How Upstart Could Affect Your Credit Score

Wondering how an Upstart loan might influence your credit? While the process is designed to be credit-conscious, several key stages can impact your score, from application to final repayment.

1. Initial Rate Check: Checking your potential rate with Upstart only requires a soft credit inquiry. This type of check is for pre-qualification purposes and has no effect on your credit score, allowing you to see offers without commitment.
2. Formal Application: If you accept a loan offer and proceed, Upstart will perform a hard credit inquiry. This formal check is recorded on your credit report and may cause a slight, temporary dip in your score.
3. New Account Impact: Once approved, the new loan is added to your credit report. This lowers the average age of your accounts, a factor in credit scoring, which can also result in a minor, temporary score decrease.
4. Credit Mix Diversification: On the positive side, adding an installment loan can improve your credit mix, especially if you primarily have revolving credit like credit cards. A diverse mix of credit types is generally viewed favorably by scoring models.
5. Payment History: The most significant long-term impact comes from your payment habits. Consistently making on-time payments will build a positive payment history and can substantially improve your credit score over the life of the loan.

How Much Will Upstart Affect Your Credit Score?

Several factors determine how an Upstart loan might impact your credit score. Here are a few key things to keep in mind:

• Soft vs. Hard Inquiry. Checking your rate with Upstart results in a soft inquiry, which doesn't affect your score. A hard inquiry occurs only if you proceed with the loan, which can cause a temporary dip in your score.
• New Credit Account. Opening a new loan will decrease the average age of your credit accounts. This can temporarily lower your score, but the effect diminishes over time as you build a positive payment history with the loan.
• Payment History. Your payment history is the most significant factor in your credit score. Making on-time payments on your Upstart loan will help build a positive credit history and can improve your score over time.

How You Can Avoid Upstart Affecting Your Credit Score

Rate Shopping Without Impact

Upstart performs a soft credit inquiry to check your rates, which does not affect your credit score. This allows you to explore your loan options without any risk. A hard inquiry is only conducted if you decide to accept a loan offer and proceed.

Making On-Time Payments

After accepting a loan, making consistent, on-time payments is crucial. This positive payment history is reported to credit bureaus and can help build your credit. Conversely, late payments will be reported and can negatively impact your score, so staying current is essential.

Using Funds for Consolidation

If you use an Upstart loan for debt consolidation, you can lower your credit utilization ratio, which may improve your score. To maintain this benefit, avoid accumulating new balances on the credit cards you've just paid off to keep your overall debt low.

Ways to Improve Your Credit Score

Improving your credit score is not only possible but crucial for your financial life, and with consistent effort, most people can see meaningful changes within three to six months. By taking a few strategic steps, you can build a stronger credit profile and unlock better financial opportunities.

• Establish Automatic Bill Payments: Your payment history is the most significant factor in your score, so setting up automatic payments is a simple way to ensure you never miss a due date.

• Reduce Your Credit Utilization Ratio: Aim to keep your credit utilization below 30% by paying down balances or requesting a credit limit increase on your accounts.

• Monitor Your Credit Reports: Regularly check your free credit reports from Experian, TransUnion, and Equifax to identify and dispute any inaccuracies that could be hurting your score.

• Become an Authorized User: Ask a trusted friend or family member with a strong credit history to add you as an authorized user on one of their accounts to benefit from their positive payment history.

• Diversify Your Credit Mix: Lenders prefer to see that you can responsibly handle various types of credit, such as a mix of credit cards (revolving credit) and installment loans (auto, personal, or mortgage).

• Limit Hard Inquiries: Avoid applying for too much new credit at once, as multiple hard inquiries can lower your score. Use prequalification tools to shop for rates without impacting your credit.

The Bottom Line

Checking your rate with Upstart won't impact your credit score, as it only requires a soft inquiry. Finalizing a loan, however, results in a hard inquiry that may affect your score.

Frequently Asked Questions

Does checking my rate with Upstart affect my credit score?

No, checking your rate only requires a soft credit inquiry, which does not impact your credit score. You can view potential loan offers without any negative effect.

Will my credit score drop after accepting an Upstart loan?

Accepting a loan triggers a hard credit inquiry, which may cause a slight, temporary dip in your score. This is a standard part of any new credit application.

How does an Upstart loan impact my credit history?

Upstart reports your payments to credit bureaus. Consistent, on-time payments can help build a positive credit history, while missed payments can have a negative impact.