One common credit card question: Does your salary and income impact your credit score? You may be glad to know it doesn’t. The size of your paycheck does not influence whether you have a good or bad credit score.
“Income isn’t considered in credit scoring systems,” John Ulzheimer, formerly of FICO and Equifax, tells CNBC Select.
“Income isn’t even on your credit reports so it cannot be considered in credit scores because credit scores only consider what’s on your credit reports,” Ulzheimer explains. “In fact, no wealth metrics are factored into your credit scores.”
That means your debt-to-income ratio and net worth also don’t impact your credit score.
Are you struggling with a low credit score? Check out CNBC Select’s round-up of the best cards for building or rebuilding credit.
What impacts your credit score?
Income doesn’t affect your credit score, but it’s still important to know the five main factors of a FICO credit score, which is the most common credit score used by lenders.
- Payment history (35%): Whether you’ve paid past credit accounts on time.
- Amounts owed (30%): The total amount of credit and loans you’re using compared to your total credit limit, also known as your utilization rate.
- Length of credit history (15%): The length of time you’ve had credit.
- New credit (10%): How often you apply for and open new accounts.
- Credit mix (10%): The variety of credit products you have, including credit cards, installment loans, finance company accounts, mortgage loans and so on.
Do lenders consider your income?
While income doesn’t affect your credit score, Ulzheimer adds a disclaimer: “That certainly doesn’t mean income and wealth aren’t considered by lenders.” After all, when you fill out a credit card application, you will be asked to enter your income.
When lenders review your eligibility for credit, he explains, they typically measure two things: Your ability to pay your bills (also known as capacity) and whether you pay your bills (also known as credit risk).
Income is considered a measurement of your capacity, not credit risk. While income doesn’t have a direct impact on your credit score, it can have an indirect impact since you need to have sufficient income to pay your bills. And if you don’t make enough money to cover your bills, you can rack up debt or miss payments, which can negatively impact your credit score.
The size of your income doesn’t necessarily affect your credit limit, and having a high salary doesn’t guarantee a higher line of credit. However, if you update your income with a card issuer to a higher amount, you may see an increase in your credit limit, which could be positive for your credit utilization ratio. Also some charge cards, like the American Express® Gold Card, have no preset spending limit, which means they don’t assign a credit limit.
Want to learn more about credit scores? Here’s how to understand and check your credit score for free and how to check your odds of getting approved for a credit card without hurting your credit score.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
What To Do When You’re Rejected For A Mobile Phone Contract
By Harriet Meyer
Many mobile phone contracts don’t require you to pay a penny upfront – even for the latest smartphone. Instead, you commit to regular payments over, say, 18 or 24 months.
But, just like other credit applications, such as for a mortgage or loan, you could be rejected for a mobile phone contract if you have a bad credit rating.
Here, we consider why you might find yourself in this frustrating position and – most importantly – what you can do about it.
Why was my contract application rejected?
It’s usually the first question on everyone’s lips when they have been turned down for credit. And the answer is that, essentially, the provider has checked your credit report and determined that you’re a high-risk customer who may fail to pay off your debt.
Providers use the information on your credit file to assess your history of managing money. So, if you’re rejected, this could be for one of the following reasons, or a combination of these:
- A history of late or missed bill payments, causing providers to see you as financially stretched, or someone who struggles to manage money
- Holding an account in joint names with someone who has a poor credit history
- You’re not registered on the electoral roll, so a provider may not be able to verify your identity and address
- County Court Judgements (CCJs) against your name, or Individual Voluntary Agreements (IVAs) on your credit record, indicating that you could face financial trouble
- Lack of credit history – you need some history of making regular payments to build up your credit history, and show that you can manage regular debt payments.
How can I check my credit score?
If you genuinely have no idea why you have been rejected, it’s worth checking your credit report. This way, you can find out what the provider was looking at when it decided not to offer you a contract.
You can do this at one of the three main credit reference agencies – Experian, Equifax, and TransUnion (formerly Callcredit). Experian offers a free service that enables you to sign up and check your credit score for a general overview. ClearScore is another free service that uses Equifax data.
The way credit scores are calculated varies between the different agencies, but they give providers an idea of how reliable you may be when you’re signing up for a contract.
What can I do if I’m rejected?
Remember that any financial contract is a commitment – so if you’re rejected, consider if it’s sensible to be signing up at all, particularly if you’re battling with other bills.
But whatever you do, avoid applying for a string of mobile phone contracts in the hope of being accepted. Each one will involve a credit search and leave a mark on your file, which could impact on your ability to get future credit, such as a mortgage.
The good news is there may be other options available which means you can still get a new phone or upgrade.
Find out more about your credit report with our guide.
Pay a deposit. The network provider may get around you having a poor credit history by asking you to pay an upfront deposit for the contract to offset any risk that you fail to make payments.
The amount of deposit will vary depending on your credit status, the package and the provider. You typically receive the deposit back once you’ve made several months’ worth of payments – typically ranging from three to 12 months.
Choose a SIM-only tariff. If you’re willing to buy a handset upfront, or already have an old phone you can use, you could opt for a pay monthly SIM-only deal. These are cheaper than full-blown contracts as you’re not receiving and paying for a phone as part of the deal.
You will still have a credit check, but you’ve got a greater chance of being accepted as payments are typically lower for these contracts, so there’s less risk for the provider.
Also, paying your monthly SIM-only bill on time will help show that you can sensibly manage a contract, which may boost your credit score over time.
Opt for a pay-as-you-go deal. If you want a phone for occasional use, then a pay-as-you-go deal might suit. Once you’ve bought a phone upfront, you pay for credit as and when needed. You won’t be tied into a contract, and will not be subject to a credit check.
Get a ‘bad credit’ contract. There are specialist companies which supply phone contracts to people with bad credit. You can do an online search to get an idea of what’s available, or speak to an adviser in a mobile phone store.
However, you may not be able to get the phone model you want, and your monthly payments may be substantially higher than for a standard contract. This is not an option to be taken lightly.
Check out family deals. You may want to ask a family member with a good credit rating to sign up to the contract. That’s if you’re opting for a family deal, when several lines may be connected to a single contract – but only one person pays the bill and undergoes a credit check.
Get a guarantor. Alternatively, you could ask someone to essentially guarantee your contract by co-signing it. But, of course, they must be comfortable being liable for any missed payments, thereby offsetting the risk for the network provider in case you default. Provided you make payments on time, this option can also gradually improve your credit rating.
Improve your credit score. To improve your chances of being accepted for a mobile phone contract or any other form of credit in the future, you can take time to improve your credit score by, for example:
- Registering on the electoral roll with your local authority
- Ensuring you don’t fall behind with monthly repayments on any bills (set up direct debits to pay them automatically)
- Sticking within your credit limit on any cards that you use and clearing the balances every month
- Check your credit report (see above) and if you find any errors, ask the agency to amend them with a ‘Notice of Correction’
Upstart vs. Sofi: Which Personal Loan Is Right for You?
Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders, all opinions are our own.
If you’re looking for a personal loan, you’ll likely come across Upstart and SoFi. Both companies offer flexible loans for a variety of purposes, but there are some differences to keep in mind when deciding between them.
Here’s a comparison of Upstart vs. SoFi to help you choose. Both Upstart and SoFi are Credible partners.
|Fixed rates||8.13% – 35.99% APR4||5.99% – 18.83% APR|
|Loan amount||$1,000 to $50,0005||$5,000 to $100,000|
|Loan terms||3 to 5 years4||2 to 7 years|
|Min. credit score||600
(in most states)
|Does not disclose|
|Time to fund||As soon as 1 – 3 business days6||3 business days|
|Origination fee||0% to 8% of loan amount||None|
|Income||$12,000||Check with lender|
|Residency||Available in all states except IA and WV||Available in all states except MS|
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Upstart personal loans
Founded by ex-Googlers, Upstart’s artificial intelligence platform fully automates 58% of its personal loans. It has originated $6.9 billion in loans and notably offers loans to those with less-than-perfect credit.
Upstart offers personal loans for a variety of uses — including debt consolidation loans, wedding loans, and more. You can borrow as little as $1,000 or as much as $50,000 and can expect fast loan funding.
Learn More: Personal Loan vs. Credit Card
- Lower minimum credit score: Upstart offers personal loans to borrowers with credit scores as low as 600. If you’re looking for bad credit personal loans or fair credit personal loans, Upstart could be a good choice.
- No prepayment penalties: You don’t have to worry about any fees if you pay off your loan early.
- Fast funding: If your application is accepted, you’ll likely get your money within just a few business days. In fact, Upstart says that 99% of applicants get their money after just one business day.
- Low minimum borrowing amount: You can borrow as little as $1,000 with Upstart, which could be helpful if you only need a small loan.
- Lower maximum loan amount: With Upstart, you can only borrow up to $50,000. This could make it harder to fund larger debt consolidations or bigger home improvements.
- High origination fees: With Upstart, you might pay an origination fee of up to 8% of the loan amount.
- No options for visa holders: Upstart doesn’t offer personal loans for visa holders — you must have a Social Security number to borrow with this lender.
Check out our Upstart personal loans review to learn more.
SoFi personal loans
SoFi offers a variety of financial products, including credit card consolidation loans and other types of personal loans. It also provides several perks to its members, such as unemployment protection, career coaching, and networking events.
With SoFi, you can borrow anywhere from $5,000 to $100,000. Plus, SoFi personal loans come with no fees.
Learn More: How Personal Loans Impact Your Credit Score
- Large loan amounts: You can borrow up to $100,000 in unsecured funds with SoFi. This can be useful for home improvement loans, wedding loans, and other large borrowing needs.
- Discounts available: If you sign up for autopay, you can get a discount on your SoFi personal loan. You might also qualify for a discount if you’re using other SoFi products.
- Member benefits and perks: As a SoFi member, you’ll have access to additional resources, including financial planning, career coaching, and networking events. SoFi also provides unemployment protection in case you lose your job.
- Options for visa holders: If you’re a visa holder without a Social Security number, you might still qualify for a SoFi personal loan.
- Higher credit score requirements: You’ll need good to excellent credit to qualify for a personal loan through SoFi. If you have poor or fair credit, you’ll likely need to consider other lenders.
- Higher minimum loan requirement: You’ll need to take out at least a $5,000 personal loan to borrow through SoFi. If you need a smaller loan, SoFi might not be the right choice for you.
- Longer funding time: SoFi personal loans typically take a few business days to fund. If you need a faster loan funding time, you might need to look elsewhere.
See our SoFi personal loans review for more details.
Choosing a lender for a personal loan
A personal loan could help you cover large or unexpected purchases. Before you borrow, it’s a good idea to shop around and consider as many lenders as possible to find a loan that fits your needs. Credible makes this easy — you can compare multiple lenders, like Upstart and SoFi, in two minutes.
Keep Reading: Where to Get a $10,000 Personal Loan
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