Guide to Airline Credit Cards?

Guide to Airline Credit Cards?

An airline credit card is a category of credit card that allows you to rack up airline miles, among other cardholder benefits. These cards are usually co-branded with a particular airline. You can reap the perks of an airline credit card through purchases made on your card.

Airline credit cards are designed with the enduring and frequent flyer in mind. However, no two cards are alike. They can vary widely in terms of perks, restrictions, and perks, which you’ll need to consider when deciding if an airline credit card is worth it.

What Is An Airline Credit Card?

As mentioned, an airline credit card is a type of credit card designed for those who hop on planes frequently, such as avid travelers and those who fly a lot for work. Major network credit card networks and banks partner with airlines to offer co-branded airline credit cards.

They usually feature a rewards program, where you can earn points or credit card miles to redeem for flights, luggage fees, in-flight wifi, food and beverages, or upgrades to first class. Other perks might include reimbursement for canceled flights, insurance for lost baggage, and hotel room upgrades.

Recommended: How Do Credit Cards Work?

How Does An Airline Credit Card Work?

When you put purchases on your airline credit card, you’ll earn points. You can later use these points for travel-related perks, such as flights, hotel stays, and free upgrades. Beyond a rewards program, an airline credit card might also feature benefits like free upgrades to first class, invitations to airport lounges, and an annual travel credit.

To redeem your points, you usually can book directly through the card issuer’s portal. Sometimes, you can transfer your points to one of the card network’s hotel or airline partners.

Unlike private label credit cards, where you can only use the card at one specific store or group of stores, airline credit cards can be used anywhere the credit card network is accepted.

Examples of Airline Credit Cards

Airline credit cards are a type of loyalty program for a particular type of airline, where you earn miles for making purchases with the card. However, there are several different kinds of airline credit cards:

•   General airline credit card: With a general airline credit card, you earn credit card points or milyoes for purchases, and you can redeem them for flights, upgrades, free wifi or in-flight food or beverage, and priority boarding or free checked bags. Some cards feature a sign-up promotion where you automatically get a certain number or miles or built-in travel perks.

•   Premium airline credit card: These have the gold cadillac version of airline card perks — think more points earned for each purchase, annual bonuses and travel credits, and access to exclusive airport lounges. As it goes, the greater the perks, the higher the annual fee. Premium airline credit cards tend to have higher annual fees than other types of airline credit cards. However, they generally aren’t quite as exclusive as, say, a black credit card.

•   Business airline credit card: This type of airline credit card is designed with the frequent business traveler in mind. Perks might include additional ways to earn higher points on business-related expenses, free upgrades to business class, a companion pass, and cards for you and your employees, which can help you earn miles more quickly.

Recommended: What Is An International Credit Card?

What to Consider Before Choosing an Airline Credit Card

The perks of an airline credit card are alluring. You’ll want to mull over these factors when shopping around for an airline credit card:

•   Fees: The more robust and attractive the perks, the higher the annual fee for a card likely is. That being said, there are a number of no annual fee credit cards in the airline credit card category that still offer perks.

•   Sign-up bonuses: Some cards will offer a sign-up bonus, such as a number of points for simply opening an account, or for spending a certain amount within a specified time frame.

•   Rewards: As you research cards, look at how you earn rewards as well as how many points you can earn for certain types of purchases. Also consider what types of rewards you’ll earn and if that’s a good fit for your spending. For instance, some people may prefer credit card miles vs. cashback.

Airline Credit Cards vs Travel Rewards Credit Cards

They might sound strikingly similar, and while airline and travel rewards credit cards both allow you to rack up credit card miles or points in return for rewards, an airline credit card is specific to an airline. In turn, you can only enjoy, say, free checked bags or flights with that specific airline.

Travel rewards cards, on the other hand, are more broad in how you can redeem miles earned. You typically use these more general rewards credit cards for any airline, hotels, and rental cars.

Both airline credit cards and travel rewards cards can come with added perks, such as credit card travel insurance. Additionally, both allow you to use them for any type of purchase. They also might feature no foreign transaction fees, like the credit card offered by SoFi.

When to Consider a General Purpose Travel Credit Card

A general travel credit card could be a good idea if you travel enough to make the most of the offered travel-related perks and rewards. It can also be a stronger choice than an airline credit card if you aren’t loyal to any particular airline carrier, or you don’t have a preference.

As usual, you’ll want to review the rewards program in addition to the perks, fees, rates, and restrictions on a card before making a decision.

Benefits of Airline Credit Cards

Unsure what the upsides are of an airline credit card? Here’s a look at the main benefits of having one:

•   Travel perks: If you hop on planes quite often, you can take advantage of an airline credit card’s rewards program. In turn, you can scoop up free flights, priority boarding, free checked bags, access to airport lounges, travel protection, and upgrades.

•   Discounts on the flight: Common in-flight discounts include money saved on wifi, meals and drinks, and on entertainment.

•   Sign-up bonuses: Some airline credit cards offer a generous sign-up bonus where you can scoop up points if you spend a certain amount within the first several months after opening an account. The exact terms will vary by card.

Airline Credit Card Cost

The cost of an airline credit card varies. Some have zero annual fees, while others can have an annual fee of several hundred dollars and upwards.

The annual percentage rate (APR) of an airline card also can vary. A particular credit card may advertise an APR range, though your rate will depend on your credit and financial situation.

Is an Airline Credit Card Right for You?

An airline credit card could be a good fit for you if you are a frequent flyer and love traveling on a particular airline. It’s important to carefully look over the perks, sign-up bonuses, and fees before moving forward with any particular airline credit card.

The Takeaway

An airline credit card could be a solid choice if you travel frequently and prefer to fly on one airline. Benefits can include travel perks, discounts, and sign-up bonuses, with rewards earned in the form of credit card points or miles. Before deciding if an airline credit card is a good idea, carefully research the perks and rewards and compare those against the fees, interest rates, and other travel cards.

In some cases, a more general rewards credit card might make more sense. With the SoFi Credit Card, for instance, you can earn cash-back rewards on all eligible purchases. You can then choose how to redeem those rewards, including using them to invest, save, or pay down eligible SoFi debt.

FAQ

Is an airline credit card worth it?

Wondering if an airline card is a good idea? An airline credit card could be worth it if you are a frequent flyer and like to travel on a particular airline. However, it might not be worth it if you won’t end up using the rewards often enough to justify any annual fees on the card.

What are the benefits of booking a flight with an airline credit card?

Perks of booking a flight with an airline credit card might include free checked bags, bonus offers on miles, priority boarding, and lounge access. The perks vary depending on the card.

Do you lose airline miles if you cancel a credit card?

Typically no. Points or miles earned on an airline credit card usually will be transferred to the specific airline’s loyalty program account shortly after you cancel and close out your account.

Must airline credit card rewards be used all at once?

Usually, you can use your rewards points or miles at your leisure and discretion. You do not have to use them in one fell swoop. However, points on an airline credit card might expire after a period of inactivity.


Photo credit: iStock/Choreograph



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



Members earn 2 rewards points for every dollar spent on 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 toward active SoFi accounts, including but not limited to, your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, Student Loan Refinance, or toward SoFi Travel purchases, 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.

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Guide to How Travel Credit Cards Work

Guide to How Travel Credit Cards Work

There are many different credit cards out there, and each comes with different perks or benefits. Deciding which credit card makes sense will depend on what types of benefits and rewards matter the most for you. If you’re a frequent traveler with one airline or hotel chain, for instance, you might find it valuable to have the corresponding travel credit card.

It’s common for travel credit cards to earn airline miles, hotel points, or other travel rewards with every purchase. Some even offer perks with specific hotels or airlines just for having the card. Although certain travel credit cards charge annual fees, it’s possible the benefits you receive may make it worth it.

Recommended: What is a Charge Card?

What Is a Travel Credit Card?

A travel credit card is a generic term that applies to a type of credit card that offers travel rewards. There are many different kinds of travel credit cards, and each one may offer a different array of rewards, benefits, and perks. Some travel credit cards might earn airline miles, while others offer hotel points.

Finding the right travel credit card for you will depend on your own specific spending and travel patterns.

Different Types of Travel Credit Cards

There are three main types of travel credit cards: airline cards, hotel cards, and cards that earn generic travel points.

Airline Travel Credit Cards

Many airlines offer one or more airline travel credit cards that earn credit card miles that you can use to fly with that specific airline. With each purchase, you can get that much closer to your next flight. Additionally, many airline travel credit cards offer perks like free checked bags, a way to earn elite status, or discounts on inflight purchases.

Hotel Travel Credit Cards

Another type of travel credit cards are hotel credit cards issued by major hotel chains including Hilton, Hyatt, and Marriott. Similar to their airline counterparts, hotel travel credit cards let you earn hotel points with each purchase that you can then use to stay with their chain. Many hotel travel credit cards also offer hotel-specific perks, like elite status, increased earnings from stays, or an annual free night certificate.

Bank Travel Credit Cards

If you like traveling but don’t want to tie yourself to a specific airline or hotel chain, you can consider a more generic travel card. Some banks, including American Express, Chase, and Citi, offer travel credit cards that earn their own proprietary credit card points. You can then use these bank points for many different forms of travel.

4 Benefits of Travel Credit Cards

There are a number of advantages to having a travel credit card. Here’s a closer look at these upsides.

Qualify For Significant Welcome Bonuses

Many travel credit cards offer welcome bonuses when you’re approved for the card and meet certain minimum spending criteria. For example, you might earn 60,000 airline miles after spending $2,000 on your card in the first three months.

These welcome bonuses can be worth hundreds if not thousands of dollars, and they can be a great way to boost your travel budget. That’s why it’s important to understand how a credit card works when you sign up and what requirements there are to make the most out of your card.

Earn Airline Miles and Hotel Points

If you love to travel, you’re likely to be excited about the possibility of earning airline miles or hotel points with each purchase. The miles and points that you earn while using your travel credit card can help fund your next vacation trip.

Get Insurance Benefits

Some travel credit cards offer different types of insurance that you might find valuable if you’re a frequent traveler. Some credit card travel insurance protects you if you are delayed or an airline loses your baggage. Other credit card insurance might cover you while renting a car, allowing you to decline the rental car company’s high-priced insurance offerings.

Enjoy Other Perks and Card Benefits

Perks like elite status, free checked bags, or an annual free night certificate are other potential benefits of having a travel credit card. If you’re traveling outside the country, you might also consider an international credit card that you can use while abroad.

3 Disadvantages of Travel Credit Cards

While travel credit cards can come with many benefits, there are also some disadvantages you’ll want to keep in mind.

Limitations in Travel Choices

If you have an airline or hotel credit card, you will likely only earn airline miles or hotel points with that specific airline or hotel chain. This can limit where you can use your travel rewards. As one example, if you have a Delta Air Lines credit card, you won’t be able to use your miles if you want to fly United or Southwest.

Not as Flexible as Cash-Back Rewards

Earning airline miles and hotel points can seem fun and exciting, but it may not be the best way to maximize your earnings. You’ll want to carefully consider the benefits of credit card miles vs. cash back to decide which type of reward makes the most sense for you. You may find that you’re better off with a cashback credit card like the SoFi credit card.

Potential for Annual Fees

Some (but not all) travel credit cards come with annual fees. These annual fees may be waived for the first year as an incentive for you to sign up, but you’ll be on the hook to pay the fee each year you continue to have the card.

While it is possible to get more value from your travel credit card than the amount of the annual fee, you’ll want to make sure that’s the case for your situation. Otherwise, you’ll want to focus your search on no annual fee credit cards.

Are Travel Credit Cards Worth It?

Whether a travel credit card is worth it will depend quite a bit on your own specific financial and travel situation. There’s no denying that there are many people who have used travel credit cards to great effect, traveling around the world at a discounted rate thanks to miles and points. Others have signed up for travel cards and continue to pay annual fees, even though they aren’t traveling as often.

Alternatives to Travel Credit Cards

You do have other options you might think about if you’re not interested in a travel credit card.

If you’re intrigued by earning rewards with a specific brand but don’t travel often, you might consider a private label credit card. These types of cards can offer benefits at a specific store or retail establishment.

Another option could be a cash-back rewards credit card. This would allow you to earn cash as a reward, which you could use for travel or anything else that suits you.

The Takeaway

Travel credit cards are a type of credit card that offers rewards, perks, and benefits for frequent travelers. You might earn airline miles, hotel points, or more generic bank points that you can use for a variety of different types of travel. While it is possible to use travel credit cards to rack up airline miles or other travel rewards, you’ll also want to keep an eye on any annual fees that you’re being charged.

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

FAQ

How do travel points and miles work?

Depending on the type of travel credit card that you have, you may earn airline miles, hotel points, or other types of travel rewards with each purchase that you make. These travel rewards will go into your account, and you can use them to book your next vacation.

Do travel rewards cards have annual fees?

There are some travel rewards cards that come with annual fees. You’ll want to be aware of these annual fees and make sure that the perks, rewards, and benefits that you receive are worth more than any annual fee you have to pay. There are also no annual fee credit cards that earn travel rewards, which may be a more attractive option.

How do I earn points with a travel credit card?

Most travel credit cards will earn airline miles, hotel points, or other travel rewards with each purchase. So earning points with a travel credit card may be as simple as just using your card to make any purchase at all. Additionally, some travel credit cards allow you to earn points as part of an initial signup bonus for being approved for the card and meeting minimum spending criteria.


Photo credit: iStock/nathaphat

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

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

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Guide to Store and Retail Credit Cards

Guide to Store and Retail Credit Cards

A retail credit card is a type of credit card that is a partnership between a bank or major credit card issuer and a retailer. Also known as a store credit card, retail credit cards usually come with discounts, rewards, and other perks that are specific to that retailer.

You might have received an offer for a retail credit card when you’re at the checkout at a brick-and-mortar store. Or, you may have gotten an offer in the mail or while shopping online. When it comes to determining whether store credit cards are worth it, you’ll want to weigh their pros and cons.

What Is a Store Credit Card?

As mentioned, a store credit card is the same as a retail credit card. A store card is a credit card from a retailer, franchise, or group of stores. It might come with a sign-up offer, such as a one-time discount on your purchase. Other perks include a credit card points rewards program, special promotions, offers, and discounts on your purchases. Some might offer 0% financing on big-ticket purchases.

Store credit cards are not to be confused with retailer loyalty cards. Loyalty cards are a way to gain access to deals and promotions, and to earn points to swap for a discount on future purchases. However, they do not allow you to borrow money.

Recommended: Defining Credit Cards

How Do Store Credit Cards Differ From Other Credit Cards?

There are two main types of store credit cards: private label store cards and co-branded store cards. Private label credit cards differ more from other credit cards, as they are closed-loop cards, meaning you can only use the card at a specific retailer or group of retailers.

Closed-loop cards are more common than co-branded store cards. Co-branded credit cards are open-loop cards that partner with a major credit card network — think Visa, Mastercard, American Express, or Discover. As such, you can use this type of store card at the featured store or group of stores, as well as anywhere that particular credit card issuer is accepted.

Unlike private label cards, open-loop cards also may give you a chance to rack up points or scoop up rewards beyond spending in that specific store. Private label cards generally reserve rewards earnings for that particular store.

Benefits and Drawbacks of Store Credit Cards

There are both pros and cons to retail credit cards. Advantages include:

•   Easy to obtain: Retail credit cards are usually easier to qualify for than other types of credit cards. They typically require just a fair credit score. And because they report to the major credit bureaus each month, they still can help you build your credit when you’re starting out.

•   Often no annual fee: Many store credit cards don’t have an annual fee, which can save you money. This especially rings true if you don’t anticipate using the card that often.

•   Instant discounts: When you first sign up for a retail credit card, you might get a one-time discount on your first purchase.

•   Discounts, promos, and offers: As a store cardholder, you might be privy to exclusive, ongoing discounts, or special promotions and offers. The types of discounts and offers vary widely depending on the retailer and time of year. For instance, a retailer might offer a flat 5% discount on every purchase. Card holders also might have access to special coupons and offers.

•   Rewards and cash back programs: Similar to other types of credit cards, you can earn points to use for store purchases or cash back.

•   Other perks: If you’re a cardholder for a particular retailer, you might receive other benefits, such as free or expedited shipping, financing on certain types of products, or more time to return items.

Here are some potential downsides of a store credit card:

•   High interest rates: Whereas the average credit card annual percentage rate (APR) is 20.40%, interest rates for store credit cards average around from 26.72% APR. If you carry a credit card balance, it could take you longer to pay off your debt. Plus, you’ll owe more in interest.

•   Inflexibility in use: If you have a private label store card, or a closed-loop card, then you can only use the card to make purchases at that particular store or group of stores. Unless you shop frequently at that particular retailer, it might prove difficult to use often enough to make sense.

•   Lower credit limits: Store credit cards usually have lower credit limits than other types of credit cards. In turn, it could be harder to keep your credit usage down. A high credit usage, or credit utilization ratio, could hurt your credit score.

•   Deferred interest: A retail card might offer 0% financing for a period of time. Here’s the potential catch: If you don’t pay off your purchase before the promotional period ends, you might be on the hook for all of the interest owed from the purchase date onward.

To recap, here are the major pros and cons to keep in mind when considering if you should get a store credit card:

Store Credit Card Pros and Cons

Pros

Cons

Easy to qualify for High interest rates
Often no annual fee Low credit limits
Rewards and cash back programs Deferred interest
Other perks Inflexibility in use

Recommended: Difference Between Credit Card Issuer and Credit Card Network

Are Store and Retail Credit Cards Worth It?

A store credit card could be beneficial if you are building credit from scratch or are new to credit. As they typically are easier to qualify for and often don’t have an annual fee, you can use it at your leisure to build credit.

It can also be worth it if you are a loyal devotee and shop frequently at a particular retailer. That way, you’ll make the most of ongoing discounts, exclusive sales, promotions, offers, and additional perks.

When to Consider Getting a Store Credit Card

As mentioned, if you’re building credit from scratch and don’t want to worry about annual fees, a store credit card could be a good choice for you. It could also be a solid option if you shop at that retailer enough to make use of the card’s perks.

A store credit card can also be a good idea if you don’t need a card with a high credit limit. Ideally, you’ll be able to pay off the balance in full each month.

When Not to Consider a Store Credit Card

If you don’t anticipate using a card very often, or prefer a card that you can use more widely, then it might be best to forgo opening a store credit card.

A store credit card also is probably not the best choice for you if you tend to carry a balance. That’s because the higher-than-average interest rates can gobble up any savings you’ve earned on rewards and discounts.

Alternatives to a Store Credit Card

Not sure a store credit card is worth it for you? Here are some alternatives to look into:

•   Cash-back credit card: A cash-back card is a type of rewards credit card that offers rewards in the form of cash back, which can offset your spending on the card. For instance, with a card that offers 1% cash back, you’d get $1 back for every $100 you spend. The SoFi credit card is an example of a cash-back card, offering unlimited cash-back rewards on all eligible purchases.

•   Airline credit card: Airline credit cards are co-branded with major credit card networks. Similar to a store or retail credit card, you’ll receive perks with a specific airline company if you make purchases on the card. Airline credit cards typically are open-loop cards, which means you can use the card anywhere that type of card is accepted.

•   Hotel credit card: Hotel credit cards are offered through partnerships between a hotel and a credit card network. With a hotel credit card, you get points toward that particular hotel’s rewards program. The card might also come with other benefits.

Recommended: Instant-Use Credit Cards

The Takeaway

A store credit card could be a good idea if you are building credit from scratch, or if there’s a card offered by a retailer you love and shop at often. Otherwise, it might make more sense to look at other options with greater flexibility in use and lower interest rates.

If you prefer a cash-back rewards credit card, consider the SoFi Credit Card. This credit card offers cash-back rewards on all eligible purchases that you can then use to invest, save, or pay down eligible SoFi debt.

FAQ

Are store credit cards good for credit?

Store credit cards can help you build credit from scratch. They tend to be easier to qualify for than other types of credit cards. And if you practice good credit card habits, such as keeping a low credit usage and paying on-time, they can help your score.

Will a store credit card improve my credit limit?

Adding another credit card, no matter the type of credit card, can help increase your credit limit. When you open a credit card, you receive a credit limit on top of those of your existing cards. For instance, let’s say you open a store credit card with a $2,000 limit, and your credit is capped at $10,000 among your other cards. By opening a store card, your credit limit will have increased to $12,000.

Should I cancel an unused store credit card?

You might consider closing an unused store credit card, but doing so could negatively impact your credit. That’s because it will lower your credit limit, which in turn increases your credit usage. Plus, it can impact your length of credit, which also plays into your score.

Will closing a store credit card hurt my credit?

Closing a store credit card could hurt your credit in two ways. First, it can lower your credit utilization ratio because your overall credit limit will decrease. Second, it could shorten your the length of your credit history, which also impacts your credit score.


Photo credit: iStock/Prostock-Studio



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

Members earn 2 rewards points for every dollar spent on 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 toward active SoFi accounts, including but not limited to, your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, Student Loan Refinance, or toward SoFi Travel purchases, 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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Guide to Credit Reports

Guide to Credit Reports

If you’ve ever had a credit card, student loans, or other type of debt, you likely have a credit report. Credit reports serve as a record of how you have handled the repayment of any loan or debt that you’ve taken out. The items that are contained in your credit report primarily come from information collected by the three major credit bureaus.

Many lenders might look at your credit report when they are considering whether or not to extend you additional credit. Your credit score is also calculated in part from information that’s included on your credit report. These are two good reasons to regularly look at your credit report and make sure the information in it is accurate.

What Is a Credit Report?

At its simplest, a credit report is a compilation of information regarding past debts, loans, or credit card accounts that you’ve managed. Your credit report will contain basic information about you, as well as information on the various accounts you’ve had in the past. This might include the name of the creditor, the dates the account was open, the monthly payment amount, if applicable, and any current or outstanding balance.

Recommended: When Are Credit Card Payments Due?

How Does a Credit Report Work?

The issuers of most credit cards, loans, or other forms of debt report information about that debt to the most popular credit bureaus — Experian, Equifax, and TransUnion. Each credit bureau compiles its own information, though there is usually a lot of overlap between the information that appears on credit reports from different credit bureaus. Lenders typically send updated information to the credit bureaus each month, or if any information about your debt changes.

Recommended: Tips for Using a Credit Card Responsibly

Credit Report Information and Your Credit Score

It’s important to understand the relationship between the information on your credit report and your credit score. While these two things are related, they are not the same thing. As information on your credit report changes, your credit score updates as well. This means that it’s possible for your credit score to change every month (or even more often).

Further, while the information on your credit report influences your credit score, you won’t find your credit report listed on your credit report. Rather, you’ll have to go to lenders or credit monitoring websites for that information, both of which can allow you to check your credit score without paying.

Information Provided By a Credit Report

In addition to information about your accounts, your credit report may include other information about you. As one example, a credit report from Experian consists of four sections:

•   Personal information: This includes details such as your name, address, employment information, and any past names you’ve used.

•   Accounts: You’ll see both open and recently closed accounts listed.

•   Inquiries: Both hard and soft credit checks will appear, though only hard pulls affect your credit score.

•   Public records: This is information about you gathered from public records, including bankruptcies.

How Is a Credit Report Made?

Each of the major credit bureaus has its own process for how it generates a credit report. It’s typical that the credit bureau will have an informational section with details about you, sourced from loan applications and/or public records.

Another section of most credit reports is a listing of your open and recently closed accounts. Lenders will often report to the credit bureaus information about the amount, payment history, and status of accounts you have with them.

Why Is a Credit Report Important?

Your credit report is important because it is one of the sources of information that’s used to calculate your credit score. And your credit score can help determine whether you are approved for other financial products, like a credit card. If your credit score is too low, you may not be able to be approved for a new credit card or loan, and if you are approved, you may have to pay a higher interest rate.

Additionally, your credit report matters because many lenders will often refer to it when determining whether to approve you and under what terms. Sometimes, they may look at what’s known as a tri-merge credit report, which combines the three credit reports from each of the major credit bureaus.

Recommended: How to Avoid Interest On a Credit Card

How to Get a Credit Report

One good way to get your credit report is through AnnualCreditReport.com . This is a website authorized by federal law and brought to you by the three major credit bureaus.

You are able to get a copy of your credit report from each of the credit bureaus every year. Note that you can only get your own credit report to review — checking someone else’s credit report isn’t an option.

When to Get a Credit Report

It is a good financial habit to regularly review your credit report. As mentioned, you can get a free copy of your credit report each year from each of the major credit bureaus.

By reading a credit report regularly, you can make sure that there’s no inaccurate information on your credit report. If you have incorrect information, it could have a negative impact on your credit score.

What to Look For in a Credit Report

As you regularly review your credit report, there are a few common credit report errors you’ll want to look out for. These include:

•   Typos or incorrect information

•   Information belonging to someone with a similar name

•   Closed accounts that are still marked as open

•   False late payment

•   Duplicate debts or accounts

Monitoring Your Credit Report

If there is any incorrect or erroneous information on your credit report, you’ll want to dispute that with the credit bureau. Disputing a credit report is a relatively straightforward process, and it’s an important one.

Generally, most credit report disputes must be submitted in writing, and it’s a good idea to send the letter via certified mail. That way, you have proof that the credit bureau received your letter.

The Takeaway

If you’ve been using credit cards, loans, or other financial products, it’s likely that you have a credit report with each of the three major credit bureaus. Your credit report contains identifying information about you as well as information about your open and recently closed credit accounts. Regularly monitoring your credit report and correcting any incorrect information is a good financial habit to have.

That’s because information from your credit report is used in the calculation of your credit score. Your credit score is used by potential lenders to decide whether they will approve you for new loans or credit cards. Having a good credit score makes it more likely that you’ll be approved for a new credit card, for example.

If you’re in the market for a new credit card, you might look at a rewards credit card like the SoFi Credit Card. With the SoFi Credit Card, you can earn cash-back rewards, which you can then use to invest, save, or pay down eligible SoFi debt.

FAQ

Can negative information remain on my credit report for long?

Yes, negative information can remain on your credit report, even after you have closed your account. Most negative information will stay on your credit report for seven years, though some information (like bankruptcies) can stay on your credit report even longer.

How do I get my credit report?

You can get your credit report through AnnualCreditReport.com. You’re able to get a free copy of your credit report from each of the credit bureaus every year.

Who is eligible to view my credit report?

You can view your own credit report, but in most cases, you will not be able to check someone else’s credit report. The only time someone else can view your credit report is if they have a legitimate reason. This might include a potential lender that’s viewing your credit report to determine whether they want to extend you additional credit.

What errors might be present in my credit report?

While the major credit bureaus make every attempt to ensure that all credit reports are completely accurate, errors have been known to happen. Possible errors might include typos, accounts from someone with a similar name, duplicate accounts, or false late payments, among other errors. This is why it’s a good idea to regularly review your credit report and dispute any incorrect information.

What is the most important thing on a credit report?

Arguably all of the information contained in your credit report is important and worth taking the time to review. Perhaps most important is information on your accounts, as the details reported there have the potential to impact your credit score, and thus your borrowing opportunities.


Photo credit: iStock/Deepak Sethi




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

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

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.

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Revolving vs Non-Revolving Credit: Key Differences

Revolving vs Non-Revolving Credit: Key Differences

One important way that some types of loans or financial products differ is in whether they’re revolving or non-revolving credit. Understanding the differences in revolving vs. non-revolving credit can allow you to better choose which financial product is right for your situation and understand how each can impact your credit.

Revolving credit refers to a line of credit that you can access over and over again, subject to a total credit limit. Credit cards are one type of revolving credit.

Non-revolving credit, on the other hand, allows you to access a specific amount of money upfront. You then pay down your balance. Once it’s paid off, you can no longer access the money. Student loans, auto loans, and mortgages are all examples of non-revolving credit.

Recommended: What is the Average Credit Card Limit?

Understanding Revolving Credit and How It Works

Revolving credit is a type of credit that you can access over an extended period of time. As mentioned, a credit card is one example of revolving credit — you’re given a maximum credit limit, and as long as your outstanding balance remains below that limit, you can continue to use the card. As you pay down your balance, the amount of your revolving credit that you can use increases.

Another example is a personal line of credit. It works similarly to a credit card, with a maximum credit limit and a minimum payment required each month, but there is no physical card included. Instead, you can access the funds with a check, a transfer, or at an ATM. A popular line of credit option is a home equity line of credit (HELOC). In this case, the home serves as collateral, though not all lines of credit are secured.

How Does Revolving Credit Impact Your Credit Score?

Many forms of revolving debt are reported to the major credit bureaus and will show up on your credit report. This means that how you use your revolving credit will impact your credit score.

If you reliably pay off your credit balances each and every month, that will generally have a positive impact on your credit score. However, if you miss payments or carry a high balance, your credit score may go down.

Recommended: When Are Credit Card Payments Due?

Advantages of a Revolving Line of Credit

The biggest advantage of a revolving line of credit is that you’re able to access the funds as you need them. Instead of taking out a large lump sum, you can only borrow the money you need right now. This can help you save money on interest charges, since you only pay interest on your outstanding balance.

A credit card is one of the most popular forms of revolving credit. With a credit card, you’re initially given a credit limit that represents the highest amount of money that you can borrow. As you make purchases, your amount of available credit decreases, but you can raise that amount by making payments to your account.

Recommended: What is a Charge Card?

What Is Non-Revolving Credit?

Non-revolving credit is another type of debt that you’ll want to be aware of. Some popular examples of non-revolving credit are auto loans, student loans and mortgages.

With non-revolving credit, you receive all of your money upfront. As you make payments, your balance decreases, but you are not able to access any additional funds.

How Does Non-Revolving Credit Work?

If you have a non-revolving credit account, you will receive all of the funds you apply for upfront. One example of a non-revolving credit account is an auto loan. If you take out an auto loan, you get the total amount to buy your car at the outset. Then, you’ll make regular monthly payments, which decreases your outstanding balance.

But with a non-revolving credit account like an auto loan, you won’t be able to access any additional money without reapplying and requalifying with your lender.

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

Benefits of Non-Revolving Credit

One benefit of a non-revolving credit account is that you may be able to qualify for a higher amount and/or lower interest rates. Banks may be more willing to extend you additional credit on a non-revolving credit line, specifically because you won’t be able to continue to revolve the debt amount over time. To illustrate this point, consider the difference in the amount and interest rate between a typical mortgage (non-revolving) and credit card (revolving).

Recommended: How to Avoid Interest On a Credit Card

Revolving Credit vs Non-Revolving Credit

Here’s a quick look at some of the differences between revolving credit vs. non-revolving credit:

Revolving Credit

Non-Revolving Credit

Access to Money Can access money over and over, subject to the total credit limit Just have access to the original amount borrowed
Interest charged Only on the amount outstanding On the full amount borrowed
Interest rate Often comes with higher interest rates Generally has lower interest rates
Purchasing Power Relatively lower credit limits Can qualify for higher amounts

The Takeaway

Credit and debt accounts can be either revolving or non-revolving, and there’s an important difference between the two. With a non-revolving credit account, you receive all of the money at once, and you’re not able to access any additional funds without reapplying with your lender. With a revolving credit account, you are only charged interest on the amount that you choose to borrow at any one time, and you can pay down your balance and access additional funds at any time.

One common form of revolving debt are credit cards. With a credit card, you can make purchases and use your card as long as your outstanding balance is below your credit limit. You’re only charged interest on any amount you don’t pay off from your monthly statement. If you’re looking for a new credit card, you might consider a rewards credit card like the SoFi credit card. With the SoFi credit card, you can earn cash-back rewards, which you can then use to invest, save, or pay down eligible SoFi debt.

FAQ

What is the major difference between revolving and non-revolving credit?

The biggest difference between revolving vs. non-revolving credit is how often you are able to access the money from your credit account. With a non-revolving credit account, you access the total amount upfront, and then are not able to access any additional funds without reapplying. If you have a revolving credit account, you can continue to pay down your balance and access additional money, as long as your balance is below your maximum credit limit.

When should I use revolving credit?

A revolving credit account, such as a credit card, can be a great choice if you don’t have a fixed amount that you’re looking to borrow. If you have a revolving credit line, you’re able to borrow (and pay interest) only on what you need at any one time. And if you later find that you need to borrow additional funds, you can do so with a revolving line, as long as your outstanding balance remains below your total credit limit.

When does a revolving line of credit become mature?

Some revolving letters of credit come with a maturity date. Before the maturity date, you can access the line of credit, pay down the balance, and continue to access additional funds. This is often known as a “draw period.” After the maturity date when this draw period ends, the line of credit converts to non-revolving, and you are no longer able to access additional funds. Make sure to check the terms of your line of credit to understand how this may affect you.


Photo credit: iStock/staticnak1983



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


Members earn 2 rewards points for every dollar spent on 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 toward active SoFi accounts, including but not limited to, your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, Student Loan Refinance, or toward SoFi Travel purchases, 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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