What Credit Score Do You Start With?

Starting Credit Score 101

When you graduate high school or college and start your path to adulthood, you will stop worrying about grades and start worrying about boring adult things.  First and foremost should be your credit score. And just like school grading systems, credit scores can be complicated.

If you’re just starting to work on building credit, you may be wondering what score you start with.

Is your score zero to start?

The answer isn’t as simple as you’d hope it to be.

When Do You Get a Credit Score?

If you don’t have credit history, you don’t have a credit score. You first have to establish a line of credit to start building your score. You’re not gifted a score at your 18th or 21st birthday. It’s up to you to start building your credit.

Not having credit doesn’t mean that your score is zero. If you have no credit – and no score – you’re essentially “credit invisible.”

No one – not even people with the worst credit – can have a score of zero. The most widely used credit scores range from 300-850. Scores of 300 are extremely rare, and only 1% of consumers have a score below 470.

What is the Starting Credit Score?

If your default credit score isn’t zero, is it 300? Do you start at the bottom of the totem pole? Nope.

Having no credit history doesn’t mean that lenders automatically assume that you’re irresponsible. The credit bureaus just don’t know enough about you to determine whether you’ll pay back what’s borrowed.

You might not be smiling when you see that initial credit rating.

Your score won’t start at the bottom or the top.  According to a recent CNBC report, the average starter credit score is 500.

There is no fixed default score. Your starting score may be different from your neighbor’s starting score.

It all starts with establishing an account relationship with a lender. This could be through a credit card, auto financing, an installment loan or another borrowing contract. The lender will then start reporting information to at least one bureau. That information will then appear on your credit report within a few days. After about six months, you should have your first credit score rating.

How Do I Have a Credit Score Before Applying for Any Financing?

If you plan to apply for a loan, whether it’s an auto loan or a mortgage, you need to have a credit score. There’s a small chance that the lender will approve your application with no credit history, but it’s highly unlikely.

So, how do you get your credit rating off to a good start?

#1 – Apply for A Single Credit Card

The age of your accounts plays a big role in your credit score. Opening a credit card account now will give you time to build your credit.

Ideally, you want a credit card that doesn’t charge an annual fee. This will allow you to keep the card open even as you obtain other cards that have better rates and rewards.

Apply for credit cards that you’re likely to get approved for instead of applying for random cards. Keeping hard inquiries to a minimum is important, especially if you don’t have a credit history.  Pick one card with a low maximum amount and apply.

#2 – Use Your Card Responsibly and Always Pay on Time

Once you’ve been approved for a credit card, make sure that you use it responsibly. Charge a small amount to your card and pay for the balance in full each time. Taking this approach will help accelerate the credit-building process.

One way to avoid getting into too much debt is to make sure that you already have the money to pay for the purchase before you buy it.

Always pay on time. Payment history accounts for 35% of your credit score and is the one component that you have complete control over.

Also, watch your credit utilization. Avoid maxing out your cards and keep a balanced ratio between available credit and the portion that you use every month.