Here's What to Do When You Discover Your Credit Score Too Late
You've worked hard, landed a great job, and finally have the income to make a major purchase. Maybe you need a reliable car for your commute, or you're ready to stop renting and buy your first home. Then you get the news: your credit score won't qualify you for the loan you need.
If this sounds familiar, you're not alone. Many young professionals in their 20s discover credit problems only when they try to borrow money for something important. The good news? Having a high income and stable employment puts you in an excellent position to fix this faster than you might think.
Why Good Income Doesn't Equal Good Credit
It seems backwards, right? You make good money, pay your bills, and live comfortably. Why would lenders turn you down?
Here's the reality: income and credit score are separate things. Your salary shows lenders you have money coming in, which matters. But your credit score shows them whether you pay debts back reliably. Lenders care about both, but they won't approve you based on income alone.
Credit scores are built on your history with borrowed money. If you've never had a credit card, taken out a loan, or built any credit history, lenders see you as an unknown risk. Even worse, if you have negative marks like late payments or high balances, your score suffers regardless of how much you earn.
According to the Consumer Financial Protection Bureau, approximately 26 million American adults have no credit history at all. Another 19 million have credit files too thin or outdated to generate a score. That's 45 million people living without credit scores, and many of them have perfectly good incomes.
For people in urban areas with high-paying jobs, this problem creates immediate friction. You need a car to maintain your job or commute reliably. You want to buy property in a competitive housing market where good credit matters even more. The timeline pressures are real.
What Credit Score Do You Actually Need?
Let's talk numbers. Understanding the thresholds helps you set realistic goals.
For Buying a Home
Until recently, conventional mortgages required a minimum credit score of 620. In November 2025, Fannie Mae eliminated this hard cutoff for loans processed through their system. However, individual lenders still set their own minimums, and most prefer to see scores of 620 or higher.
For different mortgage types, here's what you're looking at:
Conventional loans: Most lenders want 620 minimum, though some may go lower. To get the best rates, aim for 740 or higher.
FHA loans: These government-backed loans officially accept scores as low as 500 (with 10% down) or 580 (with 3.5% down). In practice, many FHA lenders prefer 620 or higher.
VA loans: No official minimum from the government, but lenders typically want 580 to 620.
USDA loans: Usually require 640, though some manual underwriting may accept lower.
The median credit score for people taking out new mortgages in early 2025 was 772, according to the Federal Reserve Bank of New York. That's the middle point, meaning half of borrowers had scores above this level.
For Buying a Car
Auto lending is less rigid than mortgages, but credit still matters significantly.
Most auto lenders prefer scores of 661 or higher. About 71% of car financing goes to borrowers in this range, according to Experian's automotive finance data from 2025.
The average credit score for new car loans is 756, while used car loans average 684. However, it's absolutely possible to get approved with lower scores. About 13% of auto financing goes to borrowers with scores between 501 and 600.
The catch? Interest rates climb sharply as credit scores drop. In early 2025, borrowers with scores above 781 got average APRs around 5.53% on new cars. For scores between 501 and 600, the average jumps to 13.62%. Below 500, you're looking at over 21%.
On a $30,000 car loan over 60 months, the difference between a 6% rate and a 14% rate costs you about $160 more per month and over $9,500 in extra interest over the loan's life.
Why Your Credit Might Be Lower Than Expected
If you've never thought about credit before, several scenarios could explain a low score:
No credit history: You've never had a credit card or loan, so there's nothing to score. Lenders see this almost like bad credit because they can't assess your reliability.
Thin credit file: You might have one old account or a few short-term accounts, but not enough history for lenders to feel confident.
High credit utilization: If you have credit cards, using more than 30% of your available credit hurts your score. Many people don't realize that carrying balances, even if you pay them off eventually, can tank your score if you use too much of your limit.
Late or missed payments: Even one payment that goes 30 days late can drop your score by 90 to 110 points. If you've missed payments on anything that reports to credit bureaus, this creates lasting damage.
Collections or charge-offs: Old unpaid bills that went to collections stay on your credit report for seven years.
Too many new applications: Each time you apply for credit, a hard inquiry hits your report. Too many applications in a short period signals risk to lenders.
The most common situation for high-earning young professionals? Simply having no credit history because you've paid cash for everything or never needed to borrow before.
Your Action Plan: Improving Credit While Planning Major Purchases
The timeline for credit improvement depends on your starting point. Someone with no credit can build a decent score faster than someone repairing damage from late payments or collections. But either way, there are immediate steps you can take.
Step 1: Find Out Where You Stand
Get your credit reports from all three bureaus (Equifax, Experian, and TransUnion) at AnnualCreditReport.com. This is the only federally authorized free source. Check each report carefully for:
- Accounts you don't recognize
- Late payments that weren't actually late
- Incorrect balances or credit limits
- Accounts that should be marked "closed" but show as open
- Collections for debts you don't owe or already paid
About 20% of consumers have errors on their credit reports, according to Federal Trade Commission research. Dispute any mistakes you find immediately through each bureau's website.
Also check your credit score through your bank or a free service. Understanding your current score helps you set realistic expectations for improvement timelines.
Step 2: Start Building Positive Credit History Immediately
This is where your high income becomes a major advantage. Unlike someone struggling financially, you have stable resources to deploy strategically.
Get a Credit Builder Product
Credit builder tools are designed specifically for people in your situation: good income but no credit or damaged credit history. These work differently from traditional credit products because they're built to create positive payment history rather than extend borrowing power.
Credit builder cards let you link your existing bank account and use the card for recurring payments like Netflix, Spotify, gym memberships, or utilities. Every payment reports to all three credit bureaus, building your credit automatically with spending you're already doing.
What makes these particularly effective is frequent reporting. Traditional credit products report monthly, which means you wait 30 days between each update. Products like Ava's Credit Builder Mastercard report within a week, which explains why 74% of Ava members see credit score improvements in less than 7 days.1
There's no hard credit check to get started, so applying doesn't hurt your score. There's no interest, no deposit required, and monthly costs are minimal ($8 to $10). Given your income level, this is an easy investment that pays dividends far exceeding the monthly fee.
Consider a Credit Builder Loan
These unique loans help you save while building credit. You make small monthly payments (typically $25 to $100) that go into a savings account. The lender reports these payments as installment loan payments to all three bureaus. After completing the term (usually 12 months), you get your money back.
Ava's Save & Build Credit Account works similarly: you pay $25 monthly for 12 months and receive $300 at the end. This builds credit while forcing you to save, accomplishing two financial goals simultaneously.
For someone with a high income, setting aside $25 monthly is painless. Think of it as paying yourself while building the credit score you need for major purchases.
Get a Secured Credit Card (If Necessary)
If you want additional credit-building tools, secured cards require a refundable deposit (typically $200 to $500) that becomes your credit limit. Because your deposit protects the lender from risk, these cards are easier to get approved for.
Look for secured cards that report to all three bureaus, have no annual fee (or a very low one), and offer a path to upgrade to an unsecured card after several months of on-time payments.
Once approved, use the card for small purchases monthly and pay the full balance before the due date. Never carry a balance beyond the payment due date. This builds credit just as effectively as carrying a balance, but it saves you interest charges.
Step 3: Optimize What You Already Have
If you have existing credit accounts, managing them better can build your credit quickly.
Pay Down High Balances
Credit utilization (how much of your available credit you're using) makes up 30% of your credit score. Keep total utilization below 30% of your limits, ideally below 10%.
If you have a $5,000 total credit limit across all cards, keep your combined balances below $1,500 (under $500 is better). With your high income, paying down balances should be doable. Attack this aggressively because high utilization can suppress your score even if you pay on time.
A tactical move: if you have multiple cards, spread small charges across them rather than loading one card up. Having three cards each at 5% utilization looks better than one card at 50%, even if the total dollars are the same.
Set Up Automatic Payments
Payment history is 35% of your credit score. Missing even one payment creates damage that lasts years. With automated payments for at least the minimum due, you eliminate this risk entirely.
Set reminders on your phone for a few days before each due date as backup. Check that autopay actually processed. This sounds basic, but life gets busy, and autopay failures happen.
Don't Close Old Accounts
If you have older credit cards you never use, keep them open (unless they have annual fees you don't want to pay). Length of credit history matters, and closing accounts shortens your average account age while also reducing your total available credit, which raises your utilization percentage.
Make a small purchase every few months to keep old accounts active, then immediately pay it off.
Step 4: Be Strategic About New Applications
Every credit application generates a hard inquiry on your report, which can temporarily lower your score by a few points. Multiple applications in a short period amplify the damage.
When you're ready to apply for a car or home loan, do your shopping within a short window (ideally 14 to 30 days). Credit scoring models typically count multiple inquiries for the same type of loan as a single inquiry if they happen close together, recognizing that consumers comparison shop.
Avoid applying for any other credit during this window. Don't open new credit cards, apply for store cards, or take out other loans while you're trying to get approved for a major purchase.
Step 5: Consider Alternative Strategies for Your Timeline
If you need a car or home quickly and your credit won't qualify you yet, you have options:
For Home Purchases:
- Get a co-signer: If a parent or family member with strong credit co-signs, you benefit from their credit history. Just understand that they're legally responsible if you don't pay, so keep up with payments religiously.
- Wait and rent longer: This might sound frustrating when you're financially ready to buy, but waiting six to 12 months while building credit aggressively could save you tens of thousands in interest over a 30-year mortgage.
- Consider FHA loans: Even with imperfect credit, FHA loans offer more lenient approval standards. You'll pay mortgage insurance, but you get in the door faster.
- Increase your down payment: A larger down payment (20% or more) reduces lender risk and may help offset a lower credit score during underwriting.
For Car Purchases:
- Make a substantial down payment: Putting 20% down on a new car or 10% on a used car shows lenders you're committed and reduces the amount you need to borrow.
- Choose a less expensive vehicle: Financing a $15,000 car is easier with imperfect credit than financing a $40,000 car. Get something reliable now, build your credit, then upgrade in a year or two.
- Consider certified pre-owned: These vehicles cost less than new while still offering warranties and reliability. Lower loan amounts mean easier approval.
- Shop credit unions: Credit unions often offer more personalized underwriting than banks. If you belong to a credit union through your employer or community association, start there.
- Wait if possible: If you can manage without a car for a few months while building credit, the interest rate improvement could save you thousands.
The Timeline: How Fast Can You Improve?
With your high income and stable employment, you're in a strong position to improve quickly. Here's what realistic timelines look like:
1 to 3 months: If you have no credit history and start with a credit builder account, you can generate your first credit score within this window. It typically takes at least one to three months of reported activity before scoring models can calculate a score.
3 to 6 months: With consistent on-time payments and low credit utilization, you can build a fair credit score (580 to 669). This might be enough to qualify for FHA mortgages or higher-interest auto loans.
6 to 12 months: Continued responsible use can push you into good credit territory (670 to 739). At this point, you qualify for conventional mortgages with decent rates and much better auto loan terms.
12 to 24 months: You can reach very good or excellent credit (740+) with perfect payment history and smart credit management. This unlocks the best rates and terms on everything.
The key variable is your starting point. Building from zero is actually faster than repairing damage from late payments or collections. Negative marks stay on your report for seven years, though their impact decreases over time as you add positive history.
What Makes This Different for High Earners
Your situation is unique because you have resources many credit-building guides don't account for. Use these advantages:
You can afford to be aggressive. Many people need months to save for a secured card deposit or struggle to make credit builder loan payments. You can deploy all these strategies simultaneously if you want. Use multiple credit-building tools, pay down balances immediately, and invest in credit monitoring services.
You have negotiating leverage. When you do apply for loans, your high income and stable employment partially offset lower credit scores. Make sure lenders see your full financial picture: bring pay stubs, offer larger down payments, and highlight your employment history.
You can save the interest difference. The money you save by improving your credit score before borrowing is substantial. Even waiting six months to improve your score by 100 points could save you $10,000 or more in interest on a mortgage.
You can get help if needed. With your income, you can work with financial advisors or credit counselors who help optimize your strategy. Many credit unions offer free financial counseling to members.
Common Mistakes High Earners Make
Smart, successful people often make specific credit mistakes:
Assuming income compensates for credit. You've seen that it doesn't. Lenders weigh credit history heavily regardless of your salary.
Paying everything with debit cards or cash. This seems financially responsible, but it builds no credit history. You need to use credit strategically to build credit.
Ignoring credit until you need it. Waiting until you need a loan to start building credit puts you in a tough spot. Start now so credit is ready when you need it.
Opening too many accounts too fast. Enthusiasm to fix the problem can lead to application sprees that hurt more than help. Be strategic and patient.
Carrying balances to "build credit." This myth costs people millions in unnecessary interest. Paying in full every month builds credit just as effectively without the interest charges.
Comparing yourself to others. Your situation is unique. Don't assume friends or colleagues with similar incomes have better credit. Many successful people have credit challenges they don't discuss.
Why Ava Works Well for Your Situation
For young professionals with high incomes and credit challenges, Ava's approach solves several problems at once:
Speed matters: With frequent reporting to all three bureaus, improvements appear faster. When you're trying to qualify for a major purchase, every week counts. 74% of Ava members see improvements in under 7 days.1
No additional debt: You're not borrowing money or taking on debt. You're getting credit for payments you already make.
Affordable: At $8 monthly for an annual plan, the cost is negligible relative to your income. Compare that to thousands in extra interest you'd pay on loans with poor credit.
Hands-off after setup: Link your bank account, connect recurring payments, and let it work automatically. Given your busy professional schedule, you don't want credit building to require constant attention.
Multiple pathways: Use both the credit builder card for ongoing payments and the Save & Build loan for installment credit history. Having both revolving and installment credit strengthens your credit mix.5
The combination of your stable income, Ava's credit-building tools, and some patience puts you on track to qualify for major purchases with good rates in less time than you might expect.
Your Next Steps
Don't let this setback derail your plans. Having a high income in your 20s puts you ahead of most people financially. Now you just need to align your credit with your income level.
Here's your action checklist:
- This week: Get your credit reports and scores. Review them for errors. Understand your starting point.
- This month: Set up at least one credit builder tool. If you have existing credit, optimize it by paying down balances and setting up autopay.
- Month 2 to 3: Monitor your credit score for improvements. Ensure your positive payments are being reported correctly.
- Month 3 to 6: Check if you're ready to apply for the loan you need. If not, continue building while saving a larger down payment.
- Month 6+: Apply strategically for your car or home loan, armed with improved credit and solid financial positioning.
The timeline might feel frustrating when you're ready to buy now, but remember: improving your credit score by 100 points before borrowing could save you tens of thousands of dollars over the life of a loan. That return on a few months of patience is hard to beat.
Ready to start building the credit your income deserves? Create your Ava account and join thousands of young professionals who are building credit to match their earning power. With improvements visible in as little as 7 days,1 you'll be back on track faster than you think.
Frequently Asked Questions
If I make six figures, why does my credit score still matter?
Lenders evaluate two separate things: your ability to make payments (income) and your willingness to repay debts reliably (credit history). High income shows you have money coming in, but credit score shows whether you actually pay debts as agreed. Lenders need both. Someone with great credit and moderate income might get approved over someone with high income but poor credit because the lender trusts them to prioritize loan payments.
How long until I can buy a house if I start building credit today?
If you're starting from zero credit, plan for six to 12 months to reach a score that qualifies for conventional mortgages (usually 620 minimum, though 740+ gets the best rates). If you're repairing damaged credit, it may take 12 to 24 months to reach good credit territory. Your high income helps because you can pay down balances aggressively and potentially offer larger down payments, which can partially offset lower scores during underwriting.
Can I get a car loan right now with bad credit?
Possibly, but it will be expensive. About 13% of auto financing goes to borrowers with scores between 501 and 600, and even borrowers below 500 sometimes get approved. However, expect interest rates of 14% to 21% or higher. On a $30,000 loan, this could cost you $9,000 to $15,000 more in interest over five years compared to good credit rates. Consider whether waiting a few months to improve your score would save more than the inconvenience costs you.
Will getting rejected hurt my credit score even more?
The application itself creates a hard inquiry that might lower your score by a few points temporarily. If you get rejected, that rejection doesn't directly hurt your score further, but you're left with the inquiry and no new credit. This is why it's smart to get pre-qualified (which uses soft inquiries that don't affect your score) before formally applying. Many lenders offer pre-qualification online that tells you your approval odds without the hard pull.
Should I wait to apply for a home until my credit is perfect?
Not necessarily. There are diminishing returns above certain scores. Once you hit 740, you qualify for the best rates on most mortgages. Going from 740 to 800 doesn't typically improve your mortgage rate. However, jumping from 620 to 740 can save you tens of thousands in interest. Set a target score that unlocks good rates rather than chasing perfection. If you're at 700 and can buy the house you want with a rate you're comfortable with, waiting another year to hit 780 might not make financial sense.
Can I use my high income to negotiate better loan terms despite lower credit?
To some extent, yes. Mortgage underwriters look at your complete financial picture, including debt-to-income ratio, employment stability, and assets. A high income with low debts looks attractive even if your credit score is merely adequate. For auto loans, offering a substantial down payment (20% or more) combined with proof of high stable income can sometimes get you better terms than your score alone would suggest. However, credit score still matters significantly, so don't expect income alone to overcome very low scores.
How much does a 100-point credit score difference actually cost?
On a $400,000 mortgage over 30 years, the difference between a 620 credit score (roughly 7.5% APR) and a 740 score (roughly 6.5% APR) costs you about $300 more per month and over $108,000 more in interest over the life of the loan. On a $30,000 car loan over five years, improving your score from 600 to 700 could save you $150 per month and about $9,000 total. These numbers show why even a few months spent improving credit before borrowing pays off dramatically.
Is it better to fix my credit or just find a co-signer?
Co-signers help you get approved and might get better rates, but they come with complications. Your co-signer is fully responsible if you don't pay, which can strain relationships. Also, you're not really building your own credit profile as effectively. Better to fix your credit if you have even six months to work with. Use a co-signer only if you absolutely must borrow immediately and have no other options. Even then, plan to refinance in your own name once your credit improves.
Do I need multiple credit builder tools or is one enough?
One credit builder tool can work, but using two or three simultaneously speeds up the process. Credit scoring models like to see a mix of different credit types: revolving credit (like credit cards) and installment credit (like loans).5 Having both a credit builder card and a credit builder loan gives you this mix. Your high income makes it easy to afford multiple tools at once. Just make sure you can manage all the payments flawlessly before adding accounts.
Sources and References
- Consumer Financial Protection Bureau (CFPB). "CFPB Report Finds 26 Million Consumers Are Credit Invisible."
- Consumer Financial Protection Bureau (CFPB). "Data Point: Credit Invisibles." May 2015.
- Federal Reserve Bank of New York - Center for Microeconomic Data. "Quarterly Report on Household Debt and Credit, 2025: Q1."
- Experian. "State of the Automotive Finance Market Report Q2 2025."
- Bankrate. "What Credit Score Do You Need To Buy A House?" June 2025.
- Fidelity. "What credit score is needed to buy a house?" 2025.
- Newsweek. "Mortgage market to be reshaped by new credit score requirements." November 2025.
- Freedom Mortgage. "What Credit Score Do I Need To Buy a House?" August 2025.
- Yahoo Finance. "The credit score needed to buy a house in 2025." October 2025.
- Rocket Mortgage. "What credit score do you need to buy a house?" November 2025.
- Bankrate. "Average auto loan interest rates by credit score in 2025." December 2025.
- Experian. "What Is a Good Credit Score for an Auto Loan?" March 2025.
- NerdWallet. "What Credit Score Is Needed to Buy a Car?" September 2025.
- LendingTree. "What Credit Score Is Needed to Buy a Car?" March 2025.
Credit Karma. "What Credit Score Do You Need To Buy a Car?"
