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Opting to buy a used vehicle rather than the newest model on the lot can be a great way to save some money.

Used cars often cost significantly less than new cars. In addition, older cars are generally cheaper to insure (since they are worth less than new cars).

The process of shopping for, and financing, a used car, however, can feel intimidating. To demystify the process, we’ve got nine simple strategies that can help you find a reliable used car that fits your lifestyle and budget.

1. Setting a Budget for a Used Car

Before you start researching used cars, you may want to first think about how much you can afford to spend on a car and how you will pay for it.

If you will be paying cash, you may want to consider how much of your savings you can realistically put towards a car. If you don’t have quite enough, or the purchase would completely gouge your savings, you may want to spend a few more months saving up for a car.

If you will be getting a loan for the car, you’ll want to think about what would be a comfortable monthly payment.

One rule of thumb is to put at least 10% down and finance the car for three years. You may also want to try to keep your total monthly auto expenses no higher than 20% of your monthly take home pay.

You can use an online auto loan calculator to get a rough idea of how much you might need to spend each month on financing.

2. Getting Financing Before You Start Shopping

If you plan to get a loan to buy the car, it can be a good idea to get a pre-approved car loan from a bank, credit union, or another lender before you start shopping.

While you may opt to go with financing offered by a car dealership, having a pre-approved car loan offer in your back pocket can give you a great negotiating tool.

Dealers tend to mark up the interest rate to make a profit, but if you already have a deal in place, they will know they need to beat it in order to get your business.

Even if you’re going to buy a car through a private sale, having a pre-approved loan in place will allow you to jump on a great deal as soon as you find it.

Recommended: Buying a Car with a Personal Loan

3. Choosing Your Ideal Car

Now that you have a car buying budget in mind, you may want to look into what types of cars you can get for that money.

Do you need a truck, SUV, or sedan? You can save money outright by buying a smaller car and also down the line if it’s good on gas mileage.

If safety is a top priority, you may want to check out the Insurance Institute for Highway Safety Ratings to see which cars perform the best in crash tests.

You can also narrow the field by making a list of must-have features, and then searching for cars that have them using a search tool like Edmunds Car Finder .

Once, you’ve narrowed your list to three target models that you can research in more detail. You may also want to read reviews about the cars you’re interested in on sites like Kelley Blue Book and J.D. Power. .

Recommended: How to Save Up for a Car

4. Shopping for a Used Car

Once you know how much you can spend and what kind of car is going to be a good fit for you, you can actually begin shopping for a used car. There’s no need to start driving to car lots all over town–you can browse through tons of vehicles online.

Good places to look include: used car superstores like Carmax or Carvana, used car dealerships, as well as new car dealerships (which often also sell used cars, though not always at the lowest prices).

You may also want to look at listings from local private party sellers, which you can find on Craigslist, eBay Motors, Facebook Marketplace, and Nextdoor.com.

5. Researching the Car

Once you’ve pinpointed a vehicle you might want to buy, it can be a good idea to find out as much as you can about the vehicle’s history.

You can get a vehicle history report from a company like Carfax or Autocheck , which can tell you if the car has any red flags, such reported accidents or flood damage, as well as information on the car’s maintenance and service history.

To get a report, you’ll need to get the car’s vehicle identification number (VIN) or license plate number from the seller. There is typically a fee for running a report (around $25) but many dealers will provide the report for free.

You may also want to run the VIN number through the United States Department of Transportation Recalls site to check for any safety recalls. If there have been any recalls, it’s a good idea to make sure that the issue has been fixed.

6. Going for a Test Drive

It can often be helpful to try before you buy, especially when it comes to buying a car. A car dealership will typically let you take a few cars for a drive so you can get a sense of how they feel.

You may want to call ahead before visiting a dealership to make sure they have the car on the lot that you’re interested in so you can see it that day.

A private seller will also likely allow you to take the car for a brief spin to see how you like it.

Some things to consider when going for a test drive:

•   How well the car accelerates and corners.
•   If the breaks are responsive.
•   If there are any unusual noises or vibrations that could indicate a mechanical issue.
•   How well the car fits you–is there enough leg room? Can you comfortably reach all of the controls?

7. Inspecting a Used Car

Even if you’re far from a car expert, it can be a good idea to do a visual inspection of the car. Is the car’s body and paint in good shape? Are the lights all working? Are there signs of cracks or water inside the lights?

You may also want to turn on the air conditioning and heating, radio, and navigation system and make sure they are all working properly.

When examining the interior, you’ll want to make sure it is in decent condition and there aren’t any unpleasant smells–a moldy smell can indicate flood damage and cigarette smells can be hard to get rid of.

8. Getting a Mechanic to Inspect the Car

Unless you are buying a certified used car with factory warranty coverage from a dealership, you may want to consider getting a car you are close to buying inspected by an independent auto mechanic.

While this does involve an investment of some cash (typically $100 to $200), it can potentially save you from dealing with a costly repair soon after you buy the car.

The inspection report may also give you some bargaining power when haggling over the price of the car.

9. Negotiating the Price of a Used Car

It’s rare that you’re going to come across a used car price where the seller is unwilling to budge, even a little.

Before you negotiate a car deal, however, you’ll want to have all your research ready, including how much the average make and model car for a particular year goes for, and any concerns or issues that came up during your personal and professional inspection.

If you’re negotiating with a dealer, it can be a good idea to keep the focus on total cost of the car, rather than bring a trade-in or financing into the mix.

Dealers may want to merge all of the numbers into one deal, which can be confusing–and also make a not-so-good deal look better.

When discussing price at a dealership, you may also want to make sure you are talking about the out-the-door price, including all fees (so there aren’t any surprises).

The Takeaway

Buying a used car can be a smart buying decision. To make sure you get a car that suits your needs and budget, however, you’ll want to research your options, come up with a target price range, and line up financing before you shop.

When shopping for used cars, it’s a good idea to learn a car’s history, test drive the car, and also have it professionally inspected.

Knowing the value of the car in the open marketplace can help you negotiate a good price. If you don’t like the deal, there’s nothing wrong with walking away.

Saving up for a new (to you) set of wheels? You may want to consider opening a bank account online with SoFi.

SoFi Checking and Savings allows you to separate your savings from your spending, while still earning competitive interest on all your money.

And with SoFi Checking and Savings’s “vaults” feature, you can create different vaults for different goals, including a “car savings” vault.

Start saving for your next sweet ride with SoFi Checking and Savings.

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¹SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc’s service. Vehicle Identification Number is confirmed by LexisNexis and car values are provided by J.D. Power. Auto Tracker is provided on an “as-is, as-available” basis with all faults and defects, with no warranty, express or implied. The values shown on this page are a rough estimate based on your car’s year, make, and model, but don’t take into account things such as your mileage, accident history, or car condition.

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

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Land loans allow borrowers to purchase a piece of land, often with the intention of building a home there or developing it for business.

Because of the inherent risk to lenders, land loans can be challenging to find. The rate and required down payment are typically higher than those of a traditional mortgage loan, and the repayment term is often shorter.

Let’s dig into land loans and look at some alternatives.

What Is a Land Loan?

A land loan, also referred to as a “lot loan,” finances a piece of land. Borrowers may have plans to build a home or start a business on the land, but they might want to keep the plot for just fishing or hunting. Developers can also get land loans to build homes or businesses.

A land loan is different from a construction loan, which is typically a short-term loan to build or rehab a home. With a land loan, the borrower might not have immediate plans to develop the land or build the house.

A land loan can be more challenging to obtain because, unlike with traditional types of mortgage loans, there is no home to serve as collateral for the lender. Thus, lenders may have stricter requirements and higher rates attached to a land loan.

Types of Land Loans

The land loan rate and terms you get — and the down payment you’re required to make — may depend on the type of land you’re trying to buy.

Raw Land

Securing financing for raw land can be challenging. Raw land, also called unimproved land, is entirely undeveloped, meaning it lacks roads and electrical, water, and sewage systems.

To improve your chances of loan approval, it’s a good idea to have a comprehensive development plan to show lenders.

Of course raw land is generally cheaper than land that has been partially developed, but because it is virtually untouched, it is not possible to know what major issues await when you start development.

Recommended: How to Find a Contractor for Home Remodeling

Improved Land

Because improved land is developed with utilities and road access, lenders may be more willing to offer financing. But the land typically costs more than raw land.

How to Find Land Loan Lenders

Finding land loan lenders can prove to be more challenging than finding a lender for a traditional mortgage.

Potential land buyers can try these routes for securing financing:

•   Local banks and credit unions: If your personal bank doesn’t issue land loans or you’re struggling to find a big-name financial institution that offers them, you might have more luck with a local bank or credit union.

•   Online lenders: Searching online allows you to compare land loan rates from the comfort of your couch. It also means you can read reviews about the lenders before applying.

•   USDA loans for low-income borrowers: The U.S. Department of Agriculture offers Section 502 direct loans to help low- and very low-income individuals or households purchase homes or buy and prepare sites, including providing water and sewage systems, in rural areas. The rate is well under current market rates. The term is as long as 38 years. No down payment is required.

•   SBA loans: Business owners planning to use land for a business may qualify for a 504 loan through the U.S. Small Business Administration. The SBA and a lender issue loans for a combined 90% of the land purchase cost. The rate is based on market rates.

Recommended: What Is a USDA Loan?

What Are Typical Land Loan Rates and Terms?

Like any other loan, the interest rate will largely depend on your credit score. That said, land loan rates are typically higher than traditional mortgage rates, thanks to the inherent risk and only the land as collateral.

And the repayment term? A land loan from a bank often is a five-year adjustable-rate loan with a balloon payment at the end. Rarely you might find a 30-year fixed-rate loan through a financial institution in the Farm Credit System.

The Federal Deposit Insurance Corp. (FDIC) recommends loan-to-value (LTV) limits. Lenders may set down payment requirements even greater than the FDIC proposes, however.

•   For raw land, the FDIC advises a 65% LTV, meaning borrowers must put 35% down.

•   For land development, the FDIC recommends a 75% LTV, meaning borrowers must put 25% down.

•   For construction of a one- to four-family residence on improved land, the FDIC calls for an 85% LTV, meaning borrowers must put 15% down on the land loan.

If you don’t plan to develop the land, the rate and down payment could be steep.

If you do build a home on the land, you may be able to refinance the land loan into a traditional mortgage.

Alternatives to Land Loans

A land loan is not your only option when purchasing a lot. One of these alternatives to land loans may be a better choice for you:

Construction-to-Permanent Loans

If you plan to build a house in short order, this kind of loan could work. At first, you would make interest-only payments on the purchase price of the land. The loan then allows for draws until the house is done, usually 12 months from closing. The loan then converts to a permanent mortgage, sometimes with the same rate.

You may need to make a down payment of at least 20% of the total loan amount. The rate for construction loans in general is higher than a regular mortgage.

FHA, VA, and USDA single-close loans are also available to eligible borrowers.

Seller Financing

Though not as common as traditional financing, owner financing is when the current landowner acts as the lender. Also called a land contract, this type of financing does not involve a bank, credit union, or traditional lender.

While it can be beneficial for those who cannot secure a land loan, buyers have fewer consumer protections working in their favor.

Home Equity Loan or HELOC

If you have significant equity in your primary home, you may qualify for a home equity loan. Your home would serve as the collateral for the loan.

Similarly, you may be able to finance the land purchase with a home equity line of credit (HELOC) or a cash-out refinance.

How much home equity can you tap? Many lenders will let you borrow 85% of your home equity, the home’s current value minus the mortgage balance, but some allow more than that.

Personal Loan

Though personal loan rates may be higher than home equity products’ and you may need to pay off the loan in a shorter time, it might be possible to use a personal loan to finance your land purchase.

You’ll receive the funds quickly, and an unsecured personal loan requires no collateral.

What You Need to Know Before Applying for a Land Loan

Before applying for a land loan, it’s important to educate yourself about land development and to understand the details of the specific lot you’re interested in.

Survey

When buying a large plot of land, knowing the boundaries can be more challenging. Hiring a surveyor to mark the boundaries can be helpful before applying for the loan.

Recommended: Should I Lock My Mortgage Rate Today?

Utilities and Roads

Unspoiled land may be beautiful, but it can be difficult to develop. Understanding what utilities and roads are available — or how to make them available and how much it will cost to do so — is important before applying.

Zoning

When considering a land purchase, it’s a good idea to research any zoning restrictions in that area. Before purchasing land, you’ll want to know that you can actually build on it the way you envision.

Recommended: Tiny House Financing

The Takeaway

Land loans allow borrowers to purchase land to develop as they see fit. Because there is more risk involved for the lender, it can be challenging to find a land loan, and the rates and terms tend to be less favorable than those of typical mortgages.

A personal loan, cash-out refinance, home equity loan, or seller financing may also allow a land buyer to hit pay dirt.

SoFi offers fixed-rate personal loans from $5,000 to $100,000 and a cash-out refinance.

And SoFi brokers a home equity line of credit that allows qualified homeowners to access up to 95%, or $500,000, of their home’s equity.

Find your rate and terms on a HELOC today.

FAQ

Is it hard to get a loan to buy land?

Getting a loan for a land purchase can be more difficult than getting a traditional mortgage. Fewer lenders offer land loans, and because there is more risk involved, they typically require a higher down payment, impose higher interest rates, and offer shorter repayment terms.

Are land loans higher interest?

Land loan rates are typically higher than traditional mortgage rates because there is no home to act as collateral for the lender. Interest rates may vary depending on credit scores and the down payment amount.

What is the first step to apply for a land loan?

First, research land loan lenders. Before applying, it’s also smart to devise a plan that shows the lender how you will develop the land, accounting for things like utilities, land boundaries, roads, and construction costs.

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Photo credit: iStock/shapecharge

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

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

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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If you’re financing your home purchase, choosing the right lender could streamline the process. But there are many types of mortgage lenders: retail lenders, direct lenders, online lenders, and others.

Although many steps of the mortgage process are consistent across lenders, there are key differences that could affect the all-in cost. To help narrow your search, this guide will cover what mortgage lenders do and explore common mortgage lenders.

Mortgage Lender, Defined

A mortgage lender is a bank, credit union, mortgage company, or individual that grants home loans to borrowers. Mortgage lenders evaluate an applicant’s creditworthiness and ability to repay the loan. Based on the buyer’s qualifications, the lender sets the interest rate and mortgage term.

After closing, the loan may be managed by a mortgage servicer vs. lender. The mortgage servicer is responsible for sending statements, collecting monthly payments, and allocating funds between the loan principal, interest, and escrow account.

It’s possible that financial institutions act as both the mortgage lender and mortgage servicer.

Mortgage Lender vs Mortgage Broker

Both lenders and mortgage brokers can assist with the purchase of a home. But there are key differences to understand when comparing a mortgage broker vs. direct lender.

Mortgage brokers do not originate or approve loans; rather, they help borrowers find a home loan that best fits their financial situation. They often have connections with many lenders and find solutions for less-qualified borrowers. A mortgage broker also helps organize required paperwork and manages communication between the borrower and lender.

A mortgage broker earns a commission for these services from either the borrower or lender after the loan closes. Licensing is required to be a mortgage broker, and the Nationwide Mortgage Licensing System & Registry maintains a database of licensed professionals by state. Search for NMLS consumer access.

You can always obtain loan quotes from at least one broker and one direct lender when you shop for a mortgage.

Online Mortgage Lender vs Bank

Borrowers can work with a bank or mortgage lender to fund their home purchase.

Banks can offer mortgages along with other financial products, including checking accounts and commercial loans. A borrower may receive benefits, like a lower rate and closing costs, when applying for a bank mortgage if they’re an existing customer.

As larger financial institutions, banks tend to service their mortgage loans after closing.

On the other hand, banks may have stricter lending requirements than mortgage companies, thanks to federal regulation and compliance. Borrowers may also have fewer loan options to choose from with a bank, as a mortgage lender specializes in mortgage products.

Common Mortgage Lender Options

If you’re in the market for a home loan, there are several types of mortgage lenders and terms to become familiar with. Here are the most common.

Direct Lenders

Direct lenders like mortgage lenders, banks, credit unions, and portfolio lenders fund, originate, underwrite, process, and close the loans on their own.

They work directly with buyers and refinancers; there is no broker involved.

Retail Lenders

Banks, credit unions, and mortgage companies can also be categorized as retail lenders. Retail lenders issue mortgages directly to consumers.

Homebuyers may receive more personalized assistance from a mortgage loan originator to find a home loan that fits their situation. But because retail lenders handle loans in-house, they generally only offer their own loan products.

Besides mortgages, retail lenders provide other credit products, including savings accounts, personal loans, and credit cards.

Wholesale Lenders

Wholesale lenders offer home loans through third parties, such as retail lenders or mortgage brokers, instead of directly to consumers.

They fund the mortgage and set the loan terms, while the third party facilitates the application process and communicates with the borrower.

After closing, wholesale lenders typically sell their home loans on the secondary mortgage market.

Portfolio Lenders

A portfolio lender, such as a community bank, uses its own money to originate nonconforming mortgages — those that do not meet Fannie and Freddie standards for purchase, such as jumbo loans.

A portfolio lender has more flexible lending standards than a conventional direct lender because it holds its own home loans in a portfolio.

But portfolio loans may come with higher interest rates and closing costs.

Warehouse Lenders

Warehouse lending provides short-term funding to mortgage lenders to finance a home loan. The mortgage serves as collateral until the lender — often a small or midsize bank — repays the warehouse lender.

With warehouse lending, the mortgage lender is responsible for the loan application and approval process. After closing, the mortgage lender sells the loan on the secondary market and uses the proceeds to repay the wholesale lender. Mortgage lenders profit from this practice through origination fees and mortgage points.

A mortgage financed through a warehouse lender may provide faster funding and more flexibility than a conventional loan. For instance, borrowers could apply for construction financing with warehouse lending.

Online Lenders

With an online lender, the mortgage application process, processing, underwriting, and closing can all be completed virtually. Opting for a digital borrowing experience can get you to the closing table faster.

No overhead means online lenders can offer lower rates and fees.

On the other hand, borrowers may find it more difficult to build a working relationship with a loan officer when completing the process online.

Recommended: Prequalification vs Preapproval: What’s the Difference?

Hard Money Lenders

Hard money lenders — individuals or private companies — offer hard money personal loans based on the value of the property rather than the borrower’s creditworthiness. The property serves as collateral, and borrowers must repay the loan in just a few years.

While hard money lenders can offer faster financing, these loans usually come with higher down payment requirements and interest rates because of their risk. Borrowers may benefit from a hard money lender if they plan to flip a property.

How to Find the Right Mortgage Lender for You

While there’s no shortage of lenders, finding the right mortgage lender takes some shopping around.

When browsing options, it’s useful to consider your financial situation and needs. For instance, can you afford a down payment on your own or with help from a family member or friend?

Is your credit score high enough to buy a house?

Checking the fees and interest rate are important to determine how much you’ll have to pay upfront and over the life of the loan.

Applying to several lenders and/or working with a mortgage broker can let you compare rates and fees to negotiate better terms. Apply to all within a 14-day window to minimize damage to your credit score.

There are first-time homebuyer programs, too. The definition of first-time homebuyer is broader than it seems. It includes anyone who has not owned a principal residence in the past three years.

Recommended: Mortgage Loan Help Center

The Takeaway

There are many types of mortgage lenders to choose from. Your financial situation and goals will help you pick the mortgage lender that offers terms that fit your budget.

Ready to compare home loan options? Check out all the advantages of mortgages from SoFi. One is that qualifying first-time homebuyers can put as little as 3% down.

When you’ve scrolled through the perks, find your rate in a few clicks.

FAQ

What does a mortgage lender do?

A mortgage lender offers home loans to borrowers with the expectation that the loans will be repaid with interest. They set the loan terms, including the interest rate and repayment schedule.

Are mortgage underwriters the same as the lender?

Most lenders manage the underwriting process in-house. Underwriters assess a borrower’s income, assets, and debt to determine whether they are approved for a mortgage.

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Photo credit: iStock/luismmolina

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

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

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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Taking out a home mortgage can be one of the biggest financial decisions you make. While some people can, it’s uncommon to pay for a house entirely with cash. Most people put some money as a down payment and then take out a mortgage for the rest of their home’s purchase price. But before you sign on the dotted line, you’ll want to make sure you understand how a mortgage affects your credit score.

The good news is that, as long as you regularly make your mortgage payment on time, having a mortgage can help your credit score. You may see a slight negative impact to your credit when you first apply for a mortgage, since the lender will likely pull your credit report. But after that, your mortgage will generally have a positive impact on your credit score, assuming you’re consistently making on-time payments.

Recommended: When Are Credit Card Payments Due?

Does Having a Mortgage Help Credit Score?

One of the mortgage basics is that in exchange for an upfront payment (generally used to purchase a home), you’ll make regular monthly payments to your lender for a specified period of time (often 30 years). Having a mortgage on your credit report can help your credit score in two ways. First of all, making your mortgage payments on time each month helps show a positive payment history. Another way that having a mortgage can help your credit is by diversifying your credit mix, which is another factor that makes up your credit score.

How Mortgage Application Impacts Credit Score

The process of applying for a mortgage can impact your credit score in a variety of different ways. Here’s a closer look.

Situations Where It May Hurt Your Credit

When you apply for a mortgage, your lender will usually do a hard pull on your credit report to assess your overall creditworthiness. The number of recent inquiries on your credit report is a negative contributing factor to your credit score, so you’ll want to limit the number you make within a certain window of time. One way to do this is to wait to apply for a mortgage until you are sure you have a sufficient credit score needed to buy a house.

Recommended: What is the Average Credit Card Limit?

Situations Where It May Help Your Credit

It can be smart when applying for a mortgage to work with different lenders to find the right lender for your situation. One piece of good news is that multiple mortgage-related inquiries in a short period of time usually will only count as one inquiry. So if you’re working on establishing credit, you won’t need to worry about multiple inquiries from different mortgage lenders pulling your credit report, as long as they’re all within the same window of time.

How a Mortgage Can Affect Your Credit

Beyond applying, there are a number of ways that having a mortgage can affect your credit. When you get a mortgage it can help your credit score, but it can also hurt it.

Hard Inquiry When You Apply

One of the factors that makes up your credit score is the number of recent hard inquiries you have. Any time a potential lender conducts a hard pull of your credit report, it can cause a temporary drop in your credit score by a few points. This drop usually goes away after a few months, but it’s something to be aware of.

Paying Your Mortgage On Time

One of the biggest factors that affects your credit score is your payment history. So if you have a mortgage and regularly pay it each month, that can make a positive contribution to your credit score. This is one reason it’s important to make sure that you don’t take out a mortgage that you’ll have trouble paying each month.

Late Or Missed Mortgage Payments

Because your payment history is such a big part of what makes up your credit score, late or missed mortgage payments can have a large negative impact on your score. Potential lenders look at your credit report to get an idea of how likely you are to repay your debt obligations, so having late or missed payments can be a red flag to future lenders.

Improving Your Credit Mix

A lesser-known but still important part of what makes up for your credit score is your overall credit mix. Generally, it’s considered a positive sign if you have a variety of different types of loans on your credit report. This includes credit cards, auto loans, mortgages, personal loans, etc. Adding a mortgage to a credit report that doesn’t have one helps diversify your credit mix.

Changing Your Average Age of Accounts

Another factor that makes up your credit score is your overall average age of accounts. Potential lenders like to see a lengthy history of you responsibly using the credit that’s been issued to you. So while initially a new mortgage will lower your overall average age of accounts, over time it will work in your favor.

Recommended: Tips to Qualify for a Mortgage

Tips for Building Your Credit Score After Buying a House

After you’ve bought your house, here are a few tips to continue building your credit:

•   Pay your mortgage in full and on time, each and every month.

•   Continue to pay your other debts (like credit cards and student loans) on time each month as well.

•   Keep an emergency fund to ensure you can still meet your debt obligations (including your mortgage) even when the unexpected happens.

•   Make sure you save enough money to pay your home insurance and property taxes (if your mortgage isn’t escrowed).

•   Regularly review your credit report for unexpected or inaccurate information.

•   Increase your credit utilization ratio by raising credit limits and limiting debt.

•   Limit your new credit inquiries as much as possible.

Recommended: Tips for Using a Credit Card Responsibly

The Takeaway

Having a mortgage can affect your credit score in a variety of ways, but most of them are positive. While you will likely see a small temporary drop in your credit score due to the hard pull from your mortgage lender, that should go away after a few months. Then, as long as you regularly pay your mortgage on time each month, you should hopefully see a positive impact on your credit score from having a mortgage.

Another great way to build your credit can be by responsibly using a credit card. Many credit cards, like the SoFi Credit Card, also offer cashback rewards for everyday usage. If you’re approved for the SoFi Credit Card, you can earn unlimited cash-back rewards. You can use those rewards as a statement credit, invest them in fractional shares, or put them toward other financial goals you might have, like paying down eligible SoFi debt.

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

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

FAQ

How long does it take for your credit score to go up after buying a house?

When you get a mortgage (or any type of loan), the potential lender will likely do a hard pull of your credit report. Because the number of recent inquiries you have is a factor that makes up your credit score, this hard pull may temporarily drop your credit score. The good news is that it usually only drops by a couple of points, and even that small effect usually goes away after a couple of months.

How long should I wait after closing to make another big purchase?

You want to be careful about making large purchases or applying for any other credit before you are approved for a loan. This is because your lender and underwriter will be digging into your credit report in detail to make sure your overall financial situation is sound, and they’ll want to know about anything out of the ordinary. After you close on your mortgage, you don’t need to be as careful about making another big purchase, as long as it fits into your overall financial picture.

What credit score is needed to get a mortgage?

There isn’t a specific credit score that’s needed to get a mortgage. Instead, each lender will have its own criteria for approving mortgages. Your overall credit score, your total down payment, and the house itself will all play a role in whether you’re approved, and at what interest rate.

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¹Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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

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

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

Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details, please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

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If you’re wondering, “do monthly subscriptions build credit?,” the answer is that it depends. You’re most likely going to build credit if your payment activity is reported to the three major credit bureaus — Experian, Equifax, and TransUnion — or if you use certain payment methods like a credit card.

If you’re hoping to build credit with subscriptions, however, there are certain steps that you can take to help ensure that happens.

What Are Monthly Digital Service Subscriptions?

Monthly digital service subscriptions are a cost that you pay each month to access a service, such as online streaming for TV shows, movies, and music. It can also include subscriptions to software, including for photo editing, audiobooks, online classes, and ebooks.

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

How Monthly Subscription Services Can Help Build Your Credit

Subscription services can help you build your credit if your payment activity is reported to the credit bureaus. You can ensure this happens by using your credit card to pay your bills or signing up for a service that reports your payment activity to the credit bureaus.

When your payment activity is reported to the credit bureaus, your monthly payments for subscription services will appear on your credit report. This can lead to either a positive or negative effect on your credit. If you miss a payment, your score could be negatively impacted, whereas on-time payments could have a positive effect.

As such, here’s a trick for ensuring that on-time payment consistently happens: setting up automatic payments.

Strategically Using Automatic Payments

Setting up automated bill payments is how you’ll most likely pay for subscription services. To make strides toward building credit, however, there are some ways you can set up your automatic payments more effectively:

•   Automatically pay with your credit card: When signing up for a subscription service, you’ll be asked for a method of payment. The simplest option is to pay using your credit card, and authorize recurring charges. Of course, you can do so using your debit card (depending on the company) or by providing your banking details. But unless you sign up for a credit reporting service, your payment history most likely won’t be reported to the credit bureaus without selecting your credit card as the payment method

•   Automatically pay your credit card from your bank account: To ensure you’re paying your credit card bill on time, consider setting up automatic payments from your bank account. That way, you’ll decrease the likelihood of missing a payment deadline. If the charge is paid on time, you’ll also get the benefit of avoiding interest charges, which is one way to save on streaming services.

If you follow these tips, it’s smart to periodically check the subscription rates to ensure your automatic payment amount matches up with what you’re currently being charged. Also check your bank account to make sure you have enough funds for the payment to go through on time.

Recommended: What is a Charge Card?

Other Ways to Build Credit

There are other methods to establish credit other than through subscription services. Here are some additional or alternative methods to consider:

•   Secured credit cards: A secured credit card is generally more accessible to those who have no or limited credit history. You’ll need to make a refundable deposit that acts as your credit line — so if you put $500 down, you’d get a $500 credit line. Otherwise, you can use a secured credit card as you would a traditional credit card by making purchases and paying down the balance each month. Depending on the credit card issuer, you may be able to be eligible to upgrade to an unsecured credit card or request one after making consistent on-time payments for a set number of months.

•   Credit builder loans: These types of loans are designed to help consumers build credit. Once you’re approved for a loan, you’ll start to pay it back in installments. But instead of receiving the loan proceeds right away, the funds will be housed in a savings account until you pay back the loan in full.

•   Personal loans: If you need funding right away, such as for a home improvement project, you can consider taking out a more traditional loan, as there are lenders who are willing to work with those who have a limited credit history. Keep in mind that interest rates could be higher compared to someone with more established credit, so make sure you can afford the loan and make on-time payments before taking one out.

•   Secured loans: Like secured credit cards, secured loans require you to put down some sort of collateral. These can include physical assets, such as a car (like auto loans) or cash (some banks offer loans that you secure with your savings account). Interest rates may be more favorable than unsecured loans.

•   Paying rent: Your landlord — especially if it’s a larger property management company — may report your payment activity to the credit bureaus, even if you don’t use your credit card to pay. Otherwise, there are reporting services (much like the ones mentioned above) that will report your payments to the credit bureaus to help you build your credit.

Recommended: Tips for Building Credit

The Takeaway

Your monthly subscription services could serve as a path toward building credit, as long as your payment activity gets reported to the credit bureaus. You can ensure this happens by either paying your subscription with a credit card or signing up for a service that reports your payments to the credit bureaus. In either case, you’ll need to make sure you’re handling your subscription service payments responsibly in order to help establish your credit.

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

Is it good to put subscriptions on your credit card?

You can put charges for subscriptions on your credit card if you’re looking to build credit. Just make sure you’re exhibiting positive credit behavior by consistently making on-time payments.

What credit card is best for subscriptions?

There is no one credit card that is best for subscriptions. Whether it’s a secured or unsecured credit card, what matters is whether you make consistent, on-time payments. The credit card you choose will also depend on what you find important. For example, if you’re interested in earning travel rewards, then consider picking a credit that allows you to do so.

Does paying multiple times a month increase your credit score?

Making multiple monthly payments toward your credit card bill will reduce the amount of credit you’re using. In other words, you’ll lower your credit utilization — a comparison between your total credit limit and how much credit you’re using — which could be a positive contributing factor in your credit.

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

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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