Key takeaways
- Your credit score doesn’t start at zero. When starting out, you’ll either have no credit or be considered credit invisible.
- Factors like on-time payments, low credit utilization, types of credit, credit inquiries and account age all impact your credit score.
- Even without a credit card, you can develop good credit by pairing healthy credit habits with other forms of credit like student loans or credit builder loans.
Your credit score can go as high as 850, but where do you start? Do you begin with a zero and work your way up from there? Not exactly. Instead of starting with a zero for a credit score, you begin with no credit.
While this may sound similar to a zero, it’s not. Beginning with no credit score is a good thing, as it allows you to achieve a good credit score more quickly once you pass through the no-score phase. By sticking to good credit practices like making on-time payments, you can build a solid credit score with time.
Where does your credit score start?
The truth is, there’s no universal “starting credit score.” While the lowest possible FICO score is 300, this isn’t where you start. Instead, if you haven’t started using credit yet, you have no credit history and no credit score — also referred to as unscorable or credit invisible.
Starting with no credit isn’t the same thing as bad credit. It just means the credit bureaus don’t yet have enough information to assign you a score. This blank slate lets you focus on building the best credit score possible from the start.
When do you receive a credit score?
There’s no magic age when credit scoring begins. It starts once you’ve opened your first line of credit, such as a credit card or a student loan.
As lenders report the credit activity from this first account to the three major credit bureaus (Equifax, Experian and TransUnion), this information will show up on your credit reports. Credit scoring companies, such as FICO and VantageScore, then use your credit reports to generate your credit score.
It takes time to collect enough information in your credit file to generate a score. You’ll need to meet FICO’s minimum scoring criteria:
- At least one credit account opened for six months or more
- At least one credit account that has been reported to one of the three major credit bureaus within the past six months
So, if you opened your first credit card yesterday, don’t expect to see a credit score tomorrow.
Important note
You can meet these requirements with just one account or several, but keep in mind that lenders may not report to all three credit bureaus. If you only have one or two lines of credit and those lenders don’t report to all three bureaus, you could end up with a “thin file” — or no file at all — with certain bureaus.
How is your credit score calculated?
Credit scores are calculated using the information on your credit reports. Each element of your credit is weighed differently depending on the credit scoring model used. When it comes to FICO, your credit score is based on the following five factors:
- Payment history (35 percent): Making on-time payments is the biggest factor affecting your score. Even if you can only make the minimum payment on your credit cards, make it on time. Just one late payment can drop your score significantly.
- Amounts owed (30 percent): This is calculated as the amount you owe versus your total credit limits, otherwise called your credit utilization. Ideally, you want to keep your credit utilization under 30 percent. For example, if you have a credit card with a $1,000 credit limit, aim for a balance of $300 or less.
- Length of credit history (15 percent): How long you’ve been using credit is another key factor in your credit score. This part of your score is all about patience; keep your accounts open and in good standing.
- Credit mix (10 percent): There are two main types of credit: revolving (credit cards) and installment (loans). Having both types of debt reported to the credit bureaus improves your credit mix.
- New credit (10 percent): This last factor is all about how often you apply for new credit. Applying for credit results in a hard inquiry. Having several of these inquiries in a short period is bad for your credit. Try waiting three to six months between credit applications to avoid damaging your credit score.
FICO credit score ranges
In addition to understanding how a FICO credit score is calculated, it’s a good idea to be familiar with the FICO credit score ranges. FICO scores range from 300 to 850 and are divided into the following categories:
- Exceptional: 800-850
- Very good: 740-799
- Good: 670-739
- Fair: 580-669
- Very poor: 300-579
The goal is to get to the good range, a 670 or better, as quickly as possible. Once you have a good credit score, you can apply for the best credit cards, and you are more likely to qualify for lower interest rates on loans. This makes it easier to reach your financial goals like taking out a mortgage, buying a car or signing up for a new smartphone plan.
VantageScore ranges
The biggest competitor to FICO is VantageScore. This credit scoring service is not as widely used in lending but is frequently used on various credit monitoring sites and apps. While this scoring model is similar to FICO, the score ranges are a bit different:
- Excellent: 781 to 850
- Good: 661 to 780
- Fair: 601 to 660
- Poor: 500 to 600
- Very poor: 300 to 499
As with a FICO score, you’ll want to hit the “good” range of a VantageScore to enjoy lower interest rates, better approval odds and discounted insurance rates.
Can you have a credit score without a credit card?
Yes, it is possible to build credit without a credit card, but it is slightly more difficult. First, you’ll need to have at least one credit account associated with your name, like a student loan or car loan. Having multiple accounts open is better. Other options for building your credit without credit cards include:
- Applying for a credit builder loan, a type of secured loan.
- Using a service like Experian Boost to add eligible rent and bill payments to your Experian credit report.
- Signing up for a non-credit card revolving line of credit, like PayPal Credit.
Not having a credit card can negatively affect the credit mix and credit utilization portions of your credit score. This makes the payment history portion of your credit especially important. Making on-time payments will help you build a positive credit history, while consistently making late payments will drag your score down.
How to establish and maintain good credit
Think of building and maintaining good credit as a marathon, not a sprint. It takes time to develop a positive credit history and the healthy credit score that goes along with it.
Start simple by paying your bills on time, every time. Payment history is the most heavily weighted factor in your credit score. Even paying your cell phone bill more than a month late can hurt your score if your cell provider reports the late payment to the credit bureaus.
Next, you’ll want to learn more about credit utilization and how to keep your revolving debt balances in check. Then, as the need arises, diversify the types of credit you have to improve your credit mix. However, don’t take out unnecessary loans just to build your credit.
Building good credit from the start is a lot easier than trying to rebuild or repair your credit later. By staying consistent with good credit-building behaviors, you can build and improve your credit score and maintain it long term.
How to check your credit score
Before you start applying for credit cards and loans, it’s a good idea to check your credit score. Knowing where your score sits can help you avoid applying for credit products you won’t qualify for, like credit cards designed for people with excellent credit. Checking your credit can also tell you which areas you need to work on to improve your score.
There are many free resources for checking your credit score, including services offered through your bank or credit card issuer. Alternatively, you can use a credit monitoring service that provides you with regular credit score updates and alerts you to potential fraud. You can also get free weekly credit report updates through AnnualCreditReport.com, although these will not include your credit score.
The bottom line
Your credit score doesn’t start at zero, nor does it magically start out high. Achieving a good credit score starts with choosing the right credit products and building a solid credit history. Developing good habits, like making on-time payments and keeping your credit card balances low, is essential to starting on the right foot.
Credit has a significant impact on various aspects of life, including renting an apartment, obtaining car insurance, qualifying for premium credit cards and buying a home. Building good credit from the beginning can save you money and prepare you for a lifetime of responsible financial management.
Frequently asked questions
— Nicole Dieker contributed to a previous version of this article.
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