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Best of Credit Building

Credit Building

Guides & reviews to help improve credit

A good credit score is the key to financial health, including higher loan approvals, lower interest rates, and better repayment terms. Today, there are more apps, lenders, and credit-building tools than ever before to help boost credit scores. However, they are not all created equal; some will be better for specific needs than others. If you're looking to build credit, monitor your scores and reports, or need help with credit repair, read on to learn about the tools and resources that can help get your credit in top shape.

Frequently Asked Questions

How long does it take to build credit?

Building your credit can take from six months up to a couple of years, especially if you don't have a credit history yet. You need to have at least one credit account open and make on-time payments regularly. The lender will need to be reporting to at least one of the three major credit bureaus to establish a credit score.

Once you have established your credit history and score, it may take several years to build a solid credit profile and increase your score to the excellent range. You will need to add a few more credit accounts and establish a positive payment history with them to build your credit enough to qualify for the most favorable lending terms.

What credit score do you need?

Your credit score can open the door to loan approvals, lower interest rates, and the ability to qualify for more premium credit cards. There are different credit score requirements for different types of loans and credit products.

We'll be covering the minimum score needed for the most common purchases and credit products below:

What credit score is needed to buy a house?

You will most likely need a credit score of around 620 or higher to qualify for a conventional home loan. And while there are several other factors to consider when qualifying for a home loan, your credit score is one of the most important.

There are ways to buy a home if your credit score is lower, and some loans may require a higher score as well. It all depends on your type of loan, the amount of your down payment, and what your lender deems acceptable. Here are some of the loan types and credit scores needed:

  • FHA Loan - 500 credit score with 10% down, or 580 score with 3.5% down.
  • VA Loan - No stated minimum, but typically 620 credit score is needed
  • USDA Loans - No stated minimum, but usually a 580 credit score needed
  • Conventional - 620 credit score with a minimum of 3% down

These listed credit scores are guidelines and not a hard and fast rule. As always, check with your lender for their specific loan requirements.

What credit score is needed to buy a car?

There are no industry minimums required for auto loans, and credit requirements will vary by lender. Auto loans have a wide variety of borrowing options, from banks and credit unions to dealer financing, and some will even offer loans to borrowers with bad credit or no credit history.

The best loan rates will be reserved for those with excellent credit profiles and high scores, so be prepared to pay a higher rate if your score is low. And while some lenders work with borrowers with poor credit, you may need to provide a larger down payment as well.

What credit score is needed for renting?

There are no set credit score limits for renting a home or apartment, but most landlords will run a credit check, and having a higher credit score will help you qualify, as well as a previous positive rental or mortgage history. If there are multiple applicants for a location, the higher your score, the higher your chances of being selected as well.

According to RentCafe, the average credit score of renters ranges from 550 to 719+, with higher scores being required in more affluent cities. This doesn't mean you can't rent a place with a low score, but you will need to be able to explain your low score to a potential landlord.

In addition to your score, landlords are also interested in any other red flags on your credit report, such as late payments, collections, a history of bankruptcy, or high debt balances.

What credit score is needed for a personal loan?

Personal loans come in all shapes and sizes, but most of them need a credit score of at least 580 to get pre-approval. Keep in mind that the lower your score, the higher your interest rate might be. That being said, there are companies that offer loans to applicants with credit scores as low as 300 or for those with very limited credit history.

Companies like Upstart don't require a minimum score but will look at other factors in addition to a credit score to qualify applicants. This may include your job history, income, and other factors.

There may also be a large up-front fee for getting the loan, which could be up to 10% of the loan amount.

What credit score is needed for a home equity loan?

A home equity line of credit (HELOC) is a loan that is secured by your house as collateral. These loans can vary in their requirements and will depend on your income, current debt loan balances, house value, and other factors.

You will most likely need a credit score of 680 or higher to qualify for a HELOC. And some lenders may require a higher score. While it may be possible to get a loan with a lower credit score, the rates are typically much higher, and the loan terms may not be the best.

If your credit isn't great and you have equity, you might want to consider a home equity investment company.

What credit score is needed for Affirm?

Affirm is a "buy now, pay later" service that lets you pay off your online purchases over time. There is no stated credit score minimum required to qualify for Affirm, though users report qualifying with a score as low as 550.

As with most loans, Affirm will review more than just your credit score, including your income, debt-to-income ratio, credit utilization, payment history, and more. To get the most favorable terms, having a score of 650 or higher will increase your chances of better rates with Affirm.

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