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You’ve been offered a job, and everything is falling nicely into place — until your potential employer tells you they need to do a background screening, which will include running a credit check. Your credit score isn’t where you want it to be, and suddenly, you’re very concerned. Will they rescind the offer based on your finances?

For positions outside the banking and finance world, your credit report will likely have zero effect on whether you get the position. And background checks for employment don’t affect your credit score.

Read on to learn the common types of background checks employers run and why they may want to look at your creditworthiness.

What Is a Background Check?

Not all job applicants are completely honest during the interview process. For that reason, many companies run some type of background check on prospective employees. According to a report by the Society for Human Resource Management (SHRM), 96% of employers in the U.S. conduct some type of background screening as part of the hiring process.

Employers order background checks not only to verify your identity but also to confirm you’re telling the truth about certain things, including your past employment, academic credentials, and whether you have a criminal record. Similarly, banks run credit checks for new checking accounts mainly to verify your identity and rule out identity theft and fraud. This shouldn’t usually affect your credit score.

Preemployment screening is typically conducted by a professional background check company hired by the employer. These third-party firms have access to resources and tools the average employer doesn’t, so they can deliver a more comprehensive report in a shorter amount of time.

Recommended: Does Opening a Checking Account Affect Your Credit Score?

What Are Employers Looking Out For?

Hiring managers are looking to avoid bringing someone on board who’s unqualified or poses any kind of risk to their business. Without any official vetting, the wrong candidate could result in financial damage to the company or make the workplace less safe for other employees.

By doing a background check, companies can reduce property damage, employee theft, and liability and legal costs incurred by hiring unqualified, uncredentialed people. Companies also hope to avoid employees who have exhibited threatening behavior toward coworkers in the past.

When companies order a credit check for employment, it’s to get an idea of whether the candidate might show signs of financial problems.

Having excessive debt and using a lot of your available credit could signal financial hardship and distress. An employer may see candidates with high outstanding debt or maxed-out credit cards as having an increased likelihood of committing theft or fraud.

How a Background Check Affects Your Credit Score

The good news is, an employer background credit check won’t affect your credit or FICO® score at all. Why? It’s considered a soft inquiry, which pulls most of your financial information for data purposes as opposed to a hard inquiry, which can take points off your score. That’s because hard checks generally take place when a financial institution looks at your score to determine whether or not to issue you a loan or a credit card.

As mentioned earlier, an employer-requested credit report will be modified, listing your credit utilization rate, any past or current bankruptcy, available lines of credit, auto or student loans, and credit card payment history.

The credit report the employer sees won’t show other soft inquiries, so they can’t see if other employers have checked on you.

You, however, can see the soft inquiries if you request your own credit report. You could even sign up for a free credit-monitoring service to keep tabs on your credit on an ongoing basis. A money-tracker app can give you ongoing insights into your financial health.

7 Types of Background Checks

There are many different types of background screenings employers use to vet job candidates. The employer may use one or a combination of checks depending on their needs and concerns. Here are seven kinds of background checks a company may use to screen a new hire:

Identity Verification

This type of check is usually one of the first stages of a background check because an employer wants to first know that the person is who they claim to be. An ID verification confirms the candidate’s name, age, address, and Social Security number to rule out any aliases or stolen identity.

Criminal Screening

A criminal record check enables the employer to make an informed decision about whether or not the employee will pose a threat to their company, clients, and employees. It’s especially important if the person will have access to financial information, security responsibilities, or work alongside vulnerable populations, such as the elderly and children.

Criminal background checks typically include county, state, or federal records of any arrests, convictions for felonies and misdemeanors, outstanding arrest warrants, sex offenses, incarceration records, and any acquittals, pending, or dismissed charges.

Recommended: What Is the Difference Between TransUnion and Equifax?

Credit Check

It may not be relevant to run a credit check for every potential new hire. An employer may feel it’s necessary for positions involving a security clearance, proximity to money, sensitive customer data, or confidential company information. And they’re not really interested in knowing whether you have a fair credit score.

A credit check may raise certain red flags that employers want to avoid, especially if it’s a job in the banking or finance sector. Many late payments can indicate you have trouble managing your money, aren’t responsible and organized, or can’t live up to agreements. As mentioned previously, these credit checks won’t affect your credit score, nor will the employer be able to see your score.

You may want to see if your state or city allows employer credit checks. Currently, 11 states (California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, New York State, Oregon, Vermont, and Washington) and the District of Columbia have passed laws restricting these types of credit checks. New York City, Chicago, Philadelphia, and several other jurisdictions have similar laws.

By the way, credit-monitoring services can alert you when someone has run a hard inquiry on your credit.

Motor Vehicle Records

When an employee may be expected to drive company vehicles or transport clients and customers, the employer will want to review the candidate’s driving record to ensure they’re hiring a safe and responsible person.

A driving record check will show the person’s driving history, including any past license suspensions or revocations, vehicular crimes, accident record, DUI convictions, and any car insurance lapses. The motor vehicle report will also reveal the number of points someone has on their license.

Recommended: What Credit Score Is Needed to Buy a Car?

Professional License and Education

Some people may exaggerate or even give false professional credentials, claiming they’re licensed by an official agency, attended a certain school, or have a specific academic degree, certain training, or certifications, thinking no one will really bother to check. But not so fast. Employers can and, in many cases, do fact-check these claims.

Not verifying stated qualifications could lead to hiring a candidate who isn’t professionally qualified for the job. And hiring someone without the skills and education needed can make the company vulnerable to lawsuits and other problems. The education verification process involves checking with universities, colleges, vocational schools, and high schools to confirm enrollment, dates of attendance, the type of degree obtained, and graduation date, among other details.

With professional licenses, background screening companies generally contact organizations to check if the person is licensed and is a bona fide member. They will make sure the membership is in good standing and hasn’t lapsed or expired.

Fingerprint Check

Along with the criminal check, fingerprint checks are used to reveal any criminal arrests, charges, or details about prior case results. Unlike other screenings, fingerprint checks require the potential employee to actively participate in the process by having their fingerprints scanned.

Fingerprint checks are often required in regulated industries such as financial services, government or criminal justice agencies, jobs requiring security clearance, and healthcare, where a candidate may be responsible for someone who’s vulnerable, such as a child or an elderly person.

E-Verify

E-Verify is a government-run, web-based system through which employers can confirm an individual’s employment eligibility. Verification is based on data taken from an employee’s Form I-9 and Employment Eligibility Verification and compared to records available to the Social Security Administration and U.S. Department of Homeland Security.

Recommended: Does Net Worth Include Home Equity?

How to Prepare for a Background Check by a Potential Employer

First, be honest, including on your job application and resume and during the interview process. Bring up anything you think might concern your employer before they do a background check. You can also do a background check on yourself to see if there are any discrepancies or mistakes in your records that you can clear up. You can order one from a provider such as TruthFinder.com.

In terms of your credit report, if you’re concerned that an employer may have some issues, it’s a good idea to review yours in case there’s something you need to correct or resolve. The three main credit-reporting bureaus are Experian®, TransUnion®, and Equifax®.

You can access your credit report for free by going to AnnualCreditReport.com, a federally mandated site. Banks sometimes rely on a tri-merge credit report to see a roundup of all three, but consumers usually don’t have access to this type of report.

What Are Your Legal Rights as a Job Applicant?

According to the Federal Trade Commission (FTC), employers must obtain your written permission before they can run a background check. You have the right to say no, but bear in mind that this could result in your not getting hired.

When employers use a third party to conduct a background check, including credit, criminal record, and past employment, the background check is covered by the Fair Credit Reporting Act (FCRA).

Under this law, employees have the right to:

•   Be informed of the background check

•   Provide consent for the background check

•   Review information pertaining to their personal and financial information

•   Correct any inaccuracies the report may contain

•   Appeal decisions if the applicant feels the decision was made unfairly

Laws in your city or state may impact whether, or when, employers can ask about and run a background check for your criminal or credit history. Before you fill out an application, check the laws in your state.

Can You Get a Copy of the Background Check?

Yes, the FCRA states you have the right to a copy of the background check from the company that prepared it. The name of the agency was likely on the consent form you signed, but if you can’t remember it, ask the employer to supply it. The screening agency should be able to provide you with a complimentary copy in a timely manner.

The Takeaway

Background checks have become a pretty routine part of the hiring process. These screenings can include a simple ID verification, a driving or criminal record check, and pulling your credit report. Although it can be worrisome to know your employer is checking on your credit, they’ll see an overview of your financial picture but not your actual credit score. Since it’s a “soft pull,” your credit score number won’t change.

By knowing where you might be most vulnerable, you can prepare yourself by maintaining good records, being honest about your work and education history, and conducting your own background check to clear up any inaccuracies or potential problems.

Getting your finances on track starts with your credit score. Free credit monitoring is available with SoFi’s money tracker app. All you have to do is sign up (it takes just minutes) and start getting insights into your financial health.

SoFi gives you the tools to monitor and impact your credit score.

FAQ

Can a background credit check affect my credit score?

No, employment-related credit checks are considered soft inquiries and don’t impact your credit score. They simply allow employers to review certain financial details without affecting your credit standing.

Can a job offer be rescinded due to bad credit?

Yes, an employer can withdraw the job offer for almost any reason, including your credit report; however, they can’t rescind the offer due to discrimination based on gender, race, or disability. If you think this could be a reason, consider talking to an attorney. Otherwise, you can express your disappointment to the hiring manager and request more details on why they made their decision, which could provide an opportunity to get a clear explanation.

What does an employer check show?

Employment background checks are typically performed to see an employee’s job history, check if they have a criminal record, and verify their identity. A screening may also include validating education and/or professional qualifications, driving records, and/or credit history.

Do background checks show up on a credit report?

When a company requests a credit check as part of employment screening, it’s considered a soft inquiry. Since soft inquiries aren’t linked to an application for new credit, they’re only visible to you when you view your credit reports.

Why do employers run background checks on job candidates?

Employers use background checks to verify identity, confirm qualifications, and assess potential risks, such as criminal history or dishonesty. This helps them avoid hiring unqualified candidates and reduce potential legal or financial issues.

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Photo credit: iStock/MissTuni

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

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

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

This article is not intended to be legal advice. Please consult an attorney for advice.

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.

SORL-Q226-004

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Employers can approach background checks in different ways. In some cases, credit reports are included. A job background check may include a credit check in certain industries, such as banking and security. The size of the company can be a factor, too: Large corporations are more likely to conduct a credit check than a small family business.

We’ll walk through the specifics of when an employment background check may include a credit check, why potential employers want this information, and what financial data they have access to.

What Are Credit Checks?

A credit check is a request to see your financial data as collected by one of the three major credit reporting bureaus: Equifax, Experian, and TransUnion. Credit reports contain information about past and existing credit accounts, payment patterns, and how much debt you’re carrying.

According to the Fair Credit Reporting Act (FCRA), only certain individuals and organizations have the right to check credit histories, such as lenders, insurance agents, and landlords. Potential employers can also conduct a credit check for employment purposes, with your permission.

Sometimes, credit checks are conducted to confirm a consumer’s identity — and head off identity fraud — rather than to investigate your financial history. For instance, banks may run a limited credit check on customers looking to open a checking account.

Credit Check vs Background Check

A background check contains identification verification information, along with data from criminal records, educational and employment backgrounds, civil records, driving history, and more. In some instances, a background check may also contain a credit check.

The Importance of Good Credit

A good credit history primarily makes it easier to get approved for a loan and to qualify for better interest rates and loan terms. The higher the score, the less someone will pay in interest over their lifetime, potentially saving them money in the long run.

Good credit can also help renters qualify for an apartment. In some cities, renters routinely provide a credit reference with their rental application. While there’s no minimum credit score needed to rent an apartment, a strong credit history shows landlords that you’re someone who pays their bills on time.

Employers may also check your credit if you’ve applied for a job. Having good credit without any red flags can make the hiring process go more smoothly. However, some cities and many states have banned this protocol or put limits on it.

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Why Employers Look at Your Credit Score

An employer may run a credit check on a job applicant whom they’re seriously considering hiring. Employer credit checks are more common in industries where employees handle money or have access to customers’ financial data.

By conducting credit checks, businesses hope to confirm that an applicant demonstrates financial responsibility and doesn’t pose a security risk to the company, other employees, or customers.

Responsibility

A credit report shows how responsibly an applicant has handled their own money. If there are any red flags, the employer may not want to hire that person to handle company funds or take on other important responsibilities.

Security

A credit report can be used to verify your identity, along with other pieces of background information. If there are discrepancies that can’t be easily cleared up, that’s a red flag.

What a Credit Report May Tell an Employer

The information in a credit report can include employment history, as well as red flags such as late payments, debts sent to collections, foreclosures, liens, lawsuits, and judgments.

Employment History

Your complete employment history isn’t included in a credit report. Past and current employers may appear on your credit report, but only if you listed them on a loan or credit card application. Typically, if a lender wants your employment history, they’ll ask you for it directly.

Late Payments

Credit reports contain information about current and historical credit accounts, including installment loans (mortgages, car loans, personal loans) and revolving credit (credit cards and lines of credit). The reports typically contain information from the past 7-10 years, including a person’s payment history and whether credit accounts are paid up to date or are past due.

Debt Collection

Once someone is behind on payments — at least 120 days — the lender may send the account to a collections agency. These agencies attempt to collect on the bill. This can have a significant impact on your credit score, since making payments on time is the biggest factor in the algorithm that determines your credit score.

Debt Charge-Off

If a company you owe money decides they can’t collect the funds, they can “charge off” the amount as uncollectible. This may stay on your credit report for seven years, starting with the delinquency date that ultimately led to the charge-off. A debt charge-off typically lowers the person’s credit score even more than going to collections.

Foreclosures

When a homeowner misses multiple mortgage payments, the lender may take possession of the home, or “foreclose” upon it. This remains on a credit report for seven years, starting with the first missed payment that ultimately led to the foreclosure. This can significantly reduce someone’s credit score — although the impact may diminish over time — and can be a red flag for employers.

Recommended: Does Net Worth Include Home Equity?

Liens

A tax lien is a claim that you owe money for taxes, usually federal, state, or property tax. Tax liens no longer appear on credit reports by the three major credit bureaus, and they can’t affect your credit. They are, however, available on public records. If an employer conducts a full background check, they can still receive this information.

Lawsuits and Judgments

Just like tax liens, judgments from lawsuits aren’t included in credit reports or factored into a credit score. An employer that conducts a background check, though, will likely receive this information because it’s part of public records.

How to Prepare for an Employer Credit Check

Every consumer should be aware of what information is available on their credit report. You can request your credit report and find out your credit score for free at AnnualCreditReport.com.

Review your report for errors. Even small typos — such as misspelled names — could present problems down the line. Report inaccuracies to the relevant credit bureaus via their online dispute process to have them corrected or removed.

You may also consider signing up for a credit monitoring service. What qualifies as credit monitoring varies from company to company. Look for a service or a money tracker app that sends customers alerts whenever their credit score changes, accounts are opened or closed, and red flags appear on their credit history.

If you’ve had financial problems in the past but have turned things around, be prepared to explain to your potential employer how you’ve accomplished that.

Recommended: What Is a Tri-Merge Credit Report?

Credit Check Limitations

Credit reports contain a lot of private financial information. However, you can feel secure knowing that there are strict limits on what can be included. The following information can’t appear on your credit report:

•  Account balances for checking, savings, and investments

•  Records of purchases made

•  Income information

•  Judgments and tax liens

•  Medical information (physical and mental), although money owed to a doctor or hospital can appear

•  Marital status

•  Disabilities

•  Race and ethnicity

•  Religious affiliations

•  Political affiliations

Does an Employer Credit Check Hurt Your Credit Score?

No. Employers conduct what’s known as a “soft credit inquiry” or soft pull. Because the credit check isn’t the result of applying for a new loan or credit card, the request probably won’t appear on your credit report, and it won’t affect your score.

What Are Your Legal Rights as a Job Applicant?

According to federal law, job applicants have the right to:

•  Know what is in their file

•  Ask for a credit score

•  Dispute incorrect or incomplete information

•  Be told if information in the file is used against them

An employer or potential employer must get written consent before they can request credit report information (the trucking industry is an exception). Some cities and many states have banned or put limits on an employer’s ability to check your credit report.

The Takeaway

Employers may run credit checks on applicants as part of the hiring process. By conducting credit checks, businesses hope to confirm that an applicant demonstrates financial responsibility and doesn’t pose a security risk to the company, other employees, and customers. Credit checks are more common at large corporations and in industries where employees handle money or have access to customers’ financial data. You can prepare for an employer credit check by requesting your report and correcting any errors. You may also want to use a credit score monitoring service to keep tabs on any changes.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

SoFi helps you stay on top of your finances.

FAQ

Why do background checks include credit reports?

Information found in a credit report can give the employer a sense of the job applicant’s financial stability. This may be especially important if the job involves handling money, financial data, or pharmaceuticals. Some industries that routinely pull credit checks on applicants include banking, retail, insurance, public safety, and security.

Does a background check include a hard credit check?

No. A background check with a credit check involves a soft inquiry, so it won’t affect your credit score.

What causes a red flag on a background check?

Anything alarming or concerning about a person’s past can be considered a red flag in a background check. This includes criminal records, suspicious credit histories, inconsistencies in information provided, and gaps in employment history.

When do employers include a credit check in a background screening?

Employers are more likely to include a credit check when hiring for roles that involve handling money, financial data, or sensitive information, such as in banking or security. Larger companies also tend to use credit checks more often than small businesses, typically when they are seriously considering a candidate.

What information can employers see in a credit check, and does it affect your score?

Employers can view details such as payment history, outstanding debts, and any negative marks — including collections or foreclosures — but not personal details such as income or medical history. These checks are soft inquiries, meaning they don’t impact your credit score or appear as a negative mark on your report.

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Photo credit: iStock/serggn

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

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.

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.

SORL-Q226-005

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Judging from the latest statistics, the most lucrative work-from-home job in America may be Con Artist. Fraudsters are utilizing texts, social media, fake websites, apps, emails, and old-fashioned voice calls to separate Americans from their money — billions every year. They play on our greed, or charity, or desperation. And they take all forms of payment.

The best way to fight back against fraud is to be aware of current schemes so you don’t fall victim in the first place. Below we share the top financial shakedowns, with enough details to help you recognize red flags and statistics that will blow your mind. Read on to learn how to avoid getting fleeced (and how to report it if you are).

Identity Theft and Credit Card Fraud Trends

If you’ve been the victim of identity theft or credit card fraud, you’re hardly alone.

According to the Federal Trade Commission (FTC), there were 609,700 reported cases of identity theft through the second half of 2025. When looking at all of 2025, the year saw an increase of more than 200,000 reported cases over 2024.

Meanwhile, there were 84,619 reported cases of credit card fraud for Q3 and Q4 of 2025, up about 2% from the previous six months. The impact of both crimes can be substantial. In 2025 alone, some 3 million consumers submitted reports and collectively lost more than $15 billion to fraud, which is around a 24% increase from 2024.

There are several potential reasons for the surge. More people are turning to digital tools to handle everyday tasks, such as shopping and banking. At the same time, scam email messages — no, that’s not the U.S. Post Office — have also spiked in recent years. And finally, the rise of crypto seems to play a role: The FTC has warned consumers that no reputable utility or creditor will demand payment only in crypto.

If you’re a victim of credit card fraud, it’s important to report it ASAP. You can get your credit report and find out your credit score for free at AnnualCreditReport.com®.

You can also enlist the help of a money tracker app, which allows you to manage all of your finances from one convenient dashboard.

Recommended: What Credit Score Is Needed to Buy a Car?

33 Identity Theft and Credit Card Fraud Stats

Below, we do a deep dive into the most common types of fraud: imposters, online shopping scams, fake prizes and sweepstakes, false job opportunities, fictional charities, investment swindles, and more. All numbers quoted below are from 2025 FTC data.

1 Imposters: Reports Filed

The total reports filed in this one category came to 1,005,012, with 20% of filers admitting losses. An imposter is a person who pretends to be someone else to steal your personal information or money. They might call, text, or email you and may pose as someone you know (“I’m on vacation in London and lost my wallet! Can you send me some cash?”).

2 Imposters: Losses

The median loss suffered by victims was $700. The total dollar amount of imposter scam losses was $3.112 billion.

3 Imposters: Scenarios

The most common way imposters approached targets was via text, and victims often paid via a payment app or service.

4 Imposters: Top States Affected

Oregon led with 2,963.2 reports per million people. New Hampshire and Delaware followed close behind.

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5 Online Shopping: Reports Filed

Total reports filed came to 419,098, with 78% claiming losses. In an online shopping scam, someone pretends to have a legitimate business by creating a phony website or posting fake ads on a real retailer’s site.

(Another form of this fraud is when scammers create and post fake negative reviews of small businesses and then tell owners that they’ll remove the reviews in exchange for digital gift cards.)

6 Online Shopping: Losses

The median loss suffered by victims was $117. The total dollar amount of online shopping scam losses totaled $446.4 million.

7 Online Shopping: Scenarios

Victims are most often taken in by websites or apps (not surprising, given the nature of this fraud), and the top payment method reported was by credit card.

8 Online Shopping: Top States Affected

Delaware led with 1,532.0 reports. Nevada and New Hampshire placed second and third.

9 Prizes & Sweepstakes: Reports Filed

Total reports filed came to 70,901, with 25% reporting losses. “Great news!” a voice over the phone gushes, “You’ve won money or valuable prizes!” All the winner needs to do is provide their bank account information or pay a processing fee.

10 Prizes & Sweepstakes: Losses

The median loss suffered by victims was $780. Total losses equaled $303.6 million.

11 Prizes & Sweepstakes: Scenarios

Phone calls were the most common contact method. Gift cards and reload cards were the top payment types.

12 Prizes & Sweepstakes: Top States Affected

Maine topped the list with 283.1 reports. Montana and Arkansas placed next in the rankings.

13 Internet Services: Reports Filed

Total reports filed equaled 193,911, with 19% admitting losses. This category includes the use of fake messages or copycat sites (ostensibly from someone’s internet service provider) as part of a phishing or spoofing scam used to commit identity theft. It also includes theft of personal information: debit card PINs, credit card and bank account numbers, and passwords.

14 Internet Services: Losses

The median loss suffered was $300. Total losses came to $209.3 million.

15 Internet Services: Scenarios

Typically, individuals are contacted via social media and send money via a payment app. In 2025, the main contact method reported was through websites or apps, with payment being by credit card.

16 Internet Services: Top States Affected

Georgia was first in line with 855.5 reports per million people. Illinois and Nevada came close on its heels.

17 Business and Job Opportunities: Reports Filed

Total reports filed were 157,841, with 32% reporting a loss. Scammers post genuine-looking want ads and business opportunities in print and online. The catch? There is no job. They just want your personal information and your money. As just one example, a “work-from-home career” starts after the target pays for training, certifications, and/or starter kits.

18 Business and Job Opportunities: Losses

Consumers experienced a median loss of $2,008. Total losses reached $906.8 million.

19 Business and Job Opportunities: Scenarios

People were most often connected by text and paid the scammers via cryptocurrency.

20 Business and Job Opportunities: Top States Affected

Nevada was again the top contender for the fifth year running, with 560.0 reports per million people. Florida and Colorado came in at second and third place.

21 Advance Payments: Reports Filed

Total reports came to 51,327, with 37% of them suffering a financial loss. Advance payments, as the name implies, refer to a consumer prepaying for a service. Fake credit service businesses purport to sell information that will allow the consumer to create a new credit file, perhaps after an identity theft occurred.

22 Advance Payments: Losses

The median loss of each victim was $768. The total amount lost was $100.8 million.

23 Advance Payments: Scenarios

Fraudsters typically communicate with potential victims via websites and apps for this kind of scam, and request wire transfers to collect the money.

24 Advance Payments: Top States Affected

Missouri is number one this time, with 522.0 reports per million people. Georgia and Nevada follow as numbers two and three.

25 Fake Charities: Reports Files

Total reports came to 12,259, with 30% reporting a monetary loss. Scammers pretend to be from a real or fake charity and ask you to make a donation right then for, say, a natural disaster that just occurred.

26 Fake Charities: Losses

The median loss was $500. The total amount lost was $35.4 million. Asking people to support a heartwarming cause has, unfortunately, been quite successful.

27 Fake Charities: Scenarios

Messages go out via social media and have the potential to go viral. Scammers most often collect their money through a payment app or service.

28 Fake Charities: Top States Affected

Nevada led the way with 36.6 reports per million people. Colorado and New Jersey came in second and third place.

29 Investments: Reports Filed

Total reports came to 143,918, with 78% claiming a financial loss. With investment fraud, a scammer tries to get you to invest: stocks, bonds, real estate, whatever. They may provide false information about a real investment or make something up entirely.

30 Investments: Losses

The median loss was $10,400. Total losses equaled $7.933 billion.

31 Investments: Scenarios

These so-called investment opportunities are described on social media platforms, with cryptocurrency being the top payment method.

32 Investments: Top States Affected

Nevada (again!) leads the way, with 489.0 reports per million people. Arizona and Florida trail behind in terms of percentage of population, but are way ahead in absolute numbers. It’s also worth noting some other states had high report figures, where Texans filed 9,437 reports and Californians filed 15,472 reports.

33 Bonus Stat: Tax Prep

A missing refund is one sign that someone else may have filed a fake tax return in your name. Here’s more information about what to do when you don’t receive a tax refund.

The FTC data shows that 4,909 reports about tax preparation fraud were filed in 2025, with 56% of people reporting a monetary loss. The total loss was $14.9 million, with a median loss of $1,151.

How to Avoid Credit Card Fraud

As these numbers show, there are plenty of scammers out there. Here are some ways to protect yourself against money scammers:

•   Avoid using debit cards, which are directly connected to your bank account. Credit cards and payment apps tend to be safer. Check your banking and credit card statements regularly, watching for errors and suspicious charges.

•   If your bank offers free transaction alerts, sign up now. For example, you can get an alert whenever a large payment (you choose the number) hits your account. Find out more about different types of bank fraud.

•   If you get a call from a company asking for payment data or other personal information, hang up. If it’s a company you normally deal with, call them back directly to see if the call was genuine.

•   Use password protection on your smartphone and computer devices. Keep your browsers up to date, and use reputable anti-virus software downloaded from the app store (not an ad, email, or website). Avoid using public wifi.

•   Shop at reputable retailers only, including but not limited to the ones you use online. If you have questions about a store, check them out on the Better Business Bureau website.

•   When pumping gas or using an ATM, watch out for skimmers, which are devices that capture your account information for fraudulent purposes. If anything looks odd, let the establishment know.

•   Be cautious about clicking on links from unknown sources, checking to make sure that an email or text message really came from the place it claims and is a reputable organization.

•   Monitor your credit report and watch for inaccuracies. What qualifies as credit monitoring varies, so look for services that send alerts whenever something new hits your report. You may also be able to sign up for free credit monitoring.

How to Report Credit Card Fraud

The first step is to file a dispute with your credit card company. Then you can contact your police station or sheriff’s office. You can also report the fraud to your state’s attorney general (get their contact info from https://www.naag.org/find-my-ag/). You can also submit an online claim with the FTC at https://reportfraud.ftc.gov/#/.

The Takeaway

Scammers are reaching out via text, social media, fake websites, apps, emails, and old-fashioned voice calls to separate you from your money. Their stories can play on your greed, charity, or desperation. And they take all forms of payment, but they especially like gift cards and crypto. By learning to recognize the top schemes, you can help protect yourself from getting swindled. More pro tips: Monitor your transactions, avoid using debit cards for purchases, and don’t ever give out your personal or financial info unless you’re 100% sure of who you’re dealing with.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

SoFi helps you stay on top of your finances.

FAQ

What are some common credit card scams?

Phishing is when a con artist tries to get you to share personal info or credit card information on the phone, by email, or through texting. Fake online websites can be built to steal credit card info, while skimmers can be set up on ATMs and credit card readers. People with ill intent can also monitor public wifi for credit card info, and these are just some of the types of financial fraud out there.

How do credit card scams happen?

Sometimes, your physical credit card can be stolen. More often, someone gets your credit card data without having the actual card. Identity thieves can also steal personal information, set up credit cards in your name, and start spending.

How can you spot credit card fraud?

As you monitor bank statements, credit card statements, and your credit report, you may spot information that just isn’t right. Although this isn’t always because of credit card fraud, that’s a common cause. Proactively investigate when something looks suspicious, and you can also set up alerts with your bank to flag certain kinds of transactions.

How can I report a suspected credit card scam?

A good first step is to contact your credit card company to dispute any suspicious transactions. After that, you can contact your police station or sheriff’s office. It’s also worth considering submitting an online claim with the Federal Trade Commission.

What are ways I can protect myself from getting scammed?

Practical steps include avoiding using debit cards and checking your banking and credit card statements regularly. Sign up for free transaction alerts if your bank offers them, use passwords for your devices, and stick to shopping at reputable retailers. And if you get a call from a company asking for payment data or other personal information, hang up and call them back on their official number to verify the request.

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Photo credit: iStock/SaskiaAcht

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

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

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

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Looking to get into a home but can’t qualify for a traditional mortgage? You may want to look at owner financing.

Owner-financed homes aren’t very common, but they have some benefits for unique buyer and seller situations. Owner financing bypasses a traditional mortgage when the seller takes on the role of lender, but seller financing comes with some risks.

Read on to discover how owner financing works and when it could make sense.

What Is Owner Financing?

Owner financing, also known as seller financing, is a transaction in which the property owner takes on the role of lender by financing the sale to the buyer. Like the trading of homes, this type of transaction bypasses traditional mortgages (unless the purchase of the home is only partially owner-financed).

The payments for buyers are typically amortized over 30 years for a smaller monthly payment, but there’s often a large balloon payment at the end of a shorter period of time (usually 5-10 years). Owner-financed transactions operate on the belief that the buyer’s finances may improve over time or the property will appreciate to a point where the buyer can get a home loan from a traditional lender.

Note: SoFi does not offer owner financing at this time. However, SoFi does offer conventional mortgage loan options.

How Does Owner Financing Work?

Owner-financed homes work much like traditionally financed homes, but with the seller acting as the lender. The seller may (or may not) require a credit check, a loan application, a down payment, an appraisal of the home, or the right to foreclose should the buyer default. Buyers and sellers will need to agree on an interest rate and the length of the loan.

The buyer and seller sign a promissory note, which contains the loan terms. They also record a mortgage (or deed of trust), and the buyer pays the seller. The buyer should also pay for homeowners insurance, taxes, title insurance, and other loan costs. It’s typical to hire real estate professionals or lawyers to get more into the details of how to use a home contract in owner financing.

Pros and Cons of Owner Financing

For Sellers

Owner financing isn’t nearly as beneficial for sellers as it is for buyers, but there are still some upsides to consider along with the increased debt load and assumed risk.

Pros for Sellers	Cons for Sellers
You attract a larger buyer pool.	You carry more debt.
You save money on selling costs.	You assume more risk because the buyer could default.
You may be able to sidestep inspections, especially if the home needs work or may not pass an inspection for FHA or VA loans.	You aren’t able to cash out for years.
You can earn higher returns by acting as a lender.	You may need to act like a landlord. The buyer may not keep up the property, and the home may lose value.
You may experience faster closing when buyers don’t have to go through the mortgage underwriting process.	If you still have a fairly large mortgage on the property, the lender must agree to the transaction. Many aren’t willing.

For Buyers

There are advantages to buying a house for sale by owner, namely that a buyer can obtain housing sooner under owner financing. A buyer may also be able to lower the down payment needed and pay lower closing costs. But it’s also riskier than borrowing from a traditional mortgage lender. If, for example, buyers are unable to finance the balloon payment, they risk losing all the money they’ve spent during the loan term.

Pros for Homebuyers	Cons for Homebuyers
You can gain equity.	Sellers may ask for a hefty down payment to protect themselves against loss.
You can improve your finances.	You may pay a higher interest rate than the market rate.
You can obtain housing and financing when traditional lenders would issue a denial.	You may pay too much for the home.
Lenders don’t always require a credit check.	Fewer consumer protections are available when a homebuyer purchases from a seller.
There’s no mortgage insurance.	The loan term is short.
There’s no minimum down payment.	Sellers may not follow consumer protection laws.
There are lower closing costs.	Buyers may not be protected by contingencies.

To reduce risk exposure in an owner-financed transaction, buyers may want to hire an attorney.

Example of Owner Financing

Bob and Vila want to purchase a large, forever home for their family. The purchase price of the home is $965,000, but Bob and Vila can only qualify for $815,000. Part of Bob’s income is from recent self-employment, which is not accounted for by the lender but will help the couple be able to afford the house.

For the remaining $150,000, the seller offers owner financing as a junior mortgage. The buyers will pay both a traditional mortgage lender and the seller in this type of owner financing.

Recommended: How Much Home Can I Afford?

Types of Owner Financing

Land contracts, mortgages, and lease-purchase agreements are a few ways to look at owner financing. Here’s how they work and how they’re different from a traditional mortgage.

Land Contracts

Because the title can’t pass to the buyer in owner financing, a land contract creates a shared title for the buyer and seller until the buyer makes the final payment to the seller. The seller maintains the legal title, but the buyer gains an interest in the property.

Mortgages

These are the different ways to structure a mortgage with owner financing:

•   All-inclusive mortgage: The seller carries the promissory note and the balance for the home purchase.

•   Junior mortgage: When a buyer is unable to finance the entire purchase with a lender on one mortgage, the seller carries a junior mortgage (or second mortgage) for the buyer. The seller is put in second position if the buyer defaults, so there’s risk to the seller by doing a second mortgage.

•   Assumable mortgage: Some FHA, VA, and conventional adjustable-rate mortgages are assumable, meaning the buyer is able to take the seller’s place on the mortgage.

A mortgage calculator can help you get an idea of what purchase price you may be able to afford.

Lease Purchase

In a lease-purchase arrangement, both parties agree on a purchase price. The potential buyer leases from the owner for an amount of time, usually 1-3 years, until a set date, when the renter has the option to purchase the property. In addition to paying rent, the tenant pays an additional fee, known as the rent premium.

It’s typical to see options that credit a percentage of the purchase price (often between 1% and 5%), rents, and rent premiums toward the purchase price. If the option to buy isn’t used, the buyer will lose the option fee and rent premiums.

These are also known as rent-to-own, lease-to-own, or lease with an option to purchase. They can be used when an aspiring buyer has a lower credit score and needs some time to qualify for traditional financing.

Steps to Structuring a Seller Financing Deal

If you’re thinking about finding a property with owner financing, consider taking these steps to help get you through the process:

1.    Hire a professional. Because owner financing bypasses traditional lending institutions, there’s a lot more risk involved. Hiring a real estate professional and an attorney can help you structure the deal to protect your interests.

2.    Find a property where the owner offers financing. An owner must be willing and able to offer seller financing to make this type of transaction happen. It’s difficult, which is why owner financing is more common between parties that know each other very well. It’s usually required that the property is owned free and clear of any mortgage. Here are a few other ways to look for seller-financed properties:

◦   Asking your current landlord if they’re open to selling their property to you

◦   Looking for real estate listings with phrases such as “seller financing available”

◦   Contacting the real estate agent about a home you’re interested in, if the home has been on the market a while and the conditions are right

◦   Finding a personal connection who is able to offer owner financing

3.    Agree to terms: Because seller financing terms are so flexible, there are a lot of details that buyers and sellers need to work out, including:

◦   Sales price

◦   Amount of down payment

◦   Length of the loan

◦   Balloon payment amount

◦   Interest rate

◦   Structure of the contract (land contract, mortgage, or lease purchase, as described above)

◦   Any late fees, prepayment penalties, and other costs the buyer is responsible for

4.    Complete due diligence: Buyers and sellers would be wise to do their due diligence as if it were a regular purchase. Sellers may want to examine a buyer’s credit, complete a background check, and confirm that the buyer has obtained homeowners insurance and title insurance to move forward with the transaction. On the buyer’s end, a home inspection and appraisal may be warranted.

5.    Sign and file paperwork: Much like a real estate transaction, the contracts involved in owner financing arrangements can be pretty involved. Depending on how your financing is structured, you may have a promissory note, an owner financing contract and addenda, and title paperwork. You’ll also want to be sure your promissory note and deed of trust are filed with the county recorder’s office. An attorney, if you hired one, should be able to complete this process for you.

Alternatives to Owner Financing

Traditional mortgage financing may work better for your individual situation:

•   FHA loans: FHA loans have a low down payment requirement and low closing costs and may be approved for homebuyers with lower credit scores. They are underwritten by the Federal Housing Administration. Even if you’ve had a bankruptcy, you may be able to get an FHA loan.

•   USDA loans: USDA loans are backed by the U.S. Department of Agriculture. Income must meet certain guidelines (as determined by geographic region), and the home purchased must be in an eligible rural area.

•   VA loans: Loans guaranteed by the Department of Veteran Affairs are geared toward eligible military members, veterans, National Guard and Reserve members, and spouses. The favorable terms include a low down payment (or no down payment), lower closing costs, a low interest rate, and the ability to use the VA for a home loan multiple times.

•   Conventional loans: A conventional loan simply means the financing isn’t insured by the federal government, as it is with FHA, VA, or USDA loans. Fannie Mae and Freddie Mac provide the backing for conforming loans: those that have maximum loan amounts that are set by the government.

It’s advisable to avoid taking interest rates at face value and to compare the annual percentage rates (APRs) instead. The APR represents the interest rate and loan fees, so if an FHA loan looks better than a conventional mortgage based on just the rates, an APR comparison may tell a different story.

For more information, a help center for mortgages can be a great resource for learning more about the mortgage and home-buying process.

Recommended: 18 Mortgage Questions for Your Lender

The Takeaway

With owner financing, the seller is the lender. Both buyers and sellers face upsides and downsides when the transaction involves owner-financed homes.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Why would an owner offer financing?

Owner financing broadens the pool of potential homebuyers, which might appeal to some homeowners. They may also appreciate having the opportunity to earn interest paid by the homebuyer.

What risks does owner financing have for the buyer?

There are fewer consumer protections available to buyers who get owner financing, which is why it’s recommended that buyers seek a lawyer’s help in reviewing any agreement. Buyers also risk paying a higher-than-usual interest rate.

What risks does owner financing have for the seller?

Sellers take on the risk that the buyer may miss payments or default on the loan. They also remain tied to the property until the loan is fully repaid, which could limit their flexibility if they need access to the cash from the sale sooner.

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Photo credit: iStock/KTStock

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

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

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
This article is not intended to be legal advice. Please consult an attorney for advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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To some, it may sound like as much fun as going to the dentist, but switching car insurance companies can make a great deal of sense. Besides, getting new car insurance really doesn’t have to be an ordeal.

That being said, to make sure you’re getting the best policy for your situation — and potentially snagging a price cut when you make a successful switch — it’s important to follow a step-by-step plan. Read on to learn what to do if you’re wondering how to switch car insurance.

When Do You Need to Switch Car Insurance?

Wondering whether switching car insurance companies makes sense? Here are some common reasons to make the change:

•   Your life circumstances have changed: Many people seek a new policy when their life has changed. Obviously, if you’ve bought a new car, you need to look into options. But if you’re planning to move to another state (or even to a different zip code), if you want to add a spouse or a child to the plan, or even if you have a new job, your existing insurance might no longer be the best fit.

•   You want to lower costs: Getting the least expensive premium is often the goal of getting new car insurance. If you noticed a sharp increase in your premium and didn’t have an accident or any other triggering incident, then switching may be a good way to lower your car insurance premiums.

•   You’re dissatisfied or looking to get certain perks: There are other reasons to change insurers aside from cost. Maybe you had a poor customer service experience with your current provider. Or perhaps you want a service that another insurer offers, such as free roadside assistance.

•   Your credit score changed drastically: Another reason you might want to consider getting new car insurance is a drastic decrease or increase in your credit score. That shift could have a good (or bad) effect on your present policy, but another insurer could look at it differently, so it’s worth your time to investigate. (Note: California, Hawaii, Massachusetts, and Michigan don’t let insurers set policy rates based on credit scores. And Maryland, Oregon, and Utah have strict limitations in place.)

On the other hand, there are some times when changing up your insurance might not be the best idea, including when:

•   You’ve just had an accident or gotten a ticket: If you’ve had a recent accident or received a ticket, it might not be a good time for a change. Your insurer will likely raise your rate, but the recalculation won’t take effect until your annual renewal time. You may as well take advantage of the months you have left before the policy renews.

•   You’ll lose certain benefits if you switch: Some companies offer loyalty discounts or accident forgiveness clauses for customers who stick with them. Make sure the loss of those benefits is worth it to you.

How to Switch Car Insurance in 5 Steps

If you’re ready to change car insurance, here’s what to do.

1. Research and Evaluate Your Coverage Needs

Do you have too much insurance or too little? The former could strain your budget, while the latter could leave you exposed to financial disaster.

Nearly every state makes it a law that you have to pay for liability coverage or you can’t drive a car. After meeting that basic requirement, it’s time to determine your collision and comprehensive car insurance needs.

Taking into account your type of car, your driver’s record, and your assets, you can determine how much auto insurance coverage you really need. You need to know that before you approach insurers eager for your business.

2. Shop Around

There are many more car insurance companies out there than you may realize, making it a highly competitive business. Experts recommend that you get quotes from at least three insurers.

You’ll need to have facts ready to feed into the evaluation to get a quote, including:

•   The address where the car will be stored

•   The car’s make, model, and year

•   The Vehicle Identification Number (VIN)

•   Your driver’s license or Social Security number

Be prepared to give the same facts to each insurer so you can make an accurate comparison.

Also, check out the companies’ customer service records and review each company’s payment options. Don’t forget to find out what discounts you could qualify for too.

3. Contact Your Current Insurer

Once you’ve picked your new plan and have proof of insurance, contact your previous insurance company to cancel. Keep in mind that some insurance companies may penalize you if you cancel before the policy expires.

To be on the safe side, log onto your account and cancel the automatic payments after you’ve ended the old policy. Some experts recommend that you put this all in writing and send a letter to your insurer, specifying that you’d like to cancel the coverage by the agreed-upon date.

4. Avoid a Coverage Gap

It’s extremely important to make sure there are no gaps in your auto insurance, even for a single day. You’ll bring a firestorm of legal and financial problems on yourself if you have an accident while uninsured, and you may even lose your driver’s license.

Also, should you seek out a new insurer in the future, if you have a record of lapsed insurance, you could be stuck with an expensive policy. So before canceling your old insurance, make sure to triple-check the effective date of your new policy.

Recommended: Auto Insurance Terms, Explained

5. Print Out Your ID Cards and Switch

After you’ve signed up with your new insurer and canceled your old plan, take the former ID card out of your car or your wallet and replace it with your new one. If you haven’t received the card in the mail yet, you can always print it out.

If your state allows digital proof of ID, you can access your digital ID card through the insurer’s app.

How Often Can You Switch Car Insurance Providers?

You can switch companies as often as you like, and there’s generally no penalty for doing so (though some insurers do charge a fee if you switch before the end of your coverage period). The Insurance Information Institute recommends reviewing your coverage once a year.

Aside from switching carriers entirely, you can also speak to your current insurer about updating your plan if your life circumstances have changed since you got your existing plan.

Recommended: Car Insurance Guide for New Drivers

The Takeaway

A better auto insurance plan might exist for you, and despite what you may think, it’s not that hard to switch. Making the change requires research into how much coverage you really need, obtaining quotes, and then, once you’ve decided to switch, canceling properly and making absolutely sure there are no coverage gaps.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

SoFi brings you real rates, with no bait and switch.

FAQ

When should I consider switching car insurance companies?

You should consider switching when your life circumstances change, such as buying a new car or adding a spouse or child to your plan. Switching also makes sense if you want to lower costs, are dissatisfied with customer service, or are looking for specific perks, such as roadside assistance.

What are the key steps for switching car insurance?

The process involves researching your liability, collision, and comprehensive coverage needs before shopping around and getting quotes from at least three different insurers. After selecting a new plan, contact your old insurer to cancel and ensure there’s no gap between the old policy ending and the new one beginning. Finally, remember to update your insurance ID card with the new policy information.

How often can I switch car insurance providers?

You can switch insurance companies as often as you like. However, be aware that some insurers may charge a fee if you cancel before your policy period expires. The Insurance Information Institute recommends that customers review their coverage once every year.

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Photo credit: iStock/Edwin Tan

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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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