Does SoFi Affect Your Credit Score?

How Sofi Could Affect Your Credit Score

Wondering how opening an account with SoFi might move the needle on your credit score? While some actions have no impact, a formal application and subsequent account management can certainly influence it.

1. Rate Shopping (Soft Inquiry): Initially, checking your potential rate for a SoFi loan or product typically results in a soft credit inquiry. This allows you to see what you might qualify for without affecting your credit score.

2. Formal Application (Hard Inquiry): If you decide to proceed with an application, SoFi will perform a hard inquiry to review your credit history in detail. This action is reported to credit bureaus and can cause a temporary, minor dip in your score.

3. New Account Impact: Upon approval, the new account is added to your credit report. This can impact your score in two ways: it can improve your credit mix, but it will also lower the average age of your accounts, which may have a slight negative effect initially.

4. Ongoing Management: The most significant, long-term impact comes from how you manage the account. Your payment history is the largest factor in your credit score; making consistent, on-time payments will help build positive credit over time.

How Much Will SoFi Affect Your Credit Score?

The exact impact on your credit score depends on several factors and your specific credit profile. Here are the main things to consider when applying for a SoFi product.

• Credit Inquiries. SoFi typically uses a soft inquiry for pre-qualification, which won't affect your score. A hard inquiry occurs if you proceed with an application, causing a potential small, temporary dip in your score.
• New Debt. Opening a new loan increases your overall debt and can lower the average age of your credit accounts. This may cause a temporary drop in your score until you build a positive payment history.
• Payment History. This is the most important factor for your credit score over the long term. Consistently making on-time payments on your SoFi loan will help build a positive credit history and improve your score.

How You Can Avoid SoFi Affecting Your Credit Score

Utilize Pre-Qualification

SoFi allows you to check potential rates and loan options through a pre-qualification process. This typically results in a soft credit inquiry, which does not impact your credit score, giving you a clear picture of your eligibility without any negative effect.

Make On-Time Payments

Once you accept a loan, your payment history is reported to credit bureaus. Consistently making payments on time is crucial for building a positive credit history. Late or missed payments can significantly lower your score, so diligence is key to maintaining financial health.

Limit Hard Inquiries

While checking rates is a soft pull, formally applying for a loan triggers a hard inquiry. Too many hard inquiries in a short time can lower your score. Only proceed with a full application when you are serious about accepting a loan to protect your credit.

Ways to Improve Your Credit Score

Improving your credit score is entirely possible and achievable with consistent effort and the right strategy. By following some proven methods, you can see meaningful changes to your score in as little as three to six months.

• Monitor your credit reports regularly. Obtain free reports from the major bureaus to identify and dispute inaccuracies, detect potential fraud, and track your progress.
• Establish automatic bill payments. Your payment history is the most significant factor in your score, so setting up automatic payments ensures you never miss a due date.
• Reduce your credit utilization ratio. Aim to keep your credit usage below 30% of your available limit by paying down balances or requesting a credit limit increase.
• Become an authorized user. Being added to an account with a long, positive credit history can help improve your score, as long as the primary user maintains low balances and pays on time.
• Diversify your credit mix. Lenders like to see that you can responsibly manage different types of credit, such as credit cards, installment loans, and mortgages.
• Limit hard inquiries. Only apply for new credit when necessary and use prequalification tools when possible, as multiple applications in a short time can temporarily lower your score.

The Bottom Line

SoFi uses a soft credit pull for pre-qualification, which doesn't affect your score. A hard inquiry occurs only if you proceed with a loan, which can have a temporary impact.

Frequently Asked Questions

Does checking my rate with SoFi affect my credit score?

No, checking your potential rates with SoFi only requires a soft credit pull, which does not impact your credit score. It’s a risk-free way to view your options.

Will taking out a SoFi loan hurt my credit score?

A new loan application results in a hard inquiry, which may cause a small, temporary dip. However, making consistent, on-time payments can positively impact your credit over time.

How does SoFi report my loan payments?

SoFi reports your payment activity to all three major credit bureaus—Equifax, Experian, and TransUnion. Timely payments can help build a positive credit history across the board.