit score reviews.

•   Request a credit report: While not always included, some reports might show your FICO score.

Here’s how you can access your CreditWise report:

•   Download the CreditWise app: Available on iOS and Android devices for easy access.

•   Visit the CreditWise website: Access the report directly at www.CreditWise.com.

•   Sign up through Capital One: CreditWise is free for Capital One customers, but others can also access it.

•   Use the Capital One mobile app: Check your credit score and report from the app if you’re a Capital One customer.

•   Monitor credit activity regularly: Track changes in your credit score and report updates over time.

The Takeaway

There are many companies that produce credit scores, and each credit score uses different information and a different model.

FICO credit scores are produced by the Fair Isaac Corporation, and are one of the most popular types of credit scores. CreditWise is a service provided by Capital One, and provides access to your VantageScore credit score. These two types of credit scores are different, though generally your scores should fall in the same range.

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.

FAQ

How close/accurate is CreditWise?

CreditWise is a service provided by Capital One to its customers, and it provides access to your credit report, credit score monitoring, and your VantageScore credit score. VantageScore is considered a valid credit score, and while it is not the same as a FICO credit score, it should generally be within a few points of FICO and other credit scores.

Why is my FICO score lower than my CreditWise score?

Your FICO score may be lower than your CreditWise score because they use different scoring models. FICO considers factors like payment history and credit utilization, while CreditWise uses the VantageScore model, which weighs credit behavior differently. Additionally, each service may access data from different credit bureaus, leading to score variations.

Is CreditWise your real credit score?

CreditWise provides a VantageScore 3.0 based on data from TransUnion, which is a legitimate credit score but not the same as a FICO score, which most lenders use. While helpful for monitoring credit health, it may not be the exact score lenders reference when making lending decisions.

What’s more accurate, CreditWise or FICO?

FICO scores are considered more accurate for lending decisions, as they are used by the majority of lenders to assess creditworthiness. CreditWise, which provides a VantageScore 3.0, is helpful for monitoring credit health but may differ from the score lenders rely on when evaluating loan applications.

Which score is closest to FICO?

VantageScore is the closest alternative to FICO, as both use similar credit data from the major bureaus — Experian, Equifax, and TransUnion. However, their scoring models differ slightly. FICO scores range from 300 to 850, while VantageScore also falls within this range but weighs factors like payment history and credit utilization differently.

What is a good CreditWise score?

A good CreditWise score typically falls within the range of 670 to 739 on the VantageScore 3.0 scale, which ranges from 300 to 850. Scores in this range indicate responsible credit management and make it easier to qualify for loans, credit cards, and favorable interest rates.

Photo credit: iStock/Delmaine Donson

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

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

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

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.

SORL-Q125-021

What Is FICO vs TransUnion vs Equifax Credit Scores?

While many people think of their credit score as a singular number, the truth is that most consumers have several different credit scores. This is because different credit bureaus (Equifax®, TransUnion®, and Experian®) use different scoring models, such as FICO® and VantageScore®.

FICO scores are one of the most popular types of credit scores. TransUnion and Equifax are credit reporting agencies and have collaborated with Experian to produce VantageScore. If you compare VantageScore vs. FICO scores, you will find that they share many similarities — and feature a few key differences.

Keep reading to learn more about FICO, TranUnion, and Equifax, including how each works, which credit score bureau is best, and how you can obtain your credit scores and credit reports.

Types of Credit Scores

There are several different types of credit scores, since different companies have different ideas of which information is most predictive of whether a consumer will be a good lending risk. However, the two most common types of credit scores are the FICO Score and the VantageScore.

How FICO Works

FICO scores are produced by the Fair Isaac Corporation and are one of the most popular types of credit scores. The Fair Isaac Corporation lists five factors that affect your FICO score:

•   Payment history (35%)

•   Amounts owed (30%)

•   Length of credit history (15%)

•   Credit mix (10%)

•   New credit (10%)

Based on these factors, you receive a FICO credit score, which is a three-digit number between 300 and 850. Those with high credit scores will typically receive the best rates and terms from lenders.

How VantageScore Works

VantageScore is a credit scoring model developed by the three major credit bureaus — Experian, Equifax, and TransUnion. It evaluates creditworthiness using factors like payment history, credit utilization, account age, total debt, and recent inquiries. Unlike FICO, VantageScore can generate a score with a shorter credit history, making it more accessible for new borrowers.

Similar to FICO, the scoring model ranges from 300 to 850, with different categories to indicate credit health:

•   781–850: Excellent

•   661–780: Good

•   601–660: Fair

•   500–600: Poor

•   300–499: Very Poor

Recommended: Differences Between VantageScore and FICO Credit Scores

TransUnion vs. Equifax

TransUnion and Equifax are two major credit reporting agencies, along with Experian. Each plays a key role in determining creditworthiness, but understanding their differences can help you better manage your financial health and navigate credit decisions.

How TransUnion Works

TransUnion does not actually produce its own credit score — instead, it is one of the three major credit reporting agencies, along with Equifax and Experian. TransUnion collects payment and other information about consumers to build a consumer credit report.

However, TransUnion, along with Equifax and Experian, did create the VantageScore credit score model in 2006. VantageScore is a company that produces credit scores. So if you hear someone talking about a TransUnion credit score, they may be referring to a VantageScore credit score.

How Equifax Works

Like TransUnion, Equifax is most often thought of as a credit reporting agency rather than as a company that produces credit scores. However, Equifax is another partner in the VantageScore credit score model. So like TransUnion, if you hear someone talking about an Equifax credit score, they may be talking about a VantageScore credit score.

Which Credit Score Bureau Is Best?

When choosing the best credit score bureau, it’s important to recognize that no single bureau is definitively superior. TransUnion, Equifax, and Experian all provide valuable insights into your credit report. The key difference lies in the information they collect and how they calculate scores, which varies slightly.

How Can You Obtain Your Credit Score?

You can check your credit score through several sources, each offering different levels of access and detail. Here are some common ways to obtain your credit score:

•   Credit card issuers and banks – Many provide free credit score access to customers.

•   Credit bureaus – You can purchase your credit score directly from Equifax, TransUnion, or Experian.

•   Online credit monitoring services – You can sign up for credit score monitoring. SoFi’s credit monitoring service allows you to track your credit score and receive weekly updates at no cost.

•   Loan applications– Some lenders disclose your credit score when you apply for a loan.

•   FICO and VantageScore websites – You can purchase official credit scores from these scoring model providers.

Recommended: How Often Does Your Credit Score Update?

How Can You Obtain Your Credit Reports?

To obtain your credit reports, you can access them through several channels. The Fair Credit Reporting Act (FCRA) grants consumers the right to a free credit report from each of the three major credit bureaus — Equifax, Experian, and TransUnion — once a year. Regularly reviewing your credit report helps identify errors and detect potential identity theft.

To obtain your credit reports, you can:

•   Visit AnnualCreditReport.com, the only federally authorized website for free reports.

•   Request your reports by calling 1-877-322-8228.

•   Submit a request via mail by completing the Annual Credit Report Request Form.

•   Access additional reports through credit monitoring services or directly from the credit bureaus.

It can be a good idea to use a money tracker app to review your payment and spending history, as well as regularly review your credit report. If you find any errors or inconsistencies, you can report or dispute them to the agency in question to get any incorrect information removed. Incorrect information on your credit report can cost you points on your credit score.

What Is a Good Credit Score Range?

A good credit score range typically falls between 670 to 739 on the FICO Score scale, which ranges from 300 to 850. Lenders generally view scores in this range as favorable, meaning borrowers are more likely to qualify for loans and credit cards with competitive interest rates.

Credit scoring models like VantageScore also use a 300 to 850 range, with a good score typically between 661 and 780. Maintaining a good credit score involves making timely payments, keeping credit utilization low, and managing different types of credit responsibly.

Recommended: How Long Does It Take to Build Credit?

The Takeaway

There are different companies that issue credit scores, so while you might think that you have a singular credit score, you actually have several different credit scores.

FICO credit scores are one of the more popular credit scores used by lenders. TransUnion and Equifax are two of the three most popular credit reporting bureaus. Along with Experian, they have partnered to create VantageScore, another common credit scoring model. Different credit score models may use different information, and it’s normal for scores from different models to vary by a few points.

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.

FAQ

Which is more accurate: TransUnion, Equifax, or FICO?

No single credit score is more “accurate.” TransUnion and Equifax are credit bureaus that collect data, while FICO is a scoring model that uses that data to generate scores. Lenders may use different scores depending on the situation, so accuracy depends on which score a lender relies on.

Is the FICO score higher than Equifax?

Sometimes FICO scores are higher than VantageScores (the scores that are affiliated with Equifax). Other times, your VantageScore may be higher than your FICO score. It depends on your individual situation, but it is common for your scores to be similar.

Do banks look at TransUnion or Equifax?

Different banks, credit unions, and other lenders may look at different credit reports (such as TransUnion, Experian, or Equifax) depending on their preferences. Generally, companies do not disclose what credit reports or credit scores they use.

Which credit score is most accurate?

No single credit score is the most accurate, as different lenders use different models. FICO scores are the most widely used for lending decisions, but Equifax, TransUnion, and Experian each generate their own scores based on available data. Accuracy depends on which score a lender considers most relevant.

What is a good FICO score?

A good FICO score typically falls between 670 and 739. Scores in this range indicate a lower risk to lenders, making it easier to qualify for loans and credit cards with favorable terms. Higher scores (740+) offer even better rates, while lower scores may lead to higher interest rates or denials.

Why is my FICO score higher than my credit score?

When considering FICO scores vs. credit scores, it is important to understand that while your FICO score is a type of credit score, it is only one type of credit score. Your FICO score may be higher than other credit scores you may have, or it could be lower. Generally, your FICO score should be within a few points of your other credit scores.

photo credit: iStock/tolgart
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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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.

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.

SORL-Q125-025

If you own a home, a home equity line of credit (HELOC) lets you tap into your home equity to finance renovations or other expenses. Before borrowing against your home equity, it’s worth asking, how does a HELOC affect credit scores?

Taking out a new credit account has an impact on your credit score. But how a home equity line of credit affects credit scores depends on multiple factors, including your payment history and existing credit.

Here’s a look at how a HELOC could affect your credit score across the entire lifespan of the line of credit, from filing your application to closing a HELOC account — plus tips to maintain your credit score.

Understanding HELOCs and Credit Scores

First, let’s start with a HELOC definition. A HELOC, or home equity line of credit, is a revolving line of credit that typically allows homeowners to borrow up to 90% of their home’s value, minus the outstanding mortgage principal. Borrowers can draw against their approved credit line as needed until the end of the draw period, which is usually 5 or 10 years, before having to repay the balance over another 10 to 25 years. That’s HELOCs explained, in a nutshell.

Meanwhile, your credit score is calculated based on how you manage debt payments, also known as credit. A variety of factors affect your credit score, including payment history, credit utilization, length of credit history, credit mix, and applications for new credit. Your credit score appears as a three-digit number. Credit score ranges run from 300 to 850, with scores of 670 or higher being considered good to excellent.

Impact of Applying for a HELOC on Your Credit

So how does a HELOC impact credit scores? Similar to other types of credit, applying for a HELOC involves a credit check, which is added to your credit report.

Hard Inquiries

When you apply for a HELOC, lenders will run a credit check to assess your creditworthiness. This involves requesting to review your credit report, which is known as a hard inquiry.

A record of any hard inquiry, sometimes referred to as a hard pull, is registered on the credit report. Having one hard inquiry could lower your FICO® Score by up to five points, but only for one year.

To avoid multiple hard credit pulls, you can check to see if lenders offer HELOC prequalification with a soft credit pull instead.

New Credit Accounts

Applying for a HELOC means opening a new credit account. This could decrease the average age of your credit accounts and ding your credit score by a few points.

Effects of Using a HELOC on Your Credit

Once you’ve been approved for a HELOC, how you begin using funds and managing payments can affect your credit. Let’s explore what goes into these HELOC credit score impacts.

Credit Utilization Ratio

Your credit utilization ratio is a calculation of how much of your credit you’re using. In other words, it’s the percentage of your credit limit you’re using on all your revolving credit accounts, such as credit cards, combined.

So does a HELOC affect your credit score and credit utilization ratio? While HELOCs operate like a revolving line of credit, they’re secured by a property. This means that it isn’t included in your credit utilization ratio as part of your FICO score.

Using funding from a HELOC to pay off high-interest debt like credit cards could lower your credit utilization ratio and boost your credit score. Maintaining a credit utilization ratio below 30% is recommended to qualify for financing or get mortgage preapproval.

Payment History

Payment history is the largest component of a credit score. Making consistent, on-time payments each month on a HELOC could help build your credit score over time. On the flip side, failing to stay current on payments could hurt your credit score and ultimately put your property at risk.

HELOCs are typically structured to have higher monthly payments after the draw period ends. Once the repayment period begins, you won’t have the ability to continue drawing funds. You can use a HELOC repayment calculator to see what your monthly payment would be based on how much you owe on a HELOC, your repayment term, and interest rate.

Credit Mix

Your credit mix refers to the number and types of credit accounts you have, including student loans, home loans, credit cards, and car loans. Demonstrating your ability to manage different types of debts can benefit your credit score.

Taking out a HELOC could improve your credit mix (and credit score) if you don’t have other types of revolving credit, especially for borrowers without much credit history.

Bottom line: The HELOC–credit score connection can be significant.

Recommended: FHA Loans

Closing a HELOC and Its Credit Implications

Paying off and closing a HELOC can have impacts on your credit. (Paying the balance off on a HELOC removes the lender’s lien on your home.) Here are some potential credit implications to consider when closing a HELOC.

Account Age

If you’ve been making payments on a HELOC for several years, closing the account could potentially lower the average age of your accounts. How much this impacts your credit score will depend on the age of your other accounts.

But if the account is in good standing with no late payments, it can still factor into your credit history for several years after closure.

Credit Availability

Closing a HELOC won’t affect your credit utilization for your FICO score. But if you don’t have other revolving lines of credit, it could reduce your credit mix, potentially putting a small dent in your credit score.

Strategies to Minimize Negative Credit Impact

Applying for a HELOC — or opening any new credit account — can initially lower your credit score by a few points. But there are several ways to reduce further damage to your credit score.

Timely Payments

As a reminder, your payment history is the largest component that goes into calculating your credit score. Continually making on-time payments each month can build up your credit. Conversely, paying less than the minimum or missing a monthly payment could harm your credit score.

Note that the interest on monthly payments could be eligible for a tax deduction, like mortgage interest, if used to make substantial improvements on your home. You’ll want to discuss this with your tax advisor.

Managing Credit Utilization

As you manage monthly HELOC payments, keep an eye on the balances for other revolving lines of credit, such as credit cards. Again, keeping a credit utilization ratio below 30% is considered beneficial for your credit score.

Monitoring Credit Reports

Periodically checking your credit report can help detect any instances of fraud or payment errors and inform strategies to improve your credit score. Requesting a credit report is free, and it’s a good idea to do so before applying for a new loan or credit card to understand how lenders will evaluate you as a borrower.

Recommended: Mortgage Rates

The Takeaway

How does a home equity line of credit affect credit scores? Applying for a HELOC involves a hard credit check, which can have some impact on your credit. However, making timely payments, keeping a strong credit mix, and maintaining a low credit utilization ratio can mitigate these effects and strengthen your credit over time.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

FAQ

Does opening a HELOC significantly lower my credit score?

Opening a HELOC typically involves a hard credit check which can lower your credit score by several points. Whether this is significant will depend on what score you start with — if your credit score is teetering near an important benchmark, such as the 669-670 dividing line between “fair” and “good” credit, it may be an important effect. The hard credit check can stay on your credit report for 12 to 24 months.

How does a HELOC affect my credit utilization ratio?

A HELOC typically does not affect your credit utilization ratio, as it’s secured with a property as collateral versus other revolving lines of credit, such as credit cards, which are unsecured.

Will closing a HELOC improve my credit score?

Closing a HELOC can have a negative effect on your credit score by reducing your credit mix and age of accounts. However, if you made on-time payments over the life of the loan, that will be reflected on your credit history for several years.

Can a HELOC help diversify my credit mix?

Yes, a HELOC can help diversify your credit mix and show lenders that you’re a responsible borrower. If you have installment credit like a mortgage, student loans, or personal loans, taking out a HELOC would provide a form of revolving credit to your credit mix.

How can I use a HELOC responsibly to maintain a good credit score?

Paying off higher-interest debt, such as personal loans or credit cards, and funding home improvements that may make it possible for you to deduct the interest paid on a HELOC, are examples of how to responsibly use a HELOC. Making monthly payments on time and in full is essential to safeguarding your credit score when taking out a HELOC.

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SOHL-Q125-057

Prequalification for a credit card is an initial credit review conducted by a financial institution to determine if you might be a good fit for a credit card. You may request a prequalification offer, or you might receive one in the mail or by email. While it’s not a guarantee that you will be approved for a card, it can be a step in the process towards approval and may provide information about different cards that could be available to you.

If you are considering shopping for a new card, learn more here about what credit card prequalification is and isn’t.

What Is a Prequalified Credit Card Offer?

As noted above, credit card prequalification is when you are alerted that you may qualify for a particular credit card. Or you might request to be prequalified before formally applying for a card.

The prequalification process typically involves a card issuer conducting a basic review of a person’s creditworthiness to see if they’re likely to be approved for a new account. When you are prequalified, it means you seem to meet some of the key requirements for a card and have a good shot at approval. You still must, however, go through the steps of formal approval if you are interested in obtaining the card.

How Do Prequalified Credit Card Offers Work?

Credit card issuers will often invite people to fill out a form to see if they are likely to qualify for a new credit card. This process authorizes the card issuer to perform a soft credit check, which is often referred to as a “soft pull.” A soft vs. hard pull is basically a glimpse of someone’s credit profile, but it doesn’t affect their credit the way a deeper inquiry can.

Other times, card issuers will prequalify a potential customer based on general data that they’ve purchased. Or the card issuer may reach out because you have requested information from them in the past or are already a customer for one of their products.

But remember: Even if you receive a prequalified credit card offer, it doesn’t mean that you will be approved for a new account. It just means that based on the information reviewed, your application is likely to be approved.

Preapproved vs Prequalified Credit Card Offers

There’s often no difference between preapproved for a credit card vs. prequalified, and those terms may be used interchangeably. In some cases, however, being preapproved for a credit card can suggest that more extensive review was conducted, meaning that the odds of approval may be higher than if you were prequalified.

For example, a card issuer may conduct more detailed credit reviews before sending preapproved offers to potential consumers, while consumers who request a prequalification offer may be subject to a slightly less rigorous credit check. As you see, there’s some variation in how the terms are used, so don’t be surprised if they may vary from one issuer to the next.

Generally, however, being preapproved or prequalified may indicate that you are very much on track to get that new rectangle of plastic with your name on it, once a final review is completed. The issuer may have already done, say, a brief review of your qualifications.

A little extra intel: With other types of loans, such as mortgages, prequalification is usually a first step to securing funding, while preapproval takes you further along the road to getting a home loan. It can be as far as you can go in the process without having a contract to buy a property in place.

Recommended: What Is the Average Credit Score in America?

Benefits of a Prequalified Credit Card Offer

Understandably, most people don’t want to apply for a credit card unless they are likely to be approved. The reason? Every time you apply for any type of credit card, the issuer will do a hard pull to review your credit, which can lower your credit score by several points for a year.

By filling out a brief form to request a credit card prequalification, potential applicants can find out if the card they are considering aligns with their credit profile. And while there’s no guarantee that being prequalified will result in approval, it could improve your credit card approval odds.

When You May Need Credit Card Prequalification

Those with solid credit may not see any reason to be prequalified before choosing a new credit card and applying for it.

However, regardless of where you fall in the credit score ranges, it can be a good idea to get prequalified. That way, you won’t waste time applying if you don’t meet the requirements. You could also avoid needlessly adding another credit inquiry to your credit report. Having multiple new inquiries in a short period of time can have a negative impact on your credit score.

Tips for Getting a Prequalified Credit Card Offer

If you’re interested in getting a prequalified credit card offer, here are some tips:

•   Credit card prequalification offers are frequently sent by email or snail mail, so take a closer look at what arrives in your virtual and real-life mailbox.

•   If you haven’t received a prequalification offer, you can often find one on the card issuer’s website. Going to the card issuer’s website is also a way to protect yourself from scams.

•   Speaking of scams: Keep in mind that a prequalification offer can be fraudulent, and it’s wise to be especially cautious of links you receive by text or through social media. Going directly to the card issuer’s website is the best way to ensure that you aren’t risking identity theft.

•   When looking for a prequalification offer, it can be smart to be selective. Smaller card issuers may send prequalified offers to those with bad credit, but the cards may have very high interest rates and fees. Always read the fine print before moving forward.

•   Remember that even if you don’t think that you have the minimum credit score for a credit card with favorable terms, you might consider a secured card. While secured cards require a refundable deposit, you may find options with competitive interest rates and no or low fees.

•   If you are seeking out a prequalified credit card offer, it may be helpful to check your credit score without paying. Once you know your number, you can request a prequalification for a card in your range.

Recommended: How Does the Credit Rating Scale Work?

Tips for Improving Your Chances of Credit Card Prequalification

There are several things that you can do to improve your chances of getting a prequalification offer from credit card issuers.

•   First, you’ll want to maintain a credit score that’s as high as possible, since the way credit cards work involves tapping a line of credit and repaying it in a timely manner. Card issuers want to know that you have managed credit well in the past. Two important ways to build or maintain your score are to pay your bills on-time and to carry as little debt as possible.

•   You’ll also want to keep your income information updated with your creditors. You can include the income of your spouse or domestic partner, as long as you expect to access that income to repay debts. You should also include all other sources of income such as child support, alimony, government benefits, and investment income. By showing a higher income, you might receive a credit limit increase on any existing cards, which could in turn lower your credit utilization ratio (your balance vs. your limit) and build your score.

   A note about credit utilization ratios: Financial experts typically recommend that your balance not exceed 30% of your limit. Ideally, it would be just 10% or less of your credit limit.

How Does a Prequalified Credit Card Impact Your Credit Score?

Being prequalified for a credit card shouldn’t impact your credit score in any way. While an actual application requires a so-called hard pull that can affect your credit, the soft pull generated by a prequalified credit card offer has no effect on your credit history or credit score.

The Takeaway

Getting a prequalified credit card offer can indicate that you are likely to be approved for a new account, but it’s not a guarantee that your application will ultimately get the green light. Whether you receive a prequalification offer or request one, it typically does not involve a hard credit pull, meaning it shouldn’t impact your credit history. By understanding how prequalified credit card offers work, you can make the best decision when you’re looking to open a new account.

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

What does it mean if you are prequalified for a credit card?

A prequalified credit card offer means that the card issuer has done a preliminary review of your credit profile and determined that you are likely (but not guaranteed) to be approved for the card. The credit company may have conducted a soft pull on your credit, which doesn’t impact your credit score, but it will likely need to do a hard pull to approve you.

Is it better to be prequalified or preapproved?

When it comes to credit cards, there’s typically no difference between being preapproved and prequalified. For other types of loans, such as mortgages, a preapproval typically carries more weight than a prequalification and usually reflects that the lender has done a deeper dive into vetting you for funding.

Can you be denied a credit card after prequalification?

Yes, you can be denied a credit card after prequalification. Being prequalified is not a guarantee that your application will be approved but an indication that you are a good candidate. When you apply for a credit card, the card issuer will take a more thorough look at your credit, conduct a hard credit pull, and may decline your application if they determine you are not creditworthy for their card.

What can prevent you from being prequalified for a credit card?

You may not be prequalified for a credit card when you appear less creditworthy than the card requires. For example, your credit score could be lower than the range sought, or your credit utilization ratio might be higher than the card issuer wants to see.

How many hard inquiries are too many?

While there’s no fixed number of hard inquiries that’s considered too many, having multiple hard inquiries within a few months can negatively impact your credit score. Each hard pull can lower your credit score by several points, often for up to a year, so multiple inquiries could ding your score by a significant amount. Applying for numerous new accounts can be interpreted by the credit-scoring algorithms as a sign of potential financial problems.

Is 10 hard inquiries a lot?

Whether 10 hard inquiries is a lot depends on the time frame. If you have 10 hard inquiries within a few months, then it will probably be seen as a sign of potential financial distress since you are seeking multiple sources of credit in a fairly short time frame. However, if those inquiries are spread out over a couple of years, that may be less of a problem.

Also, the credit-scoring formulas will effectively combine multiple hard inquiries for a single instance of seeking an auto, home, or student loan within a short period of time (from 14 to 45 days for FICO® Scores). That would typically be considered rate-shopping behavior and not a sign of financial problems.

photo credit: iStock/Igor Suka
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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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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