Category: Credit Score

When I first started teaching people how to rebuild their credit almost three decades ago, one of the biggest sources of confusion was the credit score you get from banks (and now from apps). People would come to me saying, “Phil, Chase says my score is 720. Why did I get denied for a loan?”

I get it. It’s frustrating and confusing. But once you understand how credit scores are created, and which ones lenders actually use, it all starts to make sense. In this article, we’ll break it down so that you understand credit-scoring models and how to gauge your credit score.

What Credit Score Does Chase Show?

Chase provides something called a VantageScore 3.0, which is based on a mathematical formula pulled from your TransUnion credit report.

But here’s the important part: The formula applied to create the Chase credit score isn’t the same formula that is used to create a FICO score, which is the model most lenders use. And most lenders will take a look at not only your TransUnion credit report, but also your Experian credit report, and your Equifax credit report.

This might come as a surprise, because most lenders use your FICO score to make credit decisions. In fact, around 90% of lending decisions are based on a version of the FICO model, especially when it comes to mortgages, car loans, and major credit cards.

FICO and VantageScore pull from the same types of data: payment history, credit utilization, length of credit history, and so on. But they weigh those factors differently. That means your score can look different depending on which model is used, even though the underlying credit report is the same.

Think of it like two chefs using the same ingredients to make a dish. One might prioritize spice, the other sweetness. The final result looks similar, and the dish might be called the same thing by both chefs, but it tastes different. That’s what’s happening with your credit scores: same data, different recipe.
So if you’re monitoring your credit with Chase, it’s a great way to track trends and get a general sense of your credit health, but don’t assume that number is what lenders will see when they pull your FICO score.

Watch & Learn: Do You Feel Stuck in Debt?

VantageScore vs. FICO: What’s the difference?

So what’s the difference?

Your credit score is calculated using the information in your credit report, things like:

• Your payment history
• How much debt you’re carrying
• How long you’ve had credit accounts
• What types of credit you use
• How recently you’ve opened new accounts

This information is plugged into a complex mathematical formula that spits out your credit score. But not all scoring models weigh those factors the same way.

• FICO and VantageScore are two competing credit scoring systems.
• Both use the same 300–850 scale, but the formula behind them is different.
• That’s why you can have a 720 VantageScore and a 680 FICO score; both are “accurate,” just calculated differently.

In short: Your Chase credit score is a real credit score, but it is limited in its usefulness because it is not the one most lenders are using. While it’s helpful for tracking trends, don’t assume it’s what a bank will see when you apply for credit.

Why Is My Chase Credit Score Different From Other Scores I’ve Seen?

Here’s something that might seem a little confusing, so I’ll break it down. You have many credit scores. In fact, the Consumer Financial Protection Bureau reports that consumers can have dozens of scores depending on:

• The credit bureau providing the report (TransUnion, Experian, Equifax)
• The scoring model (FICO 8, FICO 9, FICO Auto Score, VantageScore, etc.)
• The version of the scoring model
• The date your data was pulled

Here’s an example: Let’s say Chase shows your VantageScore 3.0 as 720. But if a mortgage lender pulls your FICO Score 2 based on Experian, it could be 685. Both scores are accurate in their own right. They’re just calculated differently.

Making it even more confusing, when a lender pulls your FICO Score 2, they will get three scores: One from Experian, one from TransUnion, and a third from Equifax. They will ignore the highest and the lowest scores, and they will assign you an interest rate based on the middle score.

Watch & Learn: Building Credit Through a Credit Rebuilder Program

Can I Trust Chase’s Credit Score?

You can trust the Chase credit score to monitor trends and get a general idea of where you stand, but you cannot trust it to be an accurate indicator of the terms you will receive on a credit card, mortgage, or car loan.

Here’s an example: If your Chase score drops, there’s a good chance your FICO score dropped too. If it rises, your FICO likely did as well.

But don’t make major credit decisions like applying for a mortgage or car loan based only on the score you see in your Chase dashboard. Get your real FICO scores first. (You can likely get your FICO score by asking a mortgage broker to pre-approve you for a loan.)

Does a High Chase Credit Score Mean I’ll Qualify for a Loan?

Not always. Lenders rarely use VantageScore to make approval decisions. Even if you have a 730 score with Chase, your FICO could be in the 600s depending on:

• Credit card balances
• Recent inquiries
• Derogatory marks
• Age of accounts

If you’re preparing for a big financial step, like buying a home, leasing a car, or applying for new credit, check your FICO scores in advance.

What If My Chase Credit Score Is Low?

More than 30 years ago, I was a mortgage broker helping people buy homes. One day, I walked into the bank and found out I was overdrawn. When I tried to apply for overdraft protection, I was denied. That moment was humiliating and eye-opening. I knew I had to change something. So I started learning everything I could about credit scores: How they’re built, how they’re damaged, and most importantly, how to rebuild them.

If you’re looking to improve your credit score fast, Chase or FICO, the first step is to figure out why your score is low. For some people, it’s because they don’t have enough credit history. In that case, becoming an authorized user on someone else’s well-managed credit card can give your score an instant boost. For others, high credit card balances are the problem. Lowering your credit utilization, ideally under 30 percent of your limit, or even better, under 10 percent, can lead to major gains in just a few months.

Another powerful strategy is cleaning up errors on your credit report. We’ve seen clients jump 50 to 100 points simply by disputing accounts that should have been removed after bankruptcy or fixing reporting mistakes. If you have collections on your report, paying them off doesn’t always help your score, but negotiating a pay-for-delete agreement can. And even when deletion isn’t possible, resolving the debt can reduce stress and show future lenders you’re taking responsibility.

Finally, building new, positive credit history is key, particularly if you have been through a bankruptcy. Most people think it takes seven years to rebuild a credit score, but that’s a myth. With smart, consistent habits, you can often go from the 500s to the 700s in 12 to 24 months. Focus on what the scoring models care about: recent behavior, on-time payments, low balances, and a steady track record.

Need Help?

Our program, 7 Steps to a 720 Credit Score, is built around the actual scoring models lenders use, and it works even after bankruptcy.

Want to raise your real credit score?

Join the thousands of people who have rebuilt their credit in just 12 to 24 months.
Start the free credit-education program, and take control of your credit with a plan that actually works.

Related Articles: 

“Does Overdraft Affect Credit Scores?”

“Does Klarna Affect Your Credit Score?”

“Does the Method for Calculating Credit Scores Seem Fair to You? Why or Why Not?”

FAQ Table of Contents

Why is my Chase credit score different from my FICO score?

Is the Chase credit score accurate enough to trust?

Does a high Chase credit score mean I’ll qualify for a loan?

Which score do lenders use, Chase or FICO?

How should I use the Chase credit score in my financial planning?

FAQ: Why is my Chase credit score different from my FICO score?

The score you see in your Chase account is a VantageScore, while most lenders use FICO. Both FICO and Vantage pull data from your credit report, but they weigh the information differently. That’s why your Chase Vantage score might show 720 while your FICO comes in at 685.

Think of it like two teachers grading the same essay with different rubric criteria. The work is the same, but the results vary depending on what each teacher prioritizes. Both scores are “real,” but FICO is the one lenders will use when deciding whether to approve you and at what interest rate.

Key takeaway: Your Chase score isn’t wrong, but it isn’t the number lenders rely on. Always check your FICO before applying for credit. You can learn how to pull your FICO and improve it, for free, in our free credit-education program, 7 Steps to a 720 Credit Score.

Return to FAQs

FAQ: Is the Chase credit score accurate enough to trust?

Yes and no: The Chase score is accurate for tracking trends, but it’s not accurate for predicting loan terms because lenders use FICO and not the Chase VantageScore formula to make final decisions.

That said, if your Chase score goes up or down, chances are your FICO moved in the same direction. But before applying for a mortgage, car loan, or credit card, check your actual FICO so you know exactly what lenders will see.

Key takeaway: Trust Chase for changes, not for loan decisions.

Return to FAQs

FAQ: Does a high Chase credit score mean I’ll qualify for a loan?

Not necessarily. A Chase score of 730 might look like a great credit score, but if your FICO score is 680, a lender could deny you or approve you with far less favorable terms. That difference happens because Chase shows you a VantageScore, while most lenders use FICO. Both scores are based on the same credit report, but they use different formulas to calculate risk.

This mismatch is one of the most common frustrations people face. Many borrowers apply for a car loan or mortgage feeling confident because their banking app shows a “good” score, only to find out the lender sees a lower FICO score. That lower score means higher interest rates or even rejection.

For example, imagine two people with the same Chase score of 730:

• One has a FICO score of 720 and qualifies for a $20,000 car loan at 6% interest.
• The other has a FICO score of 680 and gets offered the same loan at 11%.
  That gap translates into thousands of dollars in extra interest, all because the score they trusted wasn’t the one lenders rely on.

Key takeaway: A high Chase score doesn’t guarantee loan approval. Only your FICO score determines the terms you’ll receive. The good news is you can raise your FICO score quickly by following the right steps. Our free credit-education program, 7 Steps to a 720 Credit Score, shows you how.

Return to FAQs

FAQ: Which score do lenders use, Chase or FICO?

Lenders almost always use a version of FICO. For mortgages, they even pull three different FICO versions (one each from Experian, TransUnion, and Equifax) and use the middle score. Chase only shows you a VantageScore based on TransUnion data, which doesn’t provide the full picture.

So while Chase can give you a general sense of where you stand, it’s not the score that determines your mortgage rate, car loan terms, or whether you qualify for a premium credit card.

Key takeaway: When it comes to loans, FICO rules. Chase is helpful for monitoring trends related to your credit score, but lenders will use FICO to determine your interest rate.

Return to FAQs

FAQ: How should I use the Chase credit score in my financial planning?

Use your Chase score as a general health check, not as the final word. If it trends upward, that’s a good sign your FICO is improving too. But if you’re planning a big financial step like applying for a mortgage, leasing a car, or opening a new credit card, always check your actual FICO first.

Return to FAQs

One age group stands out with the highest percentage of credit scores 620 or less, and it’s probably not the one you think. According to aggregated data from sources like CliffsNotes, ClassAce, and CourseSidekick, the biggest spike doesn’t happen at the beginning of adulthood. It happens later.

That surprised me… until I thought about what really happens during that stage of life. Bills pile up. Mortgages, student loans, kids, credit cards: All of it hits at once. It’s a pressure cooker.

So let’s take a closer look at what age group has the highest percentage of credit scores 620 or less, and more importantly, what you can do if your score is stuck in the low 600s … or lower.

What Age Group Has the Highest Percentage of Credit Scores 620 or Less?

If you’re wondering what age group has the highest percentage of credit scores 620 or less, it’s not the very young. It’s people in their 30s. Adults between the ages of 30 and 39 are more likely than any other age group to have a credit score of 620 or lower. While it’s easy to assume that younger adults would struggle the most due to limited credit history, the data tells a different story. The trend toward a lower credit score happens in the decade when financial responsibilities start compounding fast.

Here’s why this decade is the most credit-challenging:

• Big life expenses: Mortgages, student loan payments, car loans, credit
  cards, and kids. These pile up fast.
• Risky borrowing patterns: Entry into higher-limit cards and large loans can
  lead to missed payments or high balances.
• Lingering credit damage: Mistakes from your 20s may still be dragging down
  your score, and recovery takes time.
• Not enough time to rebuild: Unlike older adults, those in their 30s haven’t
  had decades to recover from credit missteps.

By contrast, people under 30 may have limited credit history, which does lower their score, but it also translates to fewer chances for serious damage, and people over 40 are often in the process of rebuilding or have already done so.

In your 30s, you’re often juggling student loans, car payments, mortgages, childcare, and credit cards, all while trying to build a stable life. It’s a lot. And when money gets tight, it’s easy for payments to fall behind, causing credit scores to drop.

Be sure to read this related article: “How Can I Improve My Credit Score Quickly?”

What Does a Sub-620 Credit Score Mean?

If you fall into the age group with the highest percentage of credit scores 620 or less, here’s what that means for your day-to-day finances:

• Mortgage limitations: Conventional home loans often require a minimum score of 620.
• High interest rates: Lenders may approve a loan, but at punishing rates.
• Loan denials: You may not qualify at all, especially for auto or personal loans.
• Increased fees and deposits: You might be required to pay security deposits for apartments, cell phones, or utilities.

In short, a low credit score makes everything more expensive, or unavailable altogether. By contrast, here’s what you can expect if you increase your credit score to 720:

• Lower interest rates:You’ll save thousands over the life of a loan.
• Higher credit limits: Lenders trust you with more borrowing power.
• Top-tier credit cards: Get access to cards with serious perks.
• Free travel: Use points and miles to cover flights, hotels, and upgrades.
• Cash-back and rewards: Earn money or points on everyday spending.
• Stronger approval odds: Qualify more easily for mortgages, auto loans, and rentals.
• Better terms: Enjoy lower fees, better insurance rates, and fewer security deposits.

Tips for Improving a Credit Score of 620 or Less

If your credit score is below 620, the 7 Steps to a 720 Credit Score free credit-education program can help you start turning things around today. Here are three tips from the course:

Keep Your Balances Low

Your credit utilization ratio, how much credit you’re using compared to your total limit, is one of the biggest factors in your credit score. The goal is to keep this ratio under 30%, but if you want to see real movement in your score, aim for 10% or less. That doesn’t mean you need to pay off your cards entirely. Just avoid letting balances creep too high.

Dispute Credit Report Errors

Mistakes on your credit report can drag down your score for years if you don’t catch them. And they’re more common than most people realize: Industry experts estimate that between 34% and 70% of reports contain at least one error. Check your report regularly at annualcreditreport.com, which gives you free access from all three bureaus. If you find anything that looks wrong, like a payment marked late when you know it wasn’t, dispute it in writing and follow up until it’s resolved. The 7 Steps program includes templates and step-by-step instructions to walk you through it.

Mix Your Credit Types

Credit scoring models reward variety. That means having both revolving credit (like credit cards) and installment accounts (like car loans, student loans, or credit-builder loans). If you only have one type, your score may be stuck, even if you’re doing everything else right. You don’t need to take on unnecessary debt, but adding a small, manageable installment account can give your score a helpful nudge.

Watch & Learn: Building Credit Through a Credit Rebuilder Program

FAQ

What does a credit score of 620 or less mean for your finances?

A credit score of 620 or lower can be a major barrier to financial opportunity. This is the cutoff that many lenders use to determine whether you qualify for loans, credit cards, and even rental agreements.

At this level, you’re in what’s often called “subprime” territory. That means even if you get approved for credit, it’s likely to come with high interest rates, low credit limits, or extra fees. For example, someone with a 620 score might qualify for a car loan with an 11% interest rate, while someone with a 720 score could get the same loan for under 6%. Over the life of the loan, that difference could cost you thousands.

You might also face added expenses like utility deposits, higher insurance premiums, or prepaid cell phone plans. In short, a low score makes everything more expensive. A low score also has an impact on your peace of mind. Many people report feeling stuck or ashamed, even when the low score came from events outside their control. But you’re not powerless. Credit scores are fluid, and with a focused credit rebuilding plan, you can climb out of the low-600 range in just a year or two.

How fast can you raise your credit score after it drops below 620?

With the right strategy, you can reach a 700+ score in as little as 12 to 24 months.
Credit scores are not fixed. They respond quickly to new behavior. The most important thing is to stop the damage and start showing positive activity. That means on-time payments, low credit utilization, and adding the right mix of accounts. Even one new positive tradeline (like a credit card or installment account) can begin moving the needle.

People often wait for the negative items to “fall off” their credit report, assuming that time alone will fix the problem. But that’s a mistake. A bankruptcy, for example, might stay on your report for up to 10 years, but your score can recover long before that. In fact, many participants in the 7 Steps to a 720 Credit Score program see dramatic changes in their scores within the first six months, especially if they follow the credit-building steps exactly.

The key is not waiting for time to do the work. Your score improves when you start taking action. And the sooner you do, the sooner your credit begins to reflect your current behavior, not your past.

Is it better to pay off old debt or build new credit when your score is low?

You need to do both, but when it comes to raising your credit score fast, new positive activity often has the biggest impact.

Here’s why: Credit scoring models place more weight on current behavior than on the past. That means if you’re only focused on paying down old debt, your score may not budge much, especially if that debt is already charged off or in collections. On the other hand, adding new accounts and using them wisely gives the credit bureaus something positive to report.

For example, someone with a 620 score who opens a secured credit card, keeps the balance below 10%, and makes on-time payments each month can start to see their score rise within a few billing cycles. And if they add an installment loan, like the one offered through the Credit Rebuilder Program, the impact can be even stronger.

That said, paying down revolving debt (like credit cards) is still critical, especially if your credit utilization is high. But the real key is balance: clean up what you can, and start building new credit at the same time.

Should I stop using credit and go cash-only?

No, and here’s why: You need credit to build credit.

It’s completely understandable to want to ditch credit altogether, especially if you’ve gone through a bankruptcy or struggled with debt. Going cash-only can feel like a fresh start. But over the long run, avoiding credit entirely can hurt more than it helps.

Here’s the deal: Your credit score is based on your use of credit. If you don’t have active accounts reporting to the credit bureaus, there’s nothing to measure. That means even if you’re financially responsible, your score can drop because there’s no recent activity to track.

Eventually, you’ll need your credit score, whether it’s for renting an apartment, buying a car, getting a mortgage, or even setting up utilities. If you’ve been off the grid for too long, you might face high deposits, higher interest rates, or outright denials.

The smarter move is to use credit strategically. That means opening the right accounts, using them for small purchases, and paying them off in full each month. This builds a strong credit history without getting you back into debt. Programs like the free credit-education program, 7 Steps to a 720 Credit Score, are designed to walk you through exactly how to do this.

Will paying off my collections help my credit score?

Not necessarily. A lot of people assume that once you pay off a collection account, your credit score will go up. But that’s not always how it works.

Here’s why: Once a collection shows up on your credit report, the damage is already done, and simply paying it off doesn’t erase the mark. That collection can remain on your report for up to seven years, whether it’s paid or unpaid. And many credit scoring models, especially the older ones, continue to factor it in even after it’s been paid.

Some newer scoring models ignore paid collections entirely, especially if they’re medical debts. But most lenders still rely on older models, so it’s hard to know if paying the debt will actually improve your score.

There’s another risk, too: If the debt is past the statute of limitations and you make a payment, you might restart the legal clock. That means the account could become collectible again or even show up longer on your report.

One possible workaround? Negotiate a pay-for-delete agreement. That’s when you ask the collection agency to remove the item from your report entirely in exchange for payment. It’s not guaranteed, and it’s discouraged by credit bureaus, but it does happen. If successful, it could raise your score by 50 to 100 points. (Step 6 of the 7 Steps to a 720 Credit Score, our free credit-education course, walks you through how to do this.)

Even if deletion isn’t possible, paying the debt can still bring peace of mind and prevent future collection efforts. But if your goal is to boost your score, the biggest gains usually come from building new credit habits: on-time payments, low balances, and responsible use of credit going forward.

What Is a Good Credit Score?

Most credit scores range from 300 to 850. Here’s how those numbers translate: 

So, what is a good credit score for a college student? Anything above 700 is a great place to be. Above 720 is ideal. And yes, the expectations are exactly the same no matter your age.

Why It’s Hard to Get Credit When You’re Young

The biggest challenge college students face is a lack of credit history. You might not have any missed payments or financial mistakes, but you also don’t have any track record that proves you’re a responsible borrower. 

Lenders want evidence. Without it, they assume risk. This is known as being “credit invisible.” It’s like trying to get into a club without any ID. You’re not necessarily doing anything wrong. You just haven’t shown the proof they’re looking for. That’s why it’s important to understand what is a good credit score for a college student and how to take the first steps toward building one. 

That said, there are a few things you can do to get credit and start building your credit history. Here are three: 

1.  Become an Authorized User

If you want to start building credit before you qualify for your own card, one smart move is to ask a trusted family member to add you as an authorized user on their credit card.

When you’re an authorized user, the account’s activity gets reported on your credit file, even though you’re not responsible for the payments.

This can help you: 

• Establish a credit history
• Increase your score by association
• Qualify for your own card more easily later on

Important: Only do this with someone who has a strong payment history and low credit use. Their habits will reflect on your score.

Be sure to check out this article: “What Percentage of Young People Age 18-24 Have Never Checked Their Credit Score?” 

2.  Consider a Secured Credit Card

If you’re new to credit or have a low score, a secured credit card is one of the safest ways to start building responsibly. 

Here’s how it works: 

• You put down a deposit (usually $200–$500)
• That deposit becomes your credit limit
• You use the card like any other card, buy something, pay it off
• Your payments get reported to the credit bureaus

It’s a low-risk way to prove you can manage credit. And if you treat it like a debit card (never spending more than you can pay off), you’ll be in excellent shape.

Many secured card issuers will let you “graduate” to an unsecured card after several months of on-time payments.

3.  Build Credit the Smart Way

Once you’ve got a way to start building credit, either through an authorized user setup or a secured card, it’s time to develop good credit habits.

These four actions will move your score in the right direction: 

1. Pay on time, every time. Payment history makes up 35% of your credit score. One missed payment can set you back big time. Set reminders, use autopay, do whatever it takes.
2. Keep your balances low. Credit utilization (how much of your available credit you’re using) is the second-biggest factor in your score. Try to keep your usage below 30%—and below 10% if you really want to boost your score.
3. Don’t apply for too many cards. Each application results in a hard inquiry, which can temporarily ding your score. Space out applications and only apply for cards or loans you actually need.
4. Monitor your credit report. You’re entitled to a free credit report from each of the three major bureaus (Equifax, Experian, TransUnion) every year at AnnualCreditReport.com. Check for errors and dispute anything that looks wrong.

What is a good credit score for a college student? Over 200,000 people have learned the answer and built their credit with our proven strategies. Join our free credit-education program here.

Understand the Dangers of Credit Cards in College

Here’s the part most blogs skip: credit cards are risky if you’re not ready for them.

It’s easy to get into trouble fast: 

• Small balances turn into big balances
• Minimum payments barely chip away at debt
• Missed payments stay on your credit report for seven years
• One late payment can tank your score by 100 points or more 

College is already stressful. You don’t want credit card debt added to that mix. So if you’re going to open a card, do it with a plan.

Check out this list of credit cards likely to approve people with fair to poor credit. 

Rebuilding After a Credit Slip-Up

Let’s say you got a card, overspent, and missed a few payments. Is it game over?

Not even close. 

Credit scores are designed to reflect recent behavior more than old mistakes. Here’s how to start the recovery process: 

• Catch up on all payments immediately and stay current
• Stop using credit cards temporarily if you’re carrying a balance
• Pay down balances to reduce your credit utilization
• Contact your creditor and ask for a goodwill adjustment if you have one late payment and a good history otherwise (some lenders will remove it)
• Add a new positive account like a secured card or credit builder loan to get fresh data reporting to the bureaus

Within six to twelve months of consistent, responsible use, your score can see serious improvement.

Why Credit Scores Matter in College

Even if you’re not thinking about loans right now, your credit score still matters. A good score can help you: 

• Qualify for a student apartment without a cosigner
• Get approved for your first car loan
• Access credit cards with better rewards or lower interest
• Secure a job (some employers check credit reports)
• Build long-term financial stability before you ever need a mortgage

So, what is a good credit score for a college student? The same as it is for anyone else: Above 700 is great. Above 720 is ideal. 

But the more important question is: What habits are you building today that will shape your financial future tomorrow? Start small. Start smart. Learn how credit works, use it responsibly, and set yourself up for more than just a good credit score. Set yourself up for freedom—financial freedom to travel, get approved for your dream apartment, buy a car, or even a house. 

Your credit score isn’t a number that measures your worth. But it is a tool. And the earlier you learn how to use it, the better off you’ll be.

Frequently Asked Questions

1. What is a good credit score for a college student?
2. Why do college students usually have lower credit scores?
3. How can a college student build credit without going into debt?
4. Can a college student get a good loan with a fair credit score?
5. How long does it take a student to build a good credit score?

What is a good credit score for a college student?

A good credit score for a college student is the same as it is for anyone else: 700 or higher is considered good, and 720 or above is excellent. Lenders don’t grade on a curve based on age. Whether you’re 18 or 80, the same ranges apply.

One of the biggest challenges for students is that 35% of your credit score comes from your payment history, and 15% comes from the length of your credit history. When you’re young, you don’t have much of either. That’s why starting early makes such a difference. Even a single account, used responsibly, can help you move into the “good” range within a year.

To make it easier, you can enroll for free in our credit-education class, 7 Steps to a 720 Credit Score. It walks you through how credit scoring really works and gives you a plan to start building positive history right away.

Key takeaway: Aiming for 700+ puts you on track for strong financial options after graduation.

Return to FAQs

Why do college students usually have lower credit scores?

College students usually have lower credit scores because there isn’t enough history for the scoring models to measure. They have what is called a “thin” credit file. Instead of looking at a ton of information in a “fat” file, credit-scoring bureaus have to make a judgement call based on limited information.

A credit score is designed to answer one key question: How likely is this borrower to miss a payment by 30 days or more in the next two years? The models look at your past to predict your future. Because students are young, they don’t have enough accounts or years of payment data to give the models much to work with.

It’s similar to trying to get a job without experience. You may not have done anything wrong, but you don’t yet have a track record. Even if you’ve never missed a payment, the lack of history makes it harder to prove you’re a low-risk borrower. The credit-scoring equations use a “better safe than sorry” approach and assign a poor credit score to these borrowers. That’s why students often start with lower scores until they’ve built more credit experience.

Key takeaway: If you are a college student with a poor credit score, you haven’t necessarily done anything “wrong.” Your low credit score reflects limited history. The solution is to start building credit now. Our free credit-education program, 7 Steps to a 720 Credit Score, shows you how.

Return to FAQs

How can a college student build credit without going into debt?

The fastest, safest way for a student to build credit is to open three credit cards and an installment account, keep the balances below 30 percent of the limit, and pay them on time each month.

The credit cards can be traditional credit cards, secured credit cards, or authorized user accounts. (Read more about the difference in this article: Why You Need Three Credit Cards to Build a Strong Credit Score … and Which Type Works Best.) The installment account can be something small, like a credit-rebuilder loan.

For example, you could start with a secured card for $200, become an authorized user on a parent’s card, and then add one more card you qualify for on your own. Pair that with a credit-builder loan, and you’ve created a strong foundation.

This mix shows the credit bureaus that you can handle different types of credit.

Your next step is to keep the cards active without going into debt. Put a small charge on each card every month, such as gas, groceries, or a streaming subscription. Then, pay the charge in full before the due date. By keeping balances under 30 percent of your available credit (and ideally under 10 percent) you’ll see your score grow faster.

Our free credit-education program, 7 Steps to a 720 Credit Score, explains this system in detail and helps you set up the right accounts. It also makes sure you understand the difference between building credit and getting into debt. You don’t need to owe money to have a great score, but you do need consistent, positive reporting.

Key takeaway: The formula for building credit as a student is simple: three credit cards, one installment loan, balances under 30 percent, and on-time payments.

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Can a college student get a good loan with a fair credit score?

It’s possible for a college student to get a good loan with a fair credit score, but it is unlikely. A student with a fair score (660–699) may qualify for a loan, but the interest rate will be higher. Some lenders may also require a cosigner, especially for bigger loans like a car loan or private student loan.

The difference in cost can be significant. On a $10,000 car loan, a student with a 670 score might pay hundreds more in interest compared to a student with a 720 score. That’s why improving your score before applying is so valuable.

The good news is that you can likely build a great credit score within a year if you follow the 7 Steps to a 720 Credit Score, a free credit-education program.

That said, certain programs do allow people with poor credit to get approved for home loans. While this video focuses on getting a home loan after bankruptcy, it explains how specialized loan programs work and why approval is sometimes possible even with low scores. Here’s a short clip:

Key takeaway: Fair credit may get you approved, but at a price. Improving your score even 20 to 30 points could save you real money. Our free credit-education program can help you get there faster.

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Can a college student get a good loan with a fair credit score?

With consistent habits, most students can move into the “good” range within 6 to 12 months, particularly if they follow a credit-education program like 7 Steps to a 720 Credit Score. Payment history and credit utilization update quickly in the scoring models, so the impact of good behavior shows up fast.

For example:

• Month 1: Open three credit cards and a credit-rebuilder loan.
• Month 2: Use your credit cards for one or two small purchases.
• Month 3 to 12: Continue using your credit cards for small purchases. Pay the bill in full every time and pay all your bills on time.

 By the end of the first year, many students see their scores rise into the 700s.

 Key takeaway: You don’t need decades to build a good score. Even as a student, you can reach 700+ within a year if you follow the right steps. Our free credit-education program gives you those steps in detail.

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Do Overdrafts Affect Your Credit Score?

You might’ve heard that checking account activity doesn’t show up on credit reports, but does overdraft affect credit scores in other ways? The short answer is no, not directly. But there are some important exceptions. An overdraft won’t show up on your credit report right away, but how you handle it can set off a chain reaction that absolutely impacts your score.

Here’s what you need to know about overdrafts, credit scores, and the habits that can protect your financial health.

What Is an Overdraft?

An overdraft happens when you spend more than what’s available in your checking account, and your bank covers the difference, usually for a fee. You might have overdraft protection, which automatically pulls money from a linked savings account or credit card. Or you might get hit with multiple fees for each transaction that overdraws your account.

While this might seem separate from your credit profile, the way you manage your bank account can impact your creditworthiness down the line.

Does Overdraft Affect Credit Scores?

Let’s get this part clear. Overdrafts do not directly affect your credit score. Here’s why: 

• Credit bureaus don’t track checking account activity. Your credit score is based on data related to credit cards, loans, and other forms of borrowing. Overdrafts, which occur in checking accounts, are not part of that ecosystem because they aren’t related to debt and borrowing.
• Overdrafts are not credit accounts. Unless your bank links overdraft protection to a credit card or personal line of credit, overdrafts are not viewed as “borrowing” in the eyes of the credit bureaus.

So in most cases, if you go over your balance and pay the fees, your credit score won’t take a hit.

Over 200,000 people have rebuilt their credit with our proven strategies. Join our free credit-education program here. 

When Overdrafts Can Hurt Your Credit

Even though the answer to “does overdraft affect credit scores” is usually no, there are some situations where overdrafts can lead to credit damage if left unresolved: 

• Unpaid overdraft fees: If you ignore the negative balance and let it sit unpaid, your bank might eventually close your account and send the debt to a collection agency.
• Collections: Once a debt is in collections, it will be reported to the credit bureaus, and that will affect your credit score.
• ChexSystems: Banks report overdrafts and other checking account mismanagement to ChexSystems, a consumer reporting agency. This doesn’t impact your credit score, but it can make it hard to open new checking accounts.

So while the act of overdrafting won’t lower your credit score, neglecting to resolve it might.

What Factors Determine Your Credit Score?

If overdrafts don’t typically count, what does? Your credit score is a measure of how you handle credit, not your checking account. It changes frequently, sometimes daily, as lenders report new activity, old accounts fall off, or inquiries are added. Although FICO uses 22 criteria in its scoring algorithm, five major categories do most of the heavy lifting.

Payment History (35%)

This is the single most important factor. It includes your track record on credit cards, loans, mortgages, and other accounts. A late payment, especially one that’s more than 30 days overdue, can cause serious damage.

The following are included in your payment history: 

• Mortgage and car loan payments
• Credit card payments
• Collections and charge-offs
• Public records like bankruptcy or foreclosure

But these aren’t: 

• A bill paid one day late
• A bounced check that was quickly resolved
• A utility bill, unless it gets sent to collections

Amounts Owed (30%)

This part of your score looks at how much you owe compared to how much credit you have available. Credit cards matter most here. If your cards are close to maxed out, your score takes a hit—even if you’re making payments on time.

A good rule of thumb? Try to keep the balance on each card under 30% of your limit. So if your card has a $1,000 limit, aim to keep your balance below $300.

Also: 

• Don’t move all your debt onto one card, even if it has a lower interest rate. That can hurt your score.
• It’s better to spread your balances across a few cards and keep them all under that 30% mark.

Loans like car payments and mortgages also factor in, but new loans can hurt your score a little at first. Once you show you’re making steady payments, your score will start to recover.

Over 200,000 people have rebuilt their credit with our proven strategies. Join our free credit-education program here.

Length of Credit History (15%)

The longer you’ve had credit, the better it looks on your report. Lenders want to see that you’ve been managing credit for a while, not just a few months. They look at a few things: 

• How long your oldest account has been open
• The average age of all your accounts combined
• How recently you’ve used your accounts

Every time you open a new credit card or loan, it lowers the average age of your credit history, which can drag your score down a bit. 

Also, don’t be too quick to close old accounts, even if you don’t use them often. That old credit card you’ve had forever? It’s actually helping your score just by being there. Unless there’s a good reason to close it (like high fees), it’s often better to leave it open.

New Credit and Inquiries (10%)

Every time a lender checks your credit because you applied for something, like a credit card, car loan, or mortgage, it creates what’s called a hard inquiry. That can drop your score a little, especially if you don’t have much credit history or if you’ve applied for several things in a short amount of time.

But not all credit checks hurt your score. When you check your own credit, that’s a soft inquiry … and it doesn’t affect your score at all.

Also good to know: if you’re shopping around for a car loan or mortgage, the credit bureaus give you a break. All those checks within a 14 to 45 day window only count as one inquiry, so you won’t get penalized for comparing your options.

Credit Mix (10%)

Lenders want to see a mix of credit types. A healthy profile might include: 

• A mortgage
• An auto loan
• Credit cards
• A personal loan
• Credit rebuilder loans

Watch & Learn: About the Credit Rebuilder Program

What Doesn’t Affect Your Credit Score

It’s just as important to know what doesn’t show up on your credit report. Many people panic over things that won’t move the needle. Here are a few examples:

• Overdrafts on your bank account (unless they go to collections)
• Bounced checks (again, unless they are sent to collections)
• Late payments under 30 days past due
• Utility or cell phone payments (unless they’re in collections)
• Your salary or job history
• Your age, marital status, or education level
• Interest rates or fees on credit cards

That said, new credit scoring models like FICO Expansion Score and VantageScore are starting to experiment with including things like rent and utility payments, but they’re not widely used yet.

How Long Do Items Stay on Your Credit Report?

Most negative items stay on your credit report for seven years. But they don’t affect your score equally over that time.

• Recent late payments cause the most damage
• Old bankruptcies still matter, but less so as time goes on
• Inquiries stay for two years but affect your score for only one

Final Answer: Does Overdraft Affect Credit Scores or Not?

Not directly. But unpaid overdrafts that go unresolved can become collection accounts, and those do affect your score.

The best way to avoid trouble is to: 

• Monitor your checking account regularly
• Use overdraft protection wisely
• Repay any negative balances quickly

And remember, while overdrafts are unlikely to affect your credit report today, your broader financial habits matter more than any single mistake. If you’re working toward a stronger credit score, focus on the five core areas: paying on time, keeping balances low, building credit history, diversifying your credit, and applying for new credit strategically. 

Your checking account is not part of your credit profile, but your financial discipline is.

Over 200,000 people have rebuilt their credit with our proven strategies. Join our free credit-education program here.

Do I Need a Debt-Collector Attorney? And If So, What Kind?

When people use the term “debt collector attorney,” they are usually referring to one of two types of legal professionals: 

1. A bankruptcy attorney to help them get out of debt
2. A consumer protection attorney to help them fight back if their rights have been violated.

Let’s take a look at these two professionals. 

Part One: You Need Help Getting Out of Debt

If your bills have become unmanageable, collectors are blowing up your phone, or you’re behind on major payments like a mortgage, car loan, or credit card, a bankruptcy attorney is often your best ally.

A bankruptcy attorney will:

• Help you decide if bankruptcy is the right move
• Determine which type of bankruptcy to file (Chapter 7 or Chapter 13)
• Stop creditor harassment the moment your case is filed
• Protect your wages, home, car, and bank account
• Wipe out qualifying debts like credit cards, personal loans, and medical bills
• Guide you through rebuilding your credit afterward

Let’s take a minute to dispel some myths about bankruptcy. After all, bankruptcy gets a bad rap. For decades, it’s been framed as a last resort or a personal failure, but that couldn’t be further from the truth. Bankruptcy is a legal tool, written into the system, designed to help regular people reset after financial hardship. Job loss, medical bills, divorce, inflation: these are the kinds of events that push people into debt, not reckless spending. Filing for bankruptcy doesn’t mean you’ve given up. It means you’re choosing a path forward, one that stops the bleeding and gives you the structure, protection, and timeline you need to rebuild. And with the right plan, you can come out the other side with better credit, less stress, and a shot at real financial freedom.

Watch & Learn: You’ve Been Lied to About Bankruptcy

Consider calling a bankruptcy attorney if: 

• You’re behind on credit card or loan payments
• You’re being sued by a creditor
• Collectors are threatening wage garnishment
• You’ve tried budgeting, settlement, or consolidation—but nothing’s worked
• You’re stressed, stuck, and ready for a real reset

Here’s the part most people don’t realize: Filing bankruptcy immediately stops collection activity, including lawsuits, garnishments, and phone calls. That legal protection is called the automatic stay, and it goes into effect the moment your case is filed.

In other words, bankruptcy might not just be a last resort. It might be your most powerful financial tool. 

If you need an introduction to a bankruptcy attorney, we are happy to help. Schedule a free consultation with a debt professional, and we’ll connect you with a bankruptcy attorney in your state. 

Part Two: You’re Being Harassed or Misinformed

If you’re getting calls that don’t stop, letters filled with legal threats, or credit report entries that don’t look right, you may need a debt collector attorney who focuses on consumer rights. These attorneys, consumer rights attorneys, help when collectors or credit bureaus break the law. That includes violations of: 

• The Fair Debt Collection Practices Act (FDCPA)
• The Fair Credit Reporting Act (FCRA)
• State-level consumer protection laws

The Fair Debt Collection Practices Act

This federal law limits what debt collectors are allowed to do. It protects you from harassment, lies, and intimidation. For example, collectors can’t call you at work if you’ve told them not to. They can’t call in the middle of the night, threaten you with jail, or misrepresent what you owe. If they do, they’ve broken the law—and a debt collector attorney can hold them accountable.

The Fair Credit Reporting Act

This law governs your credit report. It requires that the information reported about you is accurate, complete, and up to date. If a creditor or credit bureau reports something incorrectly, like a paid-off account showing as unpaid or an account that was discharged in bankruptcy, you have the right to dispute it. And if they fail to fix the error, an attorney can step in and potentially get you compensation.

State-level Consumer Protection Laws

Many states offer additional protections on top of federal laws. These can include stricter rules on how debt is collected, tighter timelines for correcting credit errors, or higher penalties for abusive behavior. A consumer protection attorney will know the laws in your state and can use them to your advantage.

How Can a Consumer Rights Attorney Help Me?

If you’re being harassed by debt collectors, receiving letters that feel more like threats than information, or spotting credit report errors that never seem to get fixed, a consumer rights attorney can step in and level the playing field. These attorneys specialize in holding debt collectors and credit reporting agencies accountable when they break the law, something that happens far more often than most people realize.

A consumer rights attorney can stop the harassment, challenge false information, and even take legal action on your behalf. If you’ve told a collector not to call you at work and they keep doing it, that’s a violation. If they’re calling before 8 a.m. or after 9 p.m., lying about what you owe, threatening arrest, or continuing to report a discharged debt after your bankruptcy, they’re breaking federal law.

Consumer rights attorneys can sue collectors who use illegal tactics, demand the removal of inaccurate credit entries, and pursue damages when your rights have been violated. And in many cases, if a company is found liable, they may have to pay your attorney fees, not you, and you might receive financial compensation.

You might want to contact a debt collector attorney if: 

• A collector is calling you repeatedly, even after you’ve asked them to stop
• You’re getting confusing or threatening letters from companies you don’t recognize
• You’re being asked to pay a debt that seems inflated or unfamiliar
• Your credit report includes inaccurate, outdated, or duplicate entries
• You filed bankruptcy, but collectors are still contacting you about discharged debt

Table 1: What Kind of a Debt Collector Attorney Do You Need? 

In some cases, you may need both. For example, a bankruptcy attorney can help you eliminate the debt, and a consumer rights attorney can help you fight back if creditors break the law during or after the process. And in some cases, your debt collector attorney specializes in both bankruptcy and consumer rights. 

In any case, debt doesn’t fix itself, and neither do violations of your rights. If you’re feeling stuck, ashamed, or overwhelmed, the best thing you can do is get clarity.

You don’t need to have all the answers before making the call. A good attorney will walk you through your options and help you understand your rights.

Yes, You Can Get a Home Loan With Fair Credit!

A 720 credit score is not required to buy a home (but it will help lower your interest rates). In fact, FHA loans allow approval with credit scores as low as 500, though you’ll need to meet specific requirements. Once your score hits 580, options start to open up significantly. At 650, you’re above that threshold and in a position to qualify for multiple loan types.

Even people with scores in the 550s have been able to refinance under the right conditions. The key is understanding how lenders evaluate the whole picture, not just the number.

Payment History Often Matters More Than Credit Score

When it comes to mortgage approval, your recent payment behavior carries a lot of weight, sometimes even more than your actual credit score. One of the most important criteria is that you have no late mortgage payments in the last 12 months. Even if you’ve had a late payment in the past, some lenders will consider a strong letter of explanation, especially if there were extenuating circumstances like illness or job loss. 

What You Can Qualify For With a 650 Credit Score

Several loan programs are available to borrowers with a 650 credit score, including FHA loans, VA loans, USDA loans, and conventional loans. Let’s take a look at these one at a time. But first, here’s a quick comparison …

Table 1: How Much of a Home Loan Can I Get With a 650 Credit Score? 

FHA Loans

An FHA loan is a type of mortgage that’s insured by the Federal Housing Administration (FHA) and designed to make homeownership more accessible, especially for first-time buyers or those with lower credit scores. FHA loans are less credit-sensitive and highly accessible. The interest rate difference between someone with a 580 and a 720 credit score might be just one-eighth of a percent, small compared to the rate gaps in conventional loans. FHA loans also allow your upfront mortgage insurance premium (usually around $4,000–$5,000) to be rolled into your loan amount. That said, the FHA sets maximum loan amounts based on location.

So to answer your question— How much of a home loan can I get with a 650 credit score?—when it comes to FHA loans, the 2025 limit is around $498,257 in most areas, but it can go up to $1,149,825 in high-cost areas.

VA Loans

VA loans are one of the most affordable ways to buy a home if you’re a veteran or active-duty service member. They don’t require a down payment, and even with a 650 credit score, you’re likely good to go.

And here’s something a lot of people don’t realize: there’s no official loan limit anymore if you have full VA loan benefits. The only time a cap might apply is if you already have a VA loan or used part of your benefit before. But if this is your first time using it (or your previous loan is paid off), you’re wide open. So let’s answer that question with VA loans: How much of a home loan can I get with a 650 credit score? You can borrow as much as a lender is willing to give you without a down payment.

Watch & Learn: How to Get a Home Loan … Even with Bad Credit?

USDA Loans

USDA loans are another great option with no down payment, but your home must be in a USDA-approved rural area, and you must meet household income limits.

There isn’t a set loan amount cap like there is with some other programs, but there is an income cap: Your household income usually has to be below 115% of the median income in your area. That’s how the program stays focused on helping low- to moderate-income families in rural communities.

Now, just because you meet the income requirement doesn’t mean you can borrow any amount. The loan size you qualify for is based on your debt-to-income ratio (DTI), monthly bills, credit, and what you can realistically afford. In other words, they look at your finances to decide how much house you can handle, not just whether you fall under the income limit.

Also worth noting: The home has to be considered modest in size, cost, and features, so USDA loans won’t cover luxury properties, even if they’re technically in a rural area.

So to answer your question directly: How much of a home loan can I get with a 650 credit score? It’s less about how much the house costs and more about how much you earn, how much debt you carry, and where the property is located.

For best results, work with a lender who understands the impact of credit scores on your loan amount, and who can work with your unique needs. Click here for an introduction to a lender in your area.

Conventional Loans

A conventional loan is a mortgage that isn’t backed by a government agency like FHA, VA, or USDA. Instead, it comes from private lenders, such as banks, credit unions, or mortgage companies. These loans typically follows guidelines set by Fannie Mae and Freddie Mac.

Conventional loans offer a lot of flexibility. You can use them for a primary residence, a second home, or even an investment property. You also have the potential to avoid mortgage insurance if you put 20% down, and if you do pay mortgage insurance, you can get it removed once you reach 20% equity.

But they are more credit-sensitive, and this is where having a 720+ credit score is so important. With a 650 credit score, you’re likely to face a higher interest rate than someone with a 720+ score. Your loan approval might also be subject to stricter debt-to-income requirements, and private mortgage insurance (PMI) could be more expensive compared to an FHA loan.

So to answer your question—How much of a home loan can I get with a 650 credit score?—with a conventional loan, your approval amount will depend heavily on your income, existing debts, and how much you can put down. While 650 meets the minimum credit requirement for many lenders, you may qualify for a smaller loan amount or higher monthly payment than you would with an FHA loan. Still, it’s worth comparing side by side, especially if you have strong income or a larger down payment saved up.

Would you like to learn how to improve your credit score in preparation for a conventional home loan? Enroll for free in our credit-improvement program, 7 Steps to a 720 Credit Score. 

Why Credit Cards Matter After a Financial Setback

If you’ve gone through a tough financial time, the idea of opening a credit card might feel risky or even wrong. But when it comes to rebuilding your credit score, credit cards are one of the most effective tools you have, if you use them wisely.

Here’s why they matter:

• They help you establish or re-establish revolving credit
• They show lenders you can borrow and repay responsibly
• They improve your credit utilization ratio (as long as balances stay low)
• They create a consistent record of on-time payments

In the world of credit-scoring, new behavior carries more weight than old mistakes. Credit scoring models pay close attention to your most recent activity, especially the last 24 months. That means it’s entirely possible to rebuild your credit score within 12 to 24 months, even after a major financial meltdown.

But it doesn’t happen automatically. You need to take intentional steps, and one of the most important is opening new credit cards and managing them the right way.

Want a clear roadmap for rebuilding your credit fast? Get free access to the 7 Steps to a 720 Credit Score course, and learn how to use credit cards, installment accounts, and proven strategies to hit your score goals in as little as a year.

Enroll Here

Rebuilding isn’t about forgetting your past. It’s about showing the credit bureaus, and yourself, that you’ve turned a corner.

The Sparrow Rewards Mastercard: One Option Among Many

The Sparrow Rewards Mastercard is designed for people with fair or poor credit who want to rebuild. It offers a few standout features:

• 1% cashback on all purchases when paid on time
• Monthly reporting to all three credit bureaus
• Virtual card access upon approval
• Credit limit increases over time with responsible use

Sounds promising, right? It can be. But there are trade-offs:

• APR is 29.74% for purchases and 31.74% for cash advances
• Annual fee is $59 the first year, then $99 (billed monthly at $8.25)
• No known autopay feature, making it harder to avoid late payments
• Mixed reviews about declined purchases and customer service

If you choose to apply, it’s important to be realistic about the costs and whether you’ll be able to stay on top of manual payments. Used properly, it can help—but only if it fits into a larger credit strategy.

The Sparrow Rewards Mastercard is just one of many credit cards designed for people with fair to poor credit. Before applying, look at our handpicked list of the best credit cards for rebuilding credit—including options with no annual fees, easier approval odds, and better customer experiences.

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What to Look For (and Avoid) in a Credit Card When Rebuilding Your Credit Score

Credit cards usage is a key factor in how your credit score is calculated. The more responsible activity the credit bureaus can see on accounts that are actively being used and paid on time, the faster your score improves.

A lot of people want to wipe their hands of credit after a financial meltdown, but this is a losing strategy. Why? The credit-scoring bureaus need evidence that you can manage debt wisely. If they only have your older, negative patterns, they won’t ever give you a high credit score.

Remember this: No credit is just as bad as poor credit. When it comes to credit cards, three is the magic number. With three credit cards, you can:

• Maximize your available credit (which improves your utilization ratio)
• Show consistent on-time payments across multiple accounts
• Build a strong credit profile with more depth and reliability

This shows the credit scoring models that you can manage multiple lines of credit without falling behind. That pattern of responsible behavior, repeated month after month, is what drives meaningful score growth.

Here’s what you should look for in a credit card:

• Reports to all three bureaus
• Reasonable annual fees (or none)
• Tools that make payments easy (like autopay)
• Credit limit increase opportunities
• Low interest rate (though you will avoid paying interest if you pay your bills on time and in full)

Here’s what you should avoid:

• Cards with unclear terms or hidden fees
• High APRs that could trap you in debt if you carry a balance
• Cards that don’t report to all three bureaus
• Cards with no upgrade path or no rewards at all
• Poor customer service or tech issues that interfere with payment reliability

The Sparrow Rewards Mastercard checks some of these boxes, but not all.

Secured Cards and Authorized User Accounts: Two More Ways to Build Credit

If you’re not ready (or able) to get approved for a traditional credit card like the Sparrow Rewards Card, there are two powerful alternatives that can still help you rebuild your credit: Secured credit cards and authorized user accounts.

A secured credit card works just like a regular credit card, except you put down a deposit that acts as your credit limit. For example, you might deposit $200 and then have a $200 credit line. Because you’re putting up the deposit, secured cards are much easier to qualify for, even after bankruptcy or a financial meltdown. And as long as the card reports to all three credit bureaus and you use it responsibly, it helps you build your credit the same way an unsecured card would.

Many people start with a secured card and eventually graduate to a traditional, unsecured credit card.

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Another option is to ask someone you trust, like a spouse, sibling, or close friend, to add you as an authorized user on their credit card account. When you’re added as an authorized user, the payment history and credit limit on that account often get added to your credit report. If the primary account holder keeps the balance low and always pays on time, that positive history can boost your score, even if you don’t use the card yourself.

Important: Make sure the card issuer reports authorized user data to the credit bureaus. Otherwise, it won’t impact your score.

Other Smart Ways to Rebuild Your Credit Score

Opening three credit cards isn’t the only way to rebuild your credit score. Here are a few other options. (And remember, you can join our credit education program for free here.)

1. Keep your credit card balances low. Preferably, you should pay your bills in full each month or keep the balance below 30 percent of the limit month-round, or 10 percent if possible. If you max out your credit cards or carry a high balance, the credit-scoring bureaus will assume you are having financial struggles.

2. Remove errors from your credit report. About 40+ percent of people have errors on their credit report. Our free credit-education program gives you all the templates you need to dispute and correct these errors.

Open an installment account. Credit-scoring bureaus like to see that you can handle a mix of credit, so opening three credit cards and an installment account gives shows the credit bureaus that you can juggle different types of obligations.

How the Sparrow Rewards Mastercard Fits In

The Sparrow card might work as one of your three revolving accounts, especially if you like the idea of earning cashback for good habits. But it may not be the strongest option if:

• You prefer autopay
• You’re concerned about fees
• You want a simpler or more beginner-friendly experience

At the end of the day, there’s no such thing as a one-size-fits-all credit card. The Sparrow Rewards Mastercard can be a useful tool in the right hands, but credit rebuilding isn’t just about what card you carry. It’s about how you use it. So don’t just chase approval. Choose credit products that align with your financial goals, support your habits, and build your confidence.

Want to see a list of credit cards that actually help you rebuild? We’ve done the research and pulled together a trusted list of the best cards for bad credit. Check out our recommendations here.

What Is Klarna?

Klarna is a financial technology company that gives shoppers flexible ways to pay over time. Rather than requiring full payment upfront, Klarna lets you choose from several short-term and long-term options, depending on the type of purchase and your eligibility.

When you choose Klarna at checkout, you’re typically offered one of several payment options:

• Pay in 4: Split your purchase into four equal, interest-free payments, paid every two weeks. This option does not get reported to the credit bureaus and typically involves only a soft credit check. (We’ll explain “soft” credit checks in a minute. Keep reading!)
• Pay in 30 Days: Get your item now and pay the full amount in 30 days. Like Pay in 4, this option does not appear on your credit report unless payments are missed.
• Financing Plans: Choose monthly payments over 6, 12, or even 36 months. These longer-term options may involve interest, a hard credit inquiry, and reporting to the credit bureaus.

Does Klarna Affect Your Credit Score?

Klarna can affect your credit score in two main ways: 1) through a hard inquiry; and 2) through an installment account that is reported to the credit bureaus. Let’s start by taking a look at this question: Does Klarna affect your credit score through credit checks, also known as credit inquiries?

Hard Inquiries Versus Soft Inquiries

A credit inquiry is exactly what it sounds like: someone is requesting information about your credit score. This is also known as “pulling” your credit report. Inquiries account for about 10 percent of your credit score, so they matter—but not as much as things like payment history or amounts owed.

There are two types of credit inquiries: soft inquiries and hard inquiries.

A soft inquiry, or soft pull, occurs when someone reviews your credit report for reasons unrelated to a new credit application. This includes checking your own score, getting prequalified, or using certain buy now, pay later services. Unlike hard inquiries, soft pulls do not affect your credit score in any way.

A hard inquiry happens when you apply for a new credit account, like a credit card or loan. This type of inquiry can cause a small drop in your credit score, especially if your credit history is limited. The reason? Credit bureaus view hard as a possible red flag that you might be preparing to take on too much debt or struggling to pay your bills.

However, people can often worry too much about inquiries. The impact of a hard inquiry is usually temporary. Most people see their score rebound within a few months, as long as they make payments on time and keep their balances low. Also, credit scoring models group similar inquiries (like those made while rate shopping for a car or home loan) into a single event if they occur within a 14- to 45-day period.

Hard inquiries affect your score for about one year, but they remain on your credit report for two years.

Klarna and Credit Inquiries

Klarna may perform a soft or hard inquiry depending on the payment option you choose. Their short-term products like Pay in 4 and Pay in 30 Days typically involve only a soft pull and are not reported to credit bureaus unless payments are missed.

But if you choose one of Klarna’s longer-term financing plans, a hard inquiry is likely, and the loan may be reported to the credit bureaus.

Klarna and Installment Accounts

When evaluating whether Klarna affects your credit score, it’s important to understand that Klarna’s financing plans can show up as installment accounts on your credit report. When you use Klarna’s financing options (not its Pay in 4 or 30 Days), the account shows up as an installment account on your credit report. This isn’t necessarily a bad thing: Installment accounts can help your credit score if you make payments on time because they add to your credit mix and strengthen your payment history.

That said, having too many installment accounts can hurt your score, especially at first. This is because it signals to the credit bureaus that you might be over-leveraged and in danger of being unable to pay your bills. Having a high balance-to-loan amount ratio can also be damaging to your score, but the longer you pay down your balance, the more your score will improve.

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Be Careful!

These buy now, pay later tools can make it easy to overextend yourself. Taking on too many installment accounts—or borrowing more than you can comfortably repay—can lead to missed payments and rising debt, both of which can hurt your credit.

Klarna also notes that it may report missed payments for certain short-term products if they are not resolved in a timely manner, including the Pay in 4 and 30 Days options. So even if your plan started with a soft inquiry, it could still end up affecting your credit if payments go unpaid.

Pros and Cons of Using Klarna

Whether Klarna is a smart choice really depends on why you’re using it. Some people turn to buy now, pay later options to spread out the cost of a big purchase without interest. Others use it to manage cash flow when money is tight. Whatever your reason, it’s worth looking at the potential benefits—and the trade-offs. Here are some of the main pros and cons to consider.

Klarna Pros

1. Interest-Free Payments: Most of Klarna’s short-term options (like Pay in 4) come with no interest, making them a great alternative to credit cards that charge double-digit APRs.
2. Instant Approval: Approval decisions are made quickly, often in seconds. You don’t need a high credit score to qualify for the Pay in 4 or Pay in 30 Days
3. No Upfront Cost: You get the product right away and pay over time, which can help with cash flow.
4. Widely Accepted: Klarna is integrated with many well-known retailers, from fashion and electronics to home goods and travel.

Klarna Cons

While Klarna can be convenient, there are also some downsides:

1. Not All Plans Are Interest-Free: Some long-term financing options charge interest, and APRs can be high depending on your credit profile.
2. Temptation to Overspend: Splitting payments into smaller chunks can make purchases feel more affordable than they really are. This can lead to overspendingand accumulating debt.
3. Late Fees: If you miss a payment, Klarna may charge late fees. While they are usually small, repeated missed payments can add up.

Potential Impact on Credit Score

Does Klarna affect your credit score? That depends, so let’s recap what we have learned in this article:

• A hard inquiry for a financing option will hurt your credit score, but only briefly, and only by a few points, assuming that all of your other credit behavior is positive.
• A soft inquiry for a shorter plan, like Klarna’s 30 Days or Pay in 4, will not hurt your credit score.
• A missed payment, regardless of your plan, will likely hurt your credit score.
• The installment account added to your credit report when you use Klarna’s financing plan can help your credit score as long, especially as you pay your debt down. However, if you have too many installment accounts, your credit score could suffer because the credit-scoring bureaus might think you are in danger of having too many financial obligations.

So in short: Does Klarna affect your credit score? The answer depends on the plan you choose and how well you manage your payments.

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