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Most credit cards come with credit limits that determine how much you can spend at any given time. Requesting a credit line increase is something you might consider if you’d like to have more purchasing power, you want to schedule a balance transfer, or you need a cash advance.

Asking for a higher credit limit can be as simple as calling the credit card company or completing an online form. In some cases, a credit card company may grant one automatically based on an account history.

Increasing available credit can also improve credit utilization, which could raise your credit score. But asking to increase credit limits for one or more cards could potentially cost you points if it involves a hard credit inquiry.
Knowing how to increase a credit limit the right way can minimize credit score impacts.

Why Credit Limits Matter for Credit Scoring

Credit scores are a measure of your ability to manage debt responsibly. FICO® Scores, which are used by 90% of top lenders, are calculated using these five factors:

•  Payment history (35% of your score)
•  Credit utilization (30% of your score)
•  Length of credit history (15% of your score)
•  Credit mix (10% of your score)
•  New credit inquiries (10%)

Credit limits are important because they can affect the credit utilization part of your credit score. Credit utilization refers to the percentage of your available credit you’re using. For example, if you have a credit card with a $5,000 limit and a $1,000 balance, your credit utilization is 20%.

Using a lot of your available credit can be detrimental to your credit scores, while keeping balances low can improve your scores.

Generally, it’s recommended that you keep the ratio at 30% or less for the most favorable credit score impact. A higher ratio could suggest to lenders that you may be struggling to manage spending and debt.

Does Requesting a Credit Increase Hurt Your Score?

Whether a credit line increase hurts your credit score, or affects it all, depends on how the credit card company reviews your financial information. Specifically, it hinges on whether the credit card company performs a soft or hard inquiry into your credit history.

Remember, credit inquiries account for 10% of your FICO credit score. An inquiry simply means that you have authorized a creditor or biller to review your credit reports and scores. (Inquiries for credit remain on your credit report for two years, though they only affect FICO credit score calculations for 12 months.)

When requesting an increase in credit limit that involves a hard pull, you may lose a few credit score points. While the impact isn’t as significant as a late payment or a maxed-out credit card, it’s still worth noting.

If you were to ask for a credit line increase from several cards at once, multiple hard inquiries could cost you more points.

A soft inquiry, on the other hand, has no credit score impact. Checking your own credit score, prescreened credit offers, and credit screenings that are required as part of an employer’s hiring process are examples of soft pulls.

Can a Credit Line Increase Improve a Credit Score?

While you may lose a few points initially if your credit card company performs a hard inquiry, asking to increase your limit could help your credit score over time.

It all goes back to credit utilization. If raising your credit limit on one or more credit cards improves your credit utilization, then you may see a positive effect on your credit score.

Say you have a card with a $10,000 limit and a $5,000 balance. That puts your credit utilization at 50%. But if you can increase the credit limit to $15,000, you instantly shrink your credit utilization to 33%.

The key to making this strategy work is not adding to your debt balance. Going back to the previous example, say that you have to unexpectedly replace your HVAC system to the tune of $5,000. You decide to take advantage of your new higher credit limit to make the purchase.

Now your balance is $10,000. While you still have a $5,000 available credit cushion, you’ve increased your credit utilization to 66%. That could result in a credit score drop until you’re able to pay some of the balance down. So, while asking for a credit line increase can give you more purchasing power, that can work against you if you use it.

Four Ways to Increase a Credit Limit

There are several ways to get a credit line increase, depending on what your credit card company offers. There are different types of credit cards, and card issuers don’t always follow the same policies with regard to credit limit increases.

Before asking to increase your credit limit, get familiar with the various ways your credit card company allows you to do it. Then consider how much of a credit limit increase you’d like to ask for.

Keep in mind that whether the credit card company grants your request can depend on things like:

•  How long you’ve been a customer
•  Your account history, including payment and purchase history
•  Your income
•  Credit scores, if a hard pull is required

With that in mind, here are four ways to get a higher credit limit:

Request a Credit Line Increase Online

Your credit card company may make it easy to ask for a higher credit limit online. Log in to your account, navigate to the Request Credit Limit Increase section, and fill out the relevant details. You may need to update your income information.

If your credit card company offers this option, it’s possible to be approved for a credit line increase almost instantly. But a decision may be delayed if the credit card company wants to take time to review your account or credit history.

Update Your Income Information

Credit card companies may periodically ask you to update your income information when you log in. You may be tempted to skip over this step, but it’s worth taking a moment to do, as the credit card company may use the information to grant an automatic credit limit increase.

Again, whether you’re eligible for an automatic credit line increase can depend on the type of your card and your account history, income, and overall financial situation.

Call and Ask

If your credit card company doesn’t allow for automatic increases or credit limit increase requests online, you can always call and ask for a higher limit. You may need to tell them your income, specify how much of a credit limit increase you’d like, and provide a reason for the request.

Calling the credit card company may also be worthwhile if you’ve been denied for a credit limit increase online. You can ask the card provider to reconsider your request, but be prepared to make a strong case (e.g., significantly higher income, on-time payment history) for why it should do so.

Open a New Credit Card Account

If you’ve tried other avenues for requesting an increase in credit limit and been unsuccessful, you could always consider opening a brand-new credit card account. The upside is that you can expand your available credit if you’re approved, which could improve your credit utilization ratio.

Some credit cards can also help with paying off debt. With the SoFi Credit Card, for example, SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, or pay down eligible SoFi debt. Cardholders earn 1% cash back rewards when redeemed for a statement credit.¹

The downside of opening a new credit card is that applying can ding your score, since it typically involves a hard inquiry. But if you’re able to keep your credit utilization low, that could help make up the difference in lost points relatively quickly.

The Takeaway

How to increase your credit limit? If you have good credit, requesting a higher credit limit may be easy. The key is knowing how to make the most of a credit limit increase to improve your credit score.

Keeping your balances as low is a step in the right direction. Paying your balance in full each month is even better, since this can help you avoid paying interest on credit cards.

Finally, spacing out credit line increase requests and opening new accounts sparingly can help keep credit scores on track.

For a limited time, new credit card holders† who also sign up for a SoFi Checking and Savings with direct deposit can start earning 3% cash back rewards on all eligible credit card purchases for 365 days*. Offer ends 12/31/23.

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

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†SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS PROSPECTIVELY BASED ON MARKET CONDITIONS AND BORROWER ELIGIBILITY. Your eligibility for a SoFi Credit Card Account or a subsequently offered product or service is subject to the final determination by The Bank of Missouri (“TBOM”) (“Issuer”), as issuer, 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. Please allow up to 30 days from the date of submission to process your application. The card offer referenced in this communication is only available to individuals who are at least 18 years of age (or of legal age in your state of residence), and who reside in the United States.

*You will need to maintain a qualifying Direct Deposit every month with SoFi Checking and Savings in order to continue to receive this promotional cash back rate. Qualifying Direct Deposits are defined as deposits from enrolled member’s employer, payroll, or benefits provider via ACH deposit. Deposits that are not from an employer (such as check deposits; P2P transfers such as from PayPal or Venmo, etc.; merchant transactions such as from PayPal, Stripe, Square, etc.; and bank ACH transfers not from employers) do not qualify for this promotion. A maximum of 36,000 rewards points can be earned from this limited-time offer. After the promotional period ends or once you have earned the maximum points offered by this promotion, your cash back earning rate will revert back to 2%. 36,000 rewards points are worth $360 when redeemed into SoFi Checking and Savings, SoFi Money, SoFi Invest, Crypto, SoFi Personal Loan, SoFi Private Student Loan or Student Loan Refinance and are worth $180 when redeemed as a SoFi Credit Card statement credit.

Promotion Period: The Program will be available from 10/1/22 12:01 AM ET to 12/31/23 11:59PM ET

Eligible Participants: All new members who apply and get approved for the SoFi Credit Card, open a SoFi Checking and Savings account, and set up Direct Deposit transactions (“Direct Deposit”) into their SoFi Checking and Savings account during the promotion period are eligible. All existing SoFi Credit Card members who set up Direct Deposit into a SoFi Checking & Savings account during the promotion period are eligible. All existing SoFi members who have already enrolled in Direct Deposit into a SoFi Checking & Savings account prior to the promotion period, and who apply and get approved for a SoFi Credit Card during the promotion period are eligible. Existing SoFi members who already have the SoFi Credit Card and previously set up Direct Deposit through SoFi Money or SoFi Checking & Savings are not eligible for this promotion.
*See Pricing, Terms & Conditions at SoFi.com/card/terms
The SoFi Credit Card is issued by The Bank of Missouri (TBOM) (“Issuer”) 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.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website .
¹See Rewards Details at SoFi.com/card/rewards.
SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, or pay down eligible SoFi debt. Cardholders earn 1% cash back rewards when redeemed for a statement credit.¹
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Debt may seem like something you want to avoid. But having some debt can actually be a good thing, provided you can comfortably afford to make your payments each month.

A good payment history shows lenders that you can be responsible with borrowed money, and it will make them feel better about lending to you when the time comes for you to make a big purchase, like a home.

But not all debt is created equal. Consumer debt can generally be broken down into two main categories: secured and unsecured. Those two categories can then be subdivided into installment and revolving debt.

Each type of debt is structured differently and can affect your credit score in a different way.

Here are some helpful things to know about the different types of debt, plus how you may want to prioritize paying down various balances you may already have accumulated.

Secured vs. Unsecured Debt

The first distinction between types of debt is whether it’s secured or unsecured. This indicates your level of liability in the event you fall behind on payments and go into default on the loan or credit card.

Secured Debt

Secured debt means you’ve offered some type of collateral or asset to the lender or creditor in exchange for the ability to borrow funds. If you go into default on the loan, the lender may seize the property or asset used to secure the debt.

The benefit is that you improve your odds for approval by offering collateral, and you may also receive a better interest rate compared to unsecured debt. But you also risk losing your asset. The lender is typically allowed to seize the asset securing the debt and sell it to offset the loan balance.

There are many types of secured debt. Auto loans and mortgages are common examples. Your auto loan is typically secured by the vehicle–it can be repossessed if you default on payments.

Similarly, your home is used to secure your mortgage. If you fall behind on your payments, the lender can eventually start the foreclosure process to sell the home and keep the proceeds of the sale.

Not only is your property repossessed in both of these situations, but your credit score can also be severely damaged, which could make it difficult to qualify for any type of financing in the near future.

A foreclosure, for instance, generally stays on your credit report for seven years, beginning with the first mortgage payment you skipped.

Unsecured Debt

Unsecured debt comes with much less personal risk than secured debt since you don’t have to use any property or assets as collateral.

Common types of unsecured debt include credit cards, student loans, some personal loans, and medical debt. Since you don’t have to put up any type of collateral, there may be stricter requirements in order to qualify. Your lender will likely check your credit score and potentially verify your income.

With unsecured debt, you are bound by a contractual agreement to repay the funds, and if there is a default, the lender can go to court to reclaim any money owed.

However, doing so comes at a great cost to the lender, and, for this reason, unsecured debt generally comes with a higher interest rate than secured debt.

This kind of debt can pile up quickly if you’re not careful. With secured debt, you’re more motivated to make payments because you might lose your car, home or something you use every day.

With unsecured debt, it’s not as easy to see where the money you’re borrowing is going, but because of high interest rates, you will likely want to pay off the debt as quickly as you can.

Installment vs. Revolving Debt

The difference between secured and unsecured debt is one way to classify financing options, but it’s not the only way.

Both secured and unsecured debt can be broken down further into two additional categories: installment debt and revolving debt.

Installment Debt

Installment debt is usually a type of loan that gives you a lump sum payment at the beginning of the agreement. You then pay it back over time, or in installments, before a certain date.

Once you’ve paid the loan off, it’s gone, and you don’t get any more funds to spend. Examples of this type of debt include a car loan, student loan, or mortgage.

There are a number of ways an installment loan can be structured. In many cases, your regular payments are made each month and include money going towards both principal and interest.

Less frequently, an installment loan could be structured to only include interest payments throughout the term, then end with a large payment due at the end. This is called a balloon payment. Balloon payments are more frequently found with interest-only mortgages.

Rather than actually making that large payment at the end of the loan term, borrowers typically refinance the loan to a more traditional mortgage.

Installment loans can have either a fixed or adjustable interest rate. If your loan has a fixed rate, your payments should stay the same over your entire term, as long as you pay your bill on time.

A loan with an adjustable rate will change based on the index rate it’s attached to. Your loan terms tell you how frequently your interest rate will adjust.

Provided you make your payments on time, having a mortgage, student loan, or auto loan can often help your credit scores because it shows you’re a responsible borrower.

In addition, having some installment debt can help diversify your credit portfolio, which can also help your scores.

Revolving Debt

Unlike installment debt, revolving debt is an open line of credit. It gives you an amount of available credit that you can draw on and repay continually.

Both credit cards and lines of credit are common examples of revolving credit. Instead of getting a lump sum at one time (as you would with installment debt), you only use what you need–and you only pay interest on the amount you’ve drawn.

Your available credit decreases as you borrow funds, but it’s replenished once you pay off your balance.

Revolving debt can be unsecured, as in the instance of a credit card, or it can be secured, such as on a home equity line of credit.

One downside of revolving credit is that there’s no fixed payment schedule. You typically only have to make minimum payments on your revolving credit, but your interest continues to accrue.

That can result in a much higher balance than the original purchases you made with the funds. And if you miss a payment, you’ll likely owe late fees on top of everything else

Because it’s easier to get caught in a cycle of debt, having large revolving debt balances can hurt your credit score. A balance of both revolving and installment debt can give you a healthier credit mix, and potentially a better credit score.

Debt Payoff Strategies

Whatever kind of debt you carry, the key to avoiding a negative debt spiral–and maintaining good credit–is to pay installment debt (such as your student loan and mortgage) on time, and try to avoid carrying high balances on your revolving debt.

While everyone’s financial circumstances are different, here are some debt payoff strategies that can help you prioritize your payments.

Paying off the Highest Interest Debt First

If your primary goal is to save money over the life of your loans,you may want to start by paying off your highest interest rate loan first, while making just the minimum payments on everything else.

You can then move on to the next highest and next highest until your debts are paid off. This payoff approach is often referred to as the “avalanche” approach.

Paying off the Debt with the Smallest Balance First

Paying down debt can feel never-ending, so it can be nice to feel like you’re making progress. By focusing on your smallest debts first (and paying the minimum on everything else), you can cross individual loans off your balance sheet, while quickly eliminating monthly payments from your budget.

Once paid off, you can then reroute those payments to make extra payments on larger loans, an approach often referred to as the “snowball” method.

Considering Debt Consolidation

If you don’t see a clear strategy for paying off your debt, you might consider taking out a single personal loan to consolidate your other balances.

If your credit score has increased, this may be a good way to decrease your overall interest rate. But at a minimum, this move can help streamline your payments.

Being Wary of Debt Settlement Companies

If you’re feeling overwhelmed by debt, you may look for a shortcut with a debt settlement company.

Debt settlement is a service typically offered by third-party companies that allows you to pay a lump sum that’s typically less than the amount you owe to resolve, or “settle,” your debt. These companies claim to reduce your debt by negotiating a settlement with your creditor.

Paying off a debt for less than you owe may sound great at first, but debt settlement can be risky.

For one reason, there is no guarantee that the debt settlement company will be able to successfully reach a settlement for all your debts–and you may be charged fees even if your whole debt isn’t settled.

Also, if you stop making payments on a debt, you can end up paying late fees or interest, and even face collection efforts or a lawsuit filed by a creditor or debt collector.

The Takeaway

At some point in your life you may be juggling one or more of these different kinds of debt–a student loan, a car loan, credit card debt, a mortgage, and a line of credit.

Understanding the various types of debts and maintaining a varied mix of loans (including secured, unsecured, installment, and revolving) can help you increase your creditworthiness.

You can also improve your credit by making all of your debt payments on time, and keeping balances on revolving credit (like credit cards) low.

To help make managing your debt (and all your other expenses) easier, you may want to consider getting a money tracking app, such as SoFi Relay.

SoFi Relay connects all of your counts on one mobile dashboard and allows you to track your spending, stay on top of debt payments, and also track your credit score (at no cost), with weekly updates so you’ll know when your score changes.

Get ahead of your debt with SoFi Relay.

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SoFi’s Insights tool offers users the ability to connect both in-house 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. 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 provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Imagine you’re the lender, and a wellness entrepreneur comes to you to borrow thousands or hundreds of thousands of dollars. The loan seeker is the picture of health, drives a Tesla S, and lives in a solar-powered manse. But what if the would-be borrower is overextended, and not in a yoga-like way?

You’re going to want to compare current income to debt to gauge how likely you are to be paid back.

Makes sense, right? A debt-to-income ratio helps to determine whether someone qualifies for a loan, credit card, or line of credit and at what interest rate.

A low DTI ratio demonstrates that there is probably sufficient income to pay debts and take on more. But what’s “low” or “good” in most lenders’ eyes?

First, a Ratio Refresher

In case you don’t know how to calculate the percentage or have forgotten, here’s how it works:

DTI = monthly debts / gross monthly income

Let’s say monthly debt payments are as follows:

•  Auto loan: $400
•  Student loans: $300
•  Credit cards: $300
•  Mortgage payment: $1,300

That’s $2,300 in monthly obligations. Now let’s say gross monthly income is $7,000.

$2,300 / $7,000 = 0.328

Multiply the result by 100 for a DTI ratio of nearly 33%, meaning 33% of this person’s gross monthly income goes toward debt repayment.

What Is Considered a Good DTI?

The federal Consumer Financial Protection Bureau advises homeowners to consider maintaining a DTI ratio of 36% or less and for renters to consider keeping a DTI ratio of 15% to 20% or less (rent is not included in this ratio).

In general, mortgage lenders like to see a DTI ratio of no more than 36%, though that is not necessarily the maximum.

For instance, DTI limits can change based on whether or not you are considering a qualified or nonqualified mortgage. A qualified mortgage is a home loan with more stable features and without risky features like interest-only payments. Qualified mortgages limit how high your DTI ratio can be.

A nonqualified mortgage loan is not inherently high-risk or subprime. It is simply a loan that doesn’t fit into the complex rules associated with a qualified mortgage.

Nonqualified mortgages can be helpful for borrowers in unusual circumstances, such as having been self-employed for less than two years. A lender may make an exception if you have a high DTI ratio if, for example, if you have a lot of cash reserves.

In general, borrowers looking for a qualified mortgage can expect to find lenders who will accept a DTI of 43% or less.

Under certain criteria, a maximum allowable DTI ratio can be as high as 50%. Fannie Mae’s maximum DTI ratio is 36% for manually underwritten loans, but the affordable-lending promoter will allow a 45% DTI ratio if a borrower meets credit score and reserve requirements, and up to 50% for loans issued through automated underwriting.

In the market for a personal loan? Some lenders may allow a high DTI ratio because a common use of personal loans is credit card debt consolidation. But most lenders will want to be sure that you are gainfully employed and have sufficient income to repay the loan.

Front End vs. Back End

Some mortgage lenders like to break a number into front-end and back-end DTI (28/36, for instance). The top number represents the front-end ratio, and the bottom number is the back-end ratio.

A front-end ratio, also known as the housing ratio, takes into account housing costs or potential housing costs.

A back-end ratio is more comprehensive. It includes all current recurring debt payments and housing expenses.

Lenders typically look for a front-end ratio of 28%, tops, and a back-end ratio no higher than 36%, though they may accept higher ratios if a credit score, savings, and down payment are robust.

How Can I Lower My Debt-to-Income Ratio?

So what do you do if the number you’ve calculated isn’t your ideal? There are two ways to lower your DTI ratio: Increase your income or decrease your debt.

Working overtime, starting a side hustle, getting a new job, or asking for a raise are all good options to boost income.

Strangely enough, if you choose to tackle your debt by only increasing your payments each month, it could have a negative effect on your DTI ratio. Instead, it can be a good idea to consider ways to reduce your outstanding debt altogether.

The best-known debt management plans are likely the snowball and avalanche methods, but there’s also the fireball method, which combines both strategies.

Instead of canceling a credit card, it might be better to cut it up or hide it. In the world of credit, established credit in good standing is looked upon more favorably than new.

The Takeaway

Your debt-to-income ratio matters because it affects your ability to borrow money and the interest rate for doing so. In general, lenders look at a lower DTI ratio as favorable, but sometimes there’s wiggle room.

If you’re struggling with student loan debt, refinancing might be a good option if you can lower your interest rate.
And if you’re trying to pay off high-interest credit card debt, one method could be to consolidate the debt with a fixed-rate personal loan. This could lower your monthly payment, thus changing your DTI ratio.

Unlike some others, SoFi charges no origination fee or late fee for an unsecured personal loan, and no application or origination fees for student loan refinancing.

Check your rate on SoFi’s student loan refinancing and personal loans.

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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.

SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.

CLICK HERE for more information.

Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Credit freezes and credit locks are tools that can help protect you from identity theft and various forms of credit fraud.

Both credit freezes and credit locks block all access to your credit file. This prevents credit checks that are often the first step in processing applications for loans or credit cards.

Applying for either a credit lock or credit freeze at one of the national credit bureaus can be a wise move if you’ve been victimized by an identity thief, or if you know your personal data has been stolen or compromised through a data breach.

Here are the pros and cons of each type of block, as well as when simply using a fraud alert may be a sufficient form of protection.

What Does a Credit Freeze Do?

A credit freeze (also known as a security freeze) is a free tool that allows you to block all access to your credit report and makes it tougher for identity thieves to open new accounts in your name.

That’s because nearly all creditors want to see your credit report before they approve an account and extend credit to you.

If they can’t access your credit report, it’s unlikely that you will get approved. That works in your favor when someone other than you is trying to open an account in your name.

Fortunately, according to the Federal Trade Commission (FTC), freezing your credit will not harm your credit score, nor will it impair your ability to get your free annual credit report.

A credit freeze also won’t limit your ability to open new accounts. However, because credit freezes prevent lenders from checking your credit, you will need to lift the freeze temporarily before applying for a loan or credit account, and then place the freeze again when you are done accessing your account.

In addition, freezing your credit won’t hurt your ability to apply for a job, rent an apartment, or buy insurance. According to the FTC, the freeze doesn’t apply to those actions.

It’s important to keep in mind, however, that a freeze won’t prevent a thief from making charges to your existing accounts.

For that reason, you will still need to stay on top of your finances and monitor all of your bank, credit card, and insurance transactions carefully for fraudulent transactions.

You may also want to be aware that, even with a freeze, certain entities will still have access to your credit report.

These include your existing creditors, debt collectors acting on their behalf, and government agencies who need to have access in response to a court order.

How to Freeze Your Credit On Your Own

Putting a freeze in place simply requires contacting each of the nationwide credit bureaus, which include:

•   Equifax
•   Experian
•   TransUnion

You will need to supply your name, address, Social Security number, date of birth, along with some other personal information.

After receiving your freeze request, the credit bureaus will give you a PIN (personal identification number) or password. You’ll want to keep this in a safe place since you will need it whenever you choose to lift the freeze.

By law, credit bureaus must activate a credit freeze within 24 hours of receiving a request by phone or online, and they must lift a freeze within one hour of receiving a request to do so accompanied by your PIN or password.

Your freeze will remain in place until you temporarily lift or completely remove it (more on how to do that below).

How to Lock Your Credit Report

Like a credit freeze, a credit lock blocks all access to your credit report, and won’t harm your credit score.

Like a freeze, to be fully protected, you must place locks with all three credit reporting agencies.

With locks, however, there’s no PIN, and usually, there is no delay of up to 24 hours when locking your credit file, nor a delay of up to an hour for unlocking it.

With a credit lock, you can activate and disable it instantly via a smartphone app or secure website.

Locking your credit involves enrolling in one (or all) of the programs offered by the three major credit bureaus, Equifax, (Lock & Alert), Experian (CreditWorks), and TransUnion (TrueIdentity).

There is often a monthly fee involved in enrolling in one of these services. Credit locks, however, often come with additional services, such as monthly access to credit reports from all three bureaus, alerts when there’s new credit activity on your accounts at any of the three bureaus, identity theft insurance, and fraud resolution assistance.

Credit bureaus typically require you to provide proof of identity when you set up a credit lock. You can submit the necessary documents electronically or mail in hard copies.

The security benefits of a credit lock are the same as those for a credit freeze, and the limitations on access to your credit are the same as well–criminals won’t be able to access your credit file.

By the same token, new lenders whom you are legitimately working with to apply for loans or credit won’t be able to either unless you temporarily lift the block.

Unlike credit freezes, credit locks are not regulated by state law but are instead governed by a contract between you and the credit bureau.

How To Remove a Credit Freeze or a Credit Lock

If you want to lift or remove a freeze, you’ll need to call the credit bureau or visit the credit freeze page on its website, then use the PIN code or password you set up when you activated your credit freeze.

If you are lifting a freeze because you are applying for credit and you can find out which credit bureau the lender will contact for your credit file, you may be able to lift the freeze only at that particular credit bureau. Otherwise, you need to make the request with all three credit bureaus.

When you call or go online, you’ll likely have the option to thaw your credit temporarily (in which case, you will likely be issued a single-use PIN or password that you can provide to a creditor to access your frozen credit file), or to lift the freeze permanently.

Removing a credit lock, on the other hand, is typically just a matter of turning off a virtual switch online or in an app provided by the credit bureau.

When access to your credit file is no longer required, you can simply turn the switch back on.

How Is a Credit Freeze or Lock Different from a Fraud Alert?

If you are worried about identity theft but haven’t yet become a victim, you might consider placing a fraud alert on your credit report, which is less severe than a credit freeze or lock.

Unlike a freeze or lock, which shuts down access to your credit information, a fraud alert allows lenders to see your credit file, but it requires verification of your identity before any credit application is processed or any new account is opened in your name.

For example, if you have a phone number in your credit file, the business must call you to verify whether you are the person making the credit request.

A fraud alert can make it harder for an identity thief to open more accounts in your name, and can be a good idea if your wallet, Social Security card, or other personal, financial or account information is ever lost or stolen.

To place a fraud alert you simply need to contact one of the credit bureaus. It will then put the alert on your credit report–and tell the other two credit bureaus to do so.

A fraud alert is free, and the alert stays on your report for one year. It’s a good idea to mark your calendar, so you can then place a new fraud alert.

If you’ve been a victim of identity theft, credit bureaus often offer a free extended fraud alert that lasts for seven years.

The Takeaway

A credit freeze or a credit lock can provide a layer of protection if you’re an identity theft victim or you have good reason to believe someone with criminal intent has accessed your information.

Credit freezes and credit locks both restrict access to your credit reports. But you can turn a credit lock on and off instantly while adding or lifting a credit freeze requires making a request to the credit bureau.

Another key difference is that credit freezes are free, while credit locks are typically offered as part of paid services from the three national credit bureaus.

The ability to activate and deactivate a credit lock instantly, without the time delays that come with the credit freeze process, can make the process easier.

If you’re looking for some fraud protection, but maybe not quite as much as a credit freeze or lock, you might want to simply place a fraud alert on your credit file instead.

Whatever form of fraud protection you choose, it’s still important to stay on top of and regularly check all of your financial accounts.

One way to make managing your money a little simpler is to sign up for SoFi Checking and Savings®.

SoFi Checking and Savings is an account that allows you to earn competitive interest, save, and spend all in one account. And, with SoFi Checking and Savings, you can track all your spending and save with a single dashboard.

Learn more about how SoFi Checking and Savings can make it easy to save, spend, and earn all in one place.

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A lot of basic “adulting” involves a credit score. Renting an apartment? The landlord will want a credit score. Buying a home? Mortgage lenders will need to see a credit score. Getting a car? Credit score. Applying for a private student loan? You get the point.

Credit scores affect the financial part of people’s lives. As folks age and make bigger purchases, they are required to show their score more often.

Young people may think they don’t need to worry about their credit score in their late teens or early 20s. They aren’t planning on buying a house or fancy new car anytime soon, right?

There are a couple of problems with this line of thinking. First, plenty of young people do have to show their score. Are they applying for a private loan to put themselves through college?

Their credit score will help determine how low of an interest rate they qualify for. Are they trying to move off campus or rent their first post-college apartment? A low or non-existent score could lead to their application being denied.

Wondering how to start building credit with a low score—or even how to build credit with no credit score? A few simple steps can set young people on the path to success.

Obtaining a Credit Card and Using It Responsibly

Don’t own a credit card yet? Getting a card is a simple way to start establishing credit. People who already have a card with a balance might want to focus on paying it off instead of applying for a new one, though.) However, it’s crucial to use a card wisely—otherwise, cards can do more harm than good.

People may want to consider applying for just one card, not five. And keep in mind that just because someone has a card doesn’t mean they have free money. Opening one new line of credit and using it responsibly is a good way to build credit.

Recommended: Does Applying for Credit Cards Hurt Your Credit Score?

While some people out there believe credit cards are the root of all evil, if used correctly, they can boost credit scores in multiple ways. The most common credit score model is issued by Fair, Isaac and Company, aka FICO. People’s FICO scores are comprised of five factors:

•   Payment history: 35%
•   Amount owed: 30%
•   Length of credit history: 15%
•   Credit mix: 10%
•   New credit: 10%

Credit cards can be an effective tool in a new credit builder’s toolbox. When someone uses a credit card responsibly, this can potentially have a positive effect on all five FICO categories.

Payment history: Making monthly payments on time (even just minimum payments) can help people’s credit scores. As they make consecutive monthly payments, their scores should gradually increase—as long as they remain responsible with their finances in other areas of their lives.

Amount owed: Everyone has something called a “credit utilization ratio,” sometimes referred to as a “debt-to-credit ratio.” This is the ratio of debt they owe versus how much debt they can owe.

Credit cards have credit limits. Let’s say Dana’s credit limit is $10,000, and she owes $5,000 on her card. Her credit utilization ratio is 50%. If she pays off $1,000 and only owes $4,000, her ratio is 40%. The lower the ratio, the better—that’s why older adults often lecture teens and early 20-somethings to pay off their card balances in full. A low ratio means better things for borrowers’ credit scores.

Length of credit history: The longer people have a line of credit, the better it is for their score. Ideally, someone would open their first credit card and keep it for years while making payments on time and keeping their balance low.

Those who already have a credit card but have racked up debt may want to think twice before canceling their card for this very reason—they might be better off working to pay off the balance aggressively and keeping the card for longer. But if they want to remove the temptation to keep charging the card, they can cut up the credit card like Rachel does in Friends. This way, the card isn’t sitting in their wallet, but their line of credit is still open.

Credit mix: FICO likes it when people have multiple types of debt. A recent college graduate’s only debt might be student loans. To improve their credit mix, they might consider getting a credit card as well.

New credit: When someone applies for a card, the issuer checks their credit score to determine whether they’ll be approved and what the interest rate should be. This is known as a “hard credit inquiry.” A bunch of hard credit inquiries in a short amount of time looks bad for a credit score, especially for someone whose score is already low. Besides, by limiting themselves to only one card, young people who are still learning the ropes of establishing credit might be less inclined to spend recklessly.

Considering a Secured Credit Card

Young people with low credit scores (or even no scores at all) may not be accepted if they apply for a top-notch credit card. Another option is to apply for a secured credit card. This type of card is meant specifically for people who want to build credit.

To use a secured credit card, people make a cash deposit to back their credit card account. The deposit amount becomes their spending limit. For example, John makes a $100 deposit when he receives his secured credit card. He can charge up to $100 to his card before paying it off. As long as he makes payments, he can keep charging to the card as long as the balance doesn’t exceed $100. If John doesn’t make payments on time, the issuer can take money from his cash deposit.

Secured cards benefit both the consumer and issuer. The consumer can build credit, and a cash deposit makes it less risky for the issuer to do business with someone who hasn’t yet proven that they can make payments on time.

What happens to that cash deposit down the road? If all goes well, people should get back their money. Many reputable credit card issuers offering secured credit cards give consumers the option to upgrade to a regular “unsecured” credit card once their credit score improves. When the user upgrades, they should receive that deposit back.

People researching secured credit cards may want to look for issuers who will let them transition to an unsecured card. This can simplify the process of switching to a regular credit card. Plus, the borrower won’t have to hang onto an unnecessary card or cancel the secured card later—which can help the “length of credit history” part of their FICO score!

Becoming an Authorized User on a Parent’s Credit Card

Some people may not trust themselves to use a credit card without racking up a ton of debt. Or they have the exact opposite fear—they might never use it, so they wouldn’t be making payments to boost their payment history. The latter fear may be the case for young people who are still receiving financial help from their parents and therefore don’t have many expenses to put on a card.

In either of these cases, young people might consider becoming an authorized user on a parent’s credit card. The parent can call the credit card issuer to officially put their child’s name on the card.

Young people should only add their name to a parent’s card if the parent has a high credit score and solid financial habits. If the parent starts to miss payments or accumulate a ton of debt, it will negatively affect the authorized user’s credit score.

Establishing credit through a parent’s card can help someone acquire a decent score before getting their own credit card. If they have a good credit score prior to applying for their first card, they might be approved for a harder-to-get card at an attractive interest rate. After receiving their own card, they might decide to remove their name from the parent’s card so they can have sole control over their personal credit score.

Paying Bills on Time

Okay, we’ve established that making monthly credit card payments positively contributes to the “payment history” part of a credit score. Credit cards aren’t the only things people can pay on time, though. Making timely payments on things like car loans or student loans also help.

Certain bills don’t show up on credit reports, such as cell phone bills and insurance payments. While paying those bills doesn’t improve people’s credit scores, skipping payments can certainly hurt their scores. When people default on their payments, their credit scores can take a major hit. So it’s important for people to pay all their bills—even the ones that aren’t on their credit reports.

Taking out a Credit-Builder Loan

Just as secured credit cards exist for people trying to build credit, there are special loans for this purpose, as well. These are called credit-builder loans, and they are usually offered by smaller banks and credit unions.

When people take out credit-builder loans, the loan amount is held in a separate bank account until the borrower pays off the full amount. By making payments on time, the “payment history” part of people’s scores should gradually improve. Borrowers do have to pay interest on the loan, and the percentage will depend on the lender. But there’s a huge bonus: Once people pay off the loan, they get to pocket the full loan amount and the interest they’ve paid. Not only do they walk away with a better credit score, but they now have money to put toward their emergency fund or student loan payments.

While people don’t need a good score to be approved for a credit-builder loan, they do need proof that they earn enough money to make monthly payments on time. They may need to provide documents such as bank statements, employment information, housing payments, and more.

Considering taking out a credit-builder loan? When shopping around, it is a good idea to keep an eye out for factors like APR, required documents, term length, loan amount, and additional fees before making a decision.

Being Patient

Establishing credit is the perfect example of “slow and steady wins the race.” People shouldn’t get discouraged when their credit score doesn’t surge after two months of making payments on time. And if they do get discouraged, they shouldn’t give up. The important thing is to continue making payments on time and using a card responsibly. The reward will come.

Recommended: How Long Does it Take to Repair Credit?

Keeping Track of Your Credit Score

Many people have no idea what their credit score is. By regularly checking their score, they can know exactly where they stand and how much progress they need to make to reach their goals.

Some people may be concerned that checking their credit score can lower their score. But don’t worry, only “hard inquiries” affect credit scores. Hard inquiries occur when issuers or lenders check borrowers’ scores to determine whether to approve them for a credit card or auto loan, for example. But when a person checks their own score on a website or app, this is considered a “soft inquiry” and doesn’t affect their score.

Checking credit scores is easy with SoFi Relay. By seeing their spending and credit score all in one app, users might feel encouraged when they notice their payments are actually improving their score, further motivating them to keep their credit score in a good place for the future.

Track payments and credit scores with SoFi Relay.

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SoFi’s Insights tool offers users the ability to connect both in-house 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. 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 provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website .
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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