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What Credit Score Do You Start With?
When people begin to use credit, they begin to create a credit history as well as a credit score, but what credit score do you start with?
Do you have a credit score if you’ve never applied for a credit card or borrowed money?
What are the best strategies to quickly acquire a good credit score if you’re new to credit?
Let’s look at how credit ratings function, including how your initial credit score is created, how to build good credit, and whether a “beginning credit score” exists.
What Is the Starting Point for Your Credit Score?
It all relies on how you use credit at first. Some people ask if we all start with a credit score of 300 or if we all start with a credit score of zero (the lowest possible FICO score).
The truth is that a “starting credit score” does not exist. Based on how we utilize credit, we each develop our own credit score.
You won’t have a credit score if you haven’t used credit yet. Once you open your initial line of credit, like a credit card or a student loan, you begin to develop your credit score.
The way you use that first credit account decides your credit score at that point.
You’ll begin to create a credit file as lenders report your credit activity to the three major credit bureaus (Equifax, Experian, and TransUnion), which will be used to generate your starting credit score.
According to FICO, the following are the minimal scoring criteria:
➣ At least one credit account that has been open for at least six months.
➣ Within the last six months, at least one credit account has been reported to one of the three major credit bureaus.
It’s worth noting that you can achieve these requirements with just one or numerous accounts.
When a lender or landlord does a credit check on you, they’ll see a credit score that represents how you use your open credit accounts.
The most important considerations are whether you make your payments on time and how much of your available credit you use.
You could create good credit before you know it if you use your first credit account appropriately.
Your brand-new credit score could suffer if you miss payments or max out your credit cards.
What is your credit score starting point? That is the incorrect question to ask because the answer does not exist technically. Instead, consider how you can improve your credit score the most.
What Factors Go into Determining Your Credit Score?
You must understand how a credit score is determined if you want to build and maintain a decent credit score. The following five elements contribute to your FICO credit score:
➣ Payment history (35 percent): Your payment history is the most crucial aspect in determining your score.
Make sure you pay your credit cards on time, even if you can only afford the minimal amount.
➣ Credit utilization (30%): This is your credit utilization. Maintain a debt-to-credit ratio of less than 30% of your available credit.
If you have a $1,000 credit limit on your card, for example, strive to keep your outstanding balance under $300.
If your balance rises any further, make every effort to pay it off as soon as possible.
➣ Credit history length (15%): How long you’ve been using credit is another important factor in determining your credit score.
If you’re new to credit, your credit history won’t be extensive at first, but that will change with time.
➣ Credit mix (10%): The various sorts of credit accounts under your name are also important. If you have both revolving debt (credit cards) and installment debt (loans) in your credit history.
Your credit score may improve, but don’t worry if you haven’t taken out any loans yet. With simply credit cards, you can still get an excellent credit score.
➣ New credit (10%): Your credit score is determined by how frequently you apply for new credit. To avoid reducing your credit score with too many fresh credit requests, wait three to six months between credit card applications.
What Are the Credit Score Ranges for FICO?
Get to know the FICO credit score ranges in addition to comprehending how a FICO credit score is calculated. FICO ratings vary from 300 to 850 and are broken down into four categories:
— Exceptional: 800-850
— Very Good: 740-799
— Good: 670-739
— Fair: 580-669
— Very Poor: 300-579
Your immediate goal should be to raise your FICO score above 670. You’ll be able to apply for some of today’s greatest credit cards once you have strong credit.
It’ll be easier to get a mortgage, rent an apartment, buy a car, sign up for a new smartphone plan, and more after you have good credit.
Is It Possible to Get a Credit Score Without Having a Credit Card?
Is it feasible to establish credit without the use of a credit card? Yes, however you must have at least one credit line associated with your name.
When you take out a school loan or a vehicle loan, for example, those credit accounts become part of your credit history and contribute to your first credit score.
You might also utilize a service like Experian Boost to add telecommunications and utility payments to your Experian credit report, or you could become an authorized user on a friend or relative’s credit card.
Where does your credit score begin if you don’t have a credit card? It all depends on how you utilize the other credit cards you have.
Making on-time student loan payments, for example, contributes to the development of a solid credit history.
If you repeatedly miss payments, your credit history and credit score might suffer.
Checking Your Credit Score
If you’re new to credit, you should verify your personal credit score before applying for additional credit cards or loans.
You won’t make the mistake of applying for a credit card made for persons with exceptional credit while your credit is still mediocre this way.
There are, however, some cards designed specifically for persons with no credit history.
Many banks and credit card companies provide free credit scores. Credit monitoring services maintain watch of potential dangers to your credit and provide weekly credit score updates (like identity theft attempts).
Certain popular personal finance apps, such as Mint, also provide access to your credit score.
Instead of a FICO score, some free credit score agencies will give you a VantageScore.
VantageScore is a major competitor of FICO, and while its scoring system differs slightly from FICO’s, the credit ranges are similar.
You’ll have good credit with FICO if you have good credit with VantageScore.
What Credit Score Do You Start with Conclusion?
Your credit score does not begin at zero, but regardless of how you choose to create a credit history, it is critical that you get off to a good start.
Selecting the correct credit card to fit your financial objectives and habits, making on-time payments, keeping your balances low, and keeping track of your credit history as it increases are all ways to establish good credit.
These steps will assist you in establishing a solid credit history, improving your credit score, and preparing you for a lifetime of prudent credit card usage.
There is no such thing as a starting credit score, but you do have a lot of power over where it goes.