What credit score do you start with? The technical answer is that, without a credit history, you don’t start with a credit score at all. While some reporting bureaus might show a “0” on your report if you don’t have a credit history, there isn’t a way to have a 0 score. Instead, you simply have no credit history, and thus no credit score.
Once you open and start using credit products, the three major credit bureaus (Equifax, Experian and TransUnion) analyze your credit history — whether short or long — and assign your starting credit score, which changes over time with your credit history.
What Is a Credit Score?
A credit score is a three-digit number that ranges between 300-850 that “ranks” your creditworthiness according to lenders and reporting agencies. Based on information found in your credit reports, a credit score tells financial institutions, landlords and other credit providers if you’re a good or bad credit risk.
Your first credit score will reflect a variety of factors, including the newness of your credit accounts.
The Fair Isaac Corporation, a California-based data analytics firm, introduced FICO scores around 1989. The FICO scoring method has been widely used to influence lending decisions ever since. But FICO scores aren’t the only ones lenders use.
The three major credit bureaus created VantageScore as a competitor scoring method to FICO in 2006. The original VantageScore credit score used a different scale. Today’s version of VantageScore uses a very similar scale to FICO because of the strong competition between the two companies.
Accordingly, VantageScore and FICO are the main scoring models used to calculate credit scores.
The VantageScore 3.0 credit score scale currently looks like this:
- 810-850 – Excellent Credit
- 750-809 – Great Credit
- 670-749 – Good Credit
- 560-669 – Fair Credit
- 500-559 – Poor Credit
- 300-499 – Very Poor Credit
Having very poor credit means you may not be approved for a loan or a credit card. With excellent credit, you might see more credit approvals at the most favorable interest rates and terms. Most consumers fall somewhere in the middle of these two extremes.
Does Having No Credit Mean That You Have Bad Credit?
If you’ve never used credit or you just opened your first credit account, you most likely don’t have a credit history for reporting agencies to draw a score from. Once you start using credit, it can take up to six months or longer of using an account in your name to establish a credit history.
That being said, having no credit is not the same as having bad credit. However, those with no credit might run into similar challenges as those with bad credit–namely, that lenders will see them as a risk. This means that both parties might struggle with things like:
- Being approved for unsecured credit cards
- Being approved for loans
- Getting lower interest rates
So, common sense suggests that when you are in the early stages of building your credit history, you want to make sure that you do the right things. Don’t miss payments, and don’t borrow more money than you can pay back. Also try to keep your credit utilization low. To make sure your credit history is accurate, review your credit reports periodically.
Options For Those Without Credit
You need a solid credit history to qualify for many credit products. There are options, however, for those who don’t already have a credit history.
- Get a secured credit card. You don’t need a credit score to qualify for a secured credit card. With a secured card, you deposit money with the institution, and the amount of money you deposit into the account serves as your credit limit.
- Become an authorized user on an account. Someone you know and trust with an established credit history — such as a parent or spouse — can make you an authorized user on his or her credit card account.
- Pay your student loans. If you’re a college student, one of the best ways to establish a credit history is to start paying the interest on your unsubsidized student loans, which counts as an installment loan, while enrolled in school.
- Apply for a credit-builder loan. Though not commonly available, a credit-builder loan can help you establish credit. Nonprofit financial institutions like credit unions and banks may offer credit-builder loans.
What Factors Can Affect Your Score?
Credit score providers weigh several factors that can affect your credit score and predict your creditworthiness. The factors VantageScore and FICO use to determine your credit score are similar, but the weight assigned to each factor varies. Because of the different methods used to figure credit scores, don’t be surprised if your VantageScore and FICO score look different.
The following criteria are used to calculate your VantageScore:
Payment History (40%)
Your payment history gets the most weight when calculating your credit score. Whether you make your payments on time or late — and if you miss payments — figures heavily into your credit score.
Outstanding Debt (35%)
This factor is based on the total amount you owe on all of your accounts. If you have a car loan or mortgage, for example, the amount remaining to pay off on each loan — added to your remaining credit card balances — influences your credit score.
Credit Mix (10%)
Generally, a variety of credit types makes for a higher credit score. Lenders like to see that you have experience managing a credit card, auto loan, mortgage, and other types of credit payments without any hiccups.
Credit Age (10%)
Age matters, too, when it comes to good credit health. The longer you have credit accounts in good standing the better.
Credit Inquiries (5%)
Applying for new accounts routinely, which may result in numerous hard inquiries, can lower your credit score. Checking your credit score with ScoreSense, which results in soft inquiries, doesn’t impact your credit score at all.
Don’t Stress About Your Credit Scores
Not knowing what your starting credit score will be can be frustrating. For peace of mind, the best thing you can do is avoid obsessing about your credit score. Instead, stay on top of your bills, limit the amount of credit you use and don’t over-borrow. These are the habit you need to enjoy excellent credit scores in the future. ScoreSense provides credit reports and credit scores from all three credit bureaus. Sign up to take the guesswork out of monitoring your credit.