What Credit Score Do You Start With?

Even if you don’t have a credit score and are beginning your credit-building journey, the lowest credit score you could start with is 300, but you may start even higher if you’ve used your credit responsibly. Once credit bureaus (Experian, Equifax, and TransUnion) have sufficient information, FICO® and VantageScore® use multiple factors from data in your credit report to generate your credit score.

This post navigates how your credit score starts and helps you understand not only what a good credit score is but also how you can start building credit and improving your score.

What credit score do you start with?

Although the lowest possible credit score starts at 300, you may achieve a different starting credit score. Your FICO® credit score depends on a number of factors, such as credit history (or lack thereof), active credit cards, number of credit accounts, how often you’ve made on-time payments or late payments and whether you’re at or exceeding your credit card limits.^[1]

Your FICO® score may differ slightly, depending on what credit bureau (Experian, Equifax, and TransUnion) gets used to develop your score. VantageScore® pulls data from all the bureaus when calculating your score, but each credit scoring model weighs factors differently and has multiple versions. Typically, most credit scores have a low end at or around 300 and go up to 850, and the average U.S. FICO® credit score in 2021 was 714. For FICO®, a good credit score ranges from 670 to 739, and for the VantageScore® it ranges from 661 to 780.^[2]

Lenders consider several factors, including your credit score, when evaluating your application for a loan or credit. Where your score falls within a credit score range may indicate to lenders how likely you are to pay back what you owe. For example, if you have a low credit score, lenders may consider you to be a “subprime borrower.” People who fall into this category may be denied credit or given very high interest rates, which may make borrowing cost-prohibitive.

How long does it take to get a credit score?

Keep in mind that you may be categorized as credit invisible or unscored without active credit accounts. To generate a FICO® score, you need an account that is at least six months old and has been active in the past six months, and for a VantageScore® you only need one active account, even if the account has only been open a month. Otherwise, you may be scored as one of the following:

• Credit invisible means someone who hasn't had a credit report generated by the credit bureaus yet.
• Unscored refers to consumers who don't have enough active credit history to produce a credit score.

If this is the case, you can learn how to build credit.

5 components of a credit score

Credit scoring models don’t assign a random number to a person. Each scoring model uses a complex formula that takes into account several factors. For example, FICO® uses five components, including your payment history, amounts owed on debts, credit history, new credit and your credit mix to calculate your credit score.^[1] VantageScore® uses similar data but breaks these factors out a bit differently, calculating your score based on payment history, depth of credit, credit utilization, recent credit, balances and available credit.

Although FICO® and VantageScore® use similar factors, they weigh each of these components a bit differently and may call them by different names. For example, FICO® weighs these five factors as follows:

• Payment history (35% FICO®): This category influences your score the most. It reflects whether you make on-time payments or have a history of late payments.
• Amounts owed (30%): This factors the total amount of debt you owe on credit cards and loans, as well as your credit utilization rate (CUR), the amount of revolving debt you owe divided by the total amount of your revolving credit limits.
• Credit history (15%): This deals with the length of time that you have had credit. VantageScore mixes available credit utilization ratio into this category as well.
• New credit (10%): This factor covers recent credit inquiries and new lines of credit.
• Credit mix (10%): Your FICO score takes into account the different types of credit you have open, assessing whether you have a good mix of credit products, such as personal loans, credit cards, car loans, student loans, or a mortgage.^[1]

VantageScore® 3.0 breaks its scores down as follows:

• Payment history (40%): Just like the FICO® model, VantageScore® considers this factor to be highly influential to your score. It reflects whether you make on-time or late payments.
• Depth of credit (21%): This category considers both the age of your credit accounts as well as the type of credit accounts you use, which is known as “credit mix” for FICO® scoring.
• Credit utilization (20%): Slightly different than the credit utilization referred to with FICO® scoring, this factor looks at the relationship of credit you use and the credit you have access to. While revolving credit is the focus, installment loans are considered as well. When it comes to your credit utilization ratio (CUR), the ratio of revolving debt compared to your credit limit, VantageScore® suggests keeping this above 0% but below 30%.
• Recent credit (11%): This category weighs the number of accounts you’ve opened recently as well as the hard inquiries reflected on your credit report. All hard inquiries within a 14-day period will be considered as one inquiry by VantageScore®.
• Balances (5%): With this factor, VantageScore® evaluates the remaining balances on your current and delinquent accounts.
• Available credit (3%): As the category suggests, this factor looks into how much available credit you have on revolving accounts.^[3], ^[4]

What’s considered a good credit score?

If you have a credit score of around 700, creditors consider that to be a good score, one that indicates you make your payments on time, aren’t overwhelmed with debt, and generally are a low-risk customer. On the other hand, a poor credit score ranges from 300 to 600 and indicates a high-risk borrower. While a good credit score may help you get better rates or terms on loans and credit compared to someone with a bad credit score, lenders consider several factors before extending credit. Your score is only one of many items they weigh when evaluating your application.^[2]

How to start building credit

You can take control of your personal finance and start building your credit score right away by opening your first account. Some of your best options include:

• Secured credit card: Secured cards work differently than unsecured cards. You make a cash deposit that typically equals your credit limit. Then you use the card to make purchases and make regular payments on your bill. Your deposit is used as collateral, not as a way to pay your balance. Creditors then report your payments to the major credit bureaus.^[6]
• Credit builder loan: These loans differ from installment loans. Instead of getting a lump sum at the beginning of your loan term, you make payments to your lender that get deposited into a certificate of deposit (CD). Once you make all of your payments, you get your loan minus interest and fees. Like secured credit cards, creditors usually report these payments as well.^[6]
• Authorized user: You can ask a friend or family member to add you to their account as an authorized user, which allows you to join someone’s credit account. You can make purchases with that account, you are not responsible for making the payments, and the account gets reflected on your credit report. As long as the primary cardholder has a positive credit history with that account — makes payments on time, keeps a low CUR, and opened the account a while ago — you can benefit from their positive credit experience.^[7]

How do you check your credit?

By law, you can check your credit report once per year for free from each of the major credit bureaus, which you can access at AnnualCreditReport.com. You can also check your credit report for a fee any time you like with any of the three major credit bureaus (Experian, Equifax and TransUnion). They cannot charge you more than $13.50 for each report.^[8]

Regularly monitoring and checking your credit report helps you see whether you have any mistakes on your report and allows you to keep track of how your choices affect your credit history. By keeping tabs on your credit, you already know where you stand before you apply for loans and credit.

How often does your credit score change?

Lenders typically provide new information to the credit reporting agencies once per month, and 45 days at the most. This makes sense since most of your debt payments are made on a monthly basis. Some lenders may report more often. If you have multiple lenders, you may see updates to your account more frequently since they all probably update on different days depending on their own internal processes and when you opened the account.^[9]

Tips for improving your credit score

Once you begin to establish credit, if you find your score isn’t rising — or worse, it’s sinking lower — you can correct most issues. To give yourself the best chance at elevating your credit score, take these deliberate steps:

• Check your credit report regularly.
• Set up automatic payments to pay bills on time.
• Use your credit cards responsibly.
• Pay down existing debt.
• Learn how to check your credit score.

Build your credit

If you don't have a credit score or you want to improve it, there's no time like the present to build that credit file and get your first credit score. The sooner you can start taking positive actions on your credit, the sooner you can start to build that score. If you don't have an account, open a secured credit account or open a Credit Builder Account today to start making payments and building a credit history.

Sources

1. myFICO. “What's in my FICO® Scores?” https://www.myfico.com/credit-education/whats-in-your-credit-score. Accessed May 10, 2022.
2. Experian. “What Is a Good Credit Score?” https://www.experian.com/blogs/ask-experian/credit-education/score-basics/what-is-a-good-credit-score/. Accessed May 10, 2022.
3. VantageScore. “The Complete Guide to Your VantageScore,” https://vantagescore.com/press_releases/the-complete-guide-to-your-vantagescore/. Accessed September 9, 2022.
4. Forbes. “What Is A VantageScore?” https://www.forbes.com/advisor/credit-score/what-is-vantagescore/. Accessed June 15, 2022.
5. myFICO. “What is a Credit Score?” https://www.myfico.com/credit-education/credit-scores. Accessed September 9, 2022.
6. Experian. “How to Get Credit for the First Time,” https://www.experian.com/blogs/ask-experian/how-can-i-get-credit-for-the-first-time/. Accessed May 10, 2022.
7. Capital One. “What Is a Starting Credit Score?” https://www.capitalone.com/learn-grow/money-management/starting-credit-score/. Accessed May 10, 2022.
8. Consumer Financial Protection Bureau. “How do I get a copy of my credit reports?” https://www.consumerfinance.gov/ask-cfpb/how-do-i-get-a-copy-of-my-credit-reports-en-5/. Accessed September 9, 2022.
9. TransUnion. “How Long Does it Take for a Credit Report to Update?” https://www.transunion.com/blog/credit-advice/how-long-does-it-take-for-a-credit-report-to-update. Accessed May 10, 2022.

About the author

Ana Gonzalez-Ribeiro, MBA, AFC® is an Accredited Financial Counselor® and a Bilingual Personal Finance Writer and Educator dedicated to helping populations that need financial literacy and counseling. Her informative articles have been published in various news outlets and websites including Huffington Post, Fidelity, Fox Business News, MSN and Yahoo Finance. She also founded the personal financial and motivational site www.AcetheJourney.com and translated into Spanish the book, Financial Advice for Blue Collar America by Kathryn B. Hauer, CFP. Ana teaches Spanish or English personal finance courses on behalf of the W!SE (Working In Support of Education) program has taught workshops for nonprofits in NYC.

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