If you’re a young adult just entering the world of credit, the first question that might come to mind is what is my starting credit score? When you’re first applying for a credit card – or any loan – most individuals wonder what number they’re starting their credit score journey from.
If you’re in the same situation, we have a short guide below that details everything you need to know about your starting credit score.
What Is Your Starting Credit Score?
Although you can typically get your credit report and credit scores when you turn 18 and open an account to start handling your finances, it is not uncommon for minors to have credit scores. This can occur if a parent or guardian of the minor has helped them establish credit and order a credit report. The Federal Trade Commission recommends parents of 16-year-olds to check their child’s credit reports.
Most people think that their starting credit score would be zero. However, that is simply not true. Depending on the scoring model, the lowest credit score you can have is 300, not zero. So, you start your credit journey by having no score at all.
This is because unless an entity, such as a financial institution, requests a credit report to check your creditworthiness, your score simply isn’t calculated and doesn’t exist. Since you have never used credit before this point, there is no information to base calculations upon and get an accurate credit score.
Here are the ranges of FICO® Scores:
Poor: 300-579
Poor credit scores can make it challenging to secure new credit, such as loans and new credit cards. If you are approved for credit, you may to pay higher interest rates and potential fees.
Fair: 580-660
A fair score can give you more options and lower interest rates than a poor score. However, you shouldn’t expect to get the best terms available.
Good: 670-739
A good credit score gives you access to even more options. With good credit scores, you might even seek out preapproval or prequalification loan options to help you get the best rates available.
Very Good: 740-799
A very good credit score means you can be approved for loans and credit cards with better-than-average repayment terms.
Excellent: 800+
An excellent credit score means you can receive the best payment terms available. A perfect credit score is 850.
What Makes Up Your Credit Score?
Numerous factors affect your credit score, and each has its weightage in your final scores. Following are some of the factors used for calculating your credit score:
● Payment history
● Credit age
● Credit mix (Types of credits that you may have, for example, credit card, auto loan, etc.)
● Number of credit inquiries
● Debt
● Applications for new credit
What To Expect with a Starting Credit Score?
Once you start using credit, you might likely have a credit score somewhere between the 500-700 range, depending on your financial habits. However, if you start with inferior financial performance, your score could drop below this level. So, if you are not careful and start your credit history by over-spending or being late on payments, you can fall into the poor credit category.
Since you’re just starting, your interest rates may be higher when you make a large purchase. However, you can slightly offset this high rate by getting someone with a well-established credit score to co-sign with you.
Tips to Keeping a Good Credit Score
Keeping your credit score up by being financially responsible is imperative for your credit health.
Here are a few tips that can help you positively affect and maintain your credit score:
● Paying bills on time
● Preserving a long credit history by using old credit cards
● Applying for new credit lines only under necessary circumstances
● Remaining below the credit limit
Another method to help your credit score remain in a good range is using a well-established credit report monitoring service. For example, if you sign up for a credit report monitoring plan, you can stay on top of your scores and help protect yourself against identity theft.
