At What Age Does a Credit Score Start?

A credit score is a numerical representation of an individual’s creditworthiness, a three-digit number between 300 and 850. Lenders use this score to assess risk in extending credit, influencing decisions on loans and credit cards. A higher score generally indicates lower risk, potentially leading to more favorable credit terms and lower borrowing costs. Scores are derived from credit reports, which document an individual’s history of managing debt.

Understanding the Age Requirement for Credit

An individual can generally enter into a credit contract independently at 18 in most U.S. states. However, specific regulations apply to younger adults seeking credit cards. The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 introduced protections for consumers, particularly those under 21.

Under the CARD Act, credit card issuers cannot grant new accounts to anyone under 21 unless they demonstrate independent income sufficient to make payments or have a co-signer who is 21 or older with repayment means. This regulation aims to prevent young adults from accumulating debt they cannot manage. The Act also restricts credit card companies from aggressive marketing tactics on or near college campuses.

Initial Steps to Establish a Credit Score

Once eligible, individuals can begin building a credit history, necessary for a credit score to be generated. It takes at least six months of account activity for a FICO Score to be established. Several practical methods exist for new credit users to create this initial credit data.

Becoming an Authorized User

Becoming an authorized user on an established credit account is one way to start. The user receives a card connected to the primary account holder’s credit line, and the account’s payment history may appear on their credit report. For credit building, the issuer must report authorized user activity to major credit bureaus, and the primary account holder must maintain on-time payments and low balances.

Secured Credit Cards

Secured credit cards offer another avenue for building credit, particularly for those with little to no credit history. These cards require a cash deposit, typically equaling the credit limit, which serves as collateral for the issuer. As the cardholder uses the card and makes on-time payments, this activity is reported to credit bureaus, establishing a positive payment history. The deposit is usually refundable upon responsible closure of the account or upgrade to an unsecured card.

Federal Student Loans

Federal student loans can also contribute to an individual’s credit history once they enter repayment. When disbursed, the lender reports the new account to credit bureaus. Consistent, on-time payments on these installment loans help build a positive payment history, a significant factor in credit scoring. While payments may not be required during in-school deferment, the loan’s presence can still contribute to the length of credit history.

Credit Builder Loans

Credit builder loans are designed to help individuals establish or rebuild credit. Unlike traditional loans where funds are received upfront, the loan amount is held by the lender in a savings account or certificate of deposit while the borrower makes regular payments over a set term, usually six to 24 months. These on-time payments are reported to credit bureaus, and once the loan is fully repaid, the borrower receives the original loan amount, often minus interest and fees.

Key Elements for Building a Strong Score

After establishing initial credit, several factors are important for cultivating a strong credit score. These elements are weighted by credit scoring models like FICO and VantageScore.

Payment History

Payment history is the most influential factor, accounting for approximately 35% of a FICO Score and a similar portion of a VantageScore. Consistently making payments on time for all credit accounts is essential, as late or missed payments can significantly harm a score and remain on a credit report for up to seven years. Even a single payment that is 30 days past due can negatively impact a score.

Credit Utilization

Credit utilization, the amount of credit used relative to the total available credit, is another significant factor. It accounts for about 30% of a FICO Score and is highly influential in VantageScore models. Keeping this ratio low, typically below 30% of the total credit limit across all revolving accounts, signals responsible credit management. High utilization can indicate a higher risk and negatively impact the score.

Length of Credit History

The length of credit history reflects how long credit accounts have been open and actively managed. While it accounts for a smaller portion of the score, around 15% for FICO and 20% for VantageScore, a longer history indicates more experience with credit. Maintaining older accounts, even if not frequently used, can positively contribute to this factor by increasing the average age of accounts.

Credit Mix

Credit mix, or the variety of credit accounts, also plays a role. This refers to having a combination of different types of credit, such as installment loans (like student loans or car loans) and revolving credit (like credit cards). While not the most heavily weighted factor, a diverse mix can show an ability to manage various forms of debt responsibly.

New Credit Applications

New credit applications can temporarily impact a score. Each time new credit is sought, a “hard inquiry” is placed on the credit report, which can cause a small, temporary dip in the score, usually fewer than five points. Opening too many new accounts in a short period, especially when starting with a limited credit history, can be viewed as a higher risk by scoring models.