What Credit Score Do You Start With? (Plus 5 Tips to Build a Healthy Credit Score!)
Adulting is difficult. Something that makes adulting simpler for the modern American public, though, is credit: credit allows folks to make large(r) financial purchases, and also makes life a little more convenient. The 67% of Americans who have a “good” credit score or higher know this because, in the eyes of banks and other money lenders, they’re seen as eligible to move onto bigger and better things.
But how can you move onto bigger, better things, too? How do you build a “good” or even an “excellent” credit score? And what credit score do you start with?
If you’re new to the world of credit, you’ve come to the right place.
In this 101 explainer article from Grow Credit, you’ll learn what credit score people start with (which is requisite knowledge for credit newbies) and discover five essential methods for building and improving your initial credit score.
Now, that’s what we call successful adulting.
Just read through the sections below to get clued up:
What Is a Credit Score?
What Credit Score Do You Start With?
5 Tips for Building Credit Efficiently and Effectively
Reach an Excellent Credit Score With Grow Credit!
Let’s jump straight in.
What Is a Credit Score?
Before discussing what credit score people start out with, it’s imperative to define what credit score is in the first place.
In layman’s terms, a credit score is a number that demonstrates how well a person manages the credit that’s been given to them. According to a person’s FICO score (which is the model used by 90% of U.S. credit decision-makers), a person can have a “poor,” “fair,” “good,” “very good,” or “excellent” credit score. The score can either go upward or downward with time, depending on what kind of credit-related financial decisions and actions you take.
As the good people at Investopedia further explain:
“A credit score is a number between 300–850 that depicts a consumer's creditworthiness. The higher the score, the better a borrower looks to potential lenders.”
How is a FICO score—and thereby your credit score—calculated, exactly?
Good question.
There are five factors that, when considered together, calculate a person’s FICO score. These are:
Payment History (35%~)
35% of your FICO credit score is based on your payment history, meaning it’s important not to miss payments—otherwise, your credit score could quickly and steeply fall. This category also takes into account things like bankruptcies and repossessions; instances that illustrate how a given person goes about repayment, and whether they’re able to repay in an appropriate and timely manner.
Credit Utilization (30%~)
Credit utilization—that is, how much of your total available credit that you’re using—makes up 30% of your FICO score. This is also where it starts to get meta, as your credit utilization ratio is also something that’s calculated. What’s most important to know, though, is that using below 30% of your total credit is best for your credit score. Going above that threshold could worry creditors, as they could view it as you using too much credit and going beyond your means.
Length of Credit History (15%~)
Having a history of good credit management increases your overall credit score. That’s why, to build the strongest credit score possible, it’s advantageous to start as early on as possible—even if that means using credit to pay for small payments, like a monthly recurring Netflix bill. As long as the small amount is paid back each month, you’ll prove to creditors that you can handle credit well.
Credit Mix (10%~)
There isn’t just one type of credit—there are a few. For instance, revolving credit concerns credit cards, store cards, and the like, while installment credit concerns heftier things like mortgage loans. Creditors like to see that people are capable of handling various kinds of credit; for them, it shows the people they may offer credit to are financially trustworthy across the board.
New Credit (10%~)
10% of your FICO credit score regards new credit. Opening a plethora of credit accounts in a short space of time—and making many “hard inquiries,” which naturally happens when applying for a new line of credit—can adversely affect your credit score. That’s because, to creditors, it comes across as the person potentially being in financial disarray, hence their need to open up more lines of credit. The fewer new lines of credit and hard inquiries, then, the better for your overall score.
That’s what a credit score is and how it’s calculated.
With the foundation now laid, let’s tackle the burning question of “what credit score do you start with?”
What Credit Score Do You Start With?
If you were to Google the words “what credit score do you start with” (which you may have done to reach this very article), you’d notice that different sites say varying things. Some even proclaim people start at 0 credit—which isn’t the case.
Thankfully, we’re here to set the record straight.
If you haven’t established some kind of history—if you don’t have a credit card or taken out a student loan, for instance—then you won’t have 0 credit: you’ll have no credit score at all. This is completely logical when we think about it for a second: credit scores are based on credit information, and credit information is produced only after we’ve had credit for six months. It’s simply not possible to have a credit score without some kind of credit history.
When you do take out an auto loan or get a Mastercard or alternative card in your name for example, and after those initial six months have elapsed, that’s when a credit score will be established. And it’ll certainly be more than 0, because the aforementioned FICO credit score doesn’t go as low as 0: the lowest point is around 300.
The lowest point is “around” 300 because the three national credit bureaus have slightly different credit score ranges. This means the credit score you start with could be “poor,” “fair,” or “good” depending on which of the three bureaus have supplied credit-related information.
Seem complex?
Don’t worry: it’s easier to wrap your head around than you think.
Credit Score Ranges and the Three (Major) Bureaus
Experian, Equifax, and TransUnion are the nation’s three major credit bureaus (FYI, a credit bureau is defined as “a data collection agency that gathers account information from various creditors and provides that information to a consumer reporting agency,” according to Wikipedia writers.)
Here’s how each bureau perceive “poor,” “fair,” “good,” “very good,” and “excellent” credit scores:
Experian views “poor” as 300-579, “fair” as 580-669, “good” as 670-739, “very good” as 740-799, and “excellent” as 800-850.
Equifax sees “poor” as 280-559, “fair” as 560-659, “good” as 660-724, “very good” as 725-759, and “excellent” as 760 to 850.
TransUnion classifies “poor” as 300-600, “fair” as 601-657, “good” as 658-719, “very good” as 720-780, and “excellent” as 781-850.
Let’s say that, after checking your credit score for the first time, you found that your initial score starts off at around 580. Experian would view this as a “fair” score, as would Equifax. In the eyes of TransUnion, meanwhile, it’d be a “poor” score. But at least you know that the score is just on the cusp of what TransUnion sees as “fair,” which helps you to know that it won’t be long until you jump up to the next grade—as long as you undertake actions that grow your credit score.
Ultimately, your initial credit score will depend on the type of credit you’ve taken out and how responsible you’ve been with paying back credit within those first few months—but expect the figure to be around the mid-range 350-700 mark, unless you’ve immediately picked up bad credit habits.
With all this talk of positive and not-so-great credit habits, you may be wondering what you should be doing to better your credit score…
Here are five best practices so you can do exactly that.
5 Tips for Building Credit Efficiently and Effectively
No matter whether your initial credit score isn’t what you’d hoped it’d be, or if you’re happy with your initial credit score but you’d like to get as good a score as possible, there are always ways to improve upon the score the bureaus have given you.
Specifically, by doing the following, you’re able to build a healthy credit score over time:
Automate Your Bill Payments
Hulu, HelloFresh, your electricity bill: whatever bills you need to pay each month, automate those payments (and automate a transaction to top your credit balance back up, too). Why? Firstly, we all lead such busy lives—automating these payments makes it easier for you to keep on top of both bills and credit. Secondly, it ensures you’re using credit responsibly and not dipping into debt or being faced with late payment/interest charges. With automation, then, you’re able to build your credit score—and without lifting a finger!
Make Sure Bills Are in Your Name
Millennials and Gen Z folks have things financially tougher than previous generations: it’s why 52% of 18 to 29-year-olds in the U.S. still reside with their parents, and 49% of 18 to 24-year-olds are still on their parents’ cell phone plans. This presents a problem when it comes to credit, as you need to have your name on a contract to build a credit score and credit history. Even if it’s just the water or gas bill, get your name on some kind of contract as soon as possible—it doesn’t matter if roommates or your parents are somewhat contributing to the payment; what’s important is having your name on a digital or physical contract.
Don’t Let Debts Linger
Speaking of not dipping into debt, it’s crucial to pay any outstanding debt you may have. That’s because outstanding debts don't do your credit score any good, and it doesn’t instill trust. Of course, paying debt is easier said than done, and especially when it comes to larger sums. If you do have a larger sum of debt, it may be worth investigating a debt consolidation loan to, well, consolidate the number of entities you have to pay back. If you have smaller but far more manageable debts—like overdue phone bills—quash them as soon as you can for your credit score’s sake!
Use Credit Minimally
When you’re given credit for the first time, there may very well be a strong feeling of “Look at all this credit! I can buy this, that—oh, and that, too!” All those products, gadgets, and subscriptions you’ve been wanting you can finally purchase… right? Well, not really. Even if you have a lot of credit available to you, creditors don’t want you to use the majority of it. As mentioned earlier, a whopping 30% of your total FICO score concerns credit utilization. So, to build credit efficiently and effectively, you must not go over the 30% credit threshold. To figure out if you’re close to meeting that threshold, there are a plethora of online credit utilization calculators that’ll help you do the math, like this one from Omni Calculator.
Regularly Review Your Credit Score
As your credit score is in a constant state of flux, it’s important to regularly review your credit score via a credit report (it’s also a good, #adulting habit to get into, too). By reading over a credit report—which is a record containing information related to your credit history—you’re able to see what’s working (and then continue doing that!), and if there are any issues or errors that are bringing your score down, which you can dispute so your history and score are accurately reflected. You can pull your credit report from one of the three bureaus mentioned earlier, or via a third party. Usually, a report can be pulled for free once a year.
There you have it; five ways to boost your credit score.
But what if I told you there’s an additional way to build credit easily and quickly, even if you have no credit history or score to begin with?
Well, there is—thanks to Grow Credit.
Reach an Excellent Credit Score With Grow Credit!
Grow Credit enables U.S. residents to easily build credit over time. By paying off small-scale subscriptions like Amazon Prime, Netflix, and Spotify through a free virtual Grow Credit Mastercard, you’re able to establish and then improve your very own credit score incredibly simply.
For more on how Grow Credit works, check out this short explainer video.
Applying for the Grow Credit program doesn’t take long—in fact, it takes mere minutes. All you need to get started is:
A bank account (that has been open for at least 60 days)
An email address
A phone number
An SSN (social security number)
A physical U.S. address and resident status
Minimum income of $1,200 per month (for at least 2 months)
An account balance of at least $100
And to be age 18+
If that’s you, get your free Grow Credit Mastercard via our iOS and Android apps, or our website.
In addition to our free program, we have two premium plans for those serious about taking full control of their credit history and score.
The Grow Membership ($4.99/mo) includes:
A $50 monthly spending limit
Access to premium subscriptions
And periodic balance increases (coming soon!)
The Accelerate Membership ($9.99/mo), meanwhile, includes:
A $150 monthly spending limit
Access to premium subscriptions
The ability to build credit with your cell phone bill
And periodic balance increases (coming soon!)
Unsure? Worried?
Don’t be.
With Grow Credit, you’re in good hands. TechCrunch proclaimed Grow Credit to be:
“A pretty elegant way to solve a problem that’s a real barrier to entry for a large number of financial services.”
Meanwhile, creditcard.com said we’re:
“A useful tool for climbing the ladder and eventually qualifying for a better card.”
So, what’re you waiting for? It’s time to grow with Grow Credit.