What Does Your Credit Score Start At?
Your credit score isn't a fixed starting point. Learn how it's first generated, what shapes its initial value, and how to begin building your credit history.
A credit score is a numerical representation of an individual’s creditworthiness. This three-digit number influences approvals for loans, housing applications, and even insurance rates. Credit scores are not predetermined; they are generated once a consumer establishes a credit history with sufficient reported data for scoring models to analyze.
When a Credit Score is First Generated
A credit score is not automatically assigned at birth. It is calculated once a person opens their first credit account, such as a credit card or a loan. Activity from this account must then be reported to the three major credit bureaus: Experian, Equifax, and TransUnion. Scoring models, including FICO Score and VantageScore, require a minimum amount of credit activity and time before a score can be produced.
For a FICO Score to be generated, a credit report typically needs at least one account open for six months, with activity reported within the last six months. VantageScore models can often generate a score with a shorter history, sometimes requiring just one month of credit history from at least one account reported within the previous 24 months. Both FICO and VantageScore models produce scores within a range of 300 to 850. While the lowest score possible is 300, most new credit users do not start at this minimum. Initial credit scores for individuals with new credit histories fall between 500 and 700 points, depending on their early credit behavior.
Initial Factors Determining Your Score
Once enough credit history exists to generate a score, several data points influence an individual’s first credit score. Payment history is the most influential factor, indicating whether payments on credit accounts are made on time. Consistent, timely payments demonstrate financial responsibility and are fundamental to establishing a positive credit profile.
Another important factor is credit utilization, which measures the amount of credit used relative to the total available credit limit on an account. To positively impact a score, keep credit utilization low, below 30% of the available credit. The length of credit history begins calculating from the opening date of the oldest account.
Credit mix, or the types of credit used, reflects a blend of revolving accounts like credit cards and installment loans such as student or auto loans. The number of new credit accounts opened in a short period can influence an initial score. Applying for multiple accounts too quickly can be viewed negatively by scoring models. These factors are weighed collectively to produce the initial credit score.
Building Credit From Scratch
For individuals with no existing credit history, establishing a credit score requires deliberate and responsible financial actions. One way to begin is by applying for a secured credit card. These cards require a refundable cash deposit, which serves as collateral and becomes the credit limit. Issuers of secured credit cards report payment activity to the three major credit bureaus, allowing on-time payments to build a positive credit history.
Another option is a credit-builder loan, which functions differently from a traditional loan. With this loan, the money is held in a savings account or certificate of deposit while the borrower makes regular payments. These consistent, on-time payments are reported to the credit bureaus, and the borrower receives the loan amount once the full balance is paid.
Becoming an authorized user on a well-managed credit account belonging to a trusted individual, such as a family member, can also help establish a credit history. If the primary account holder makes timely payments and maintains low credit utilization, that positive activity can appear on the authorized user’s credit report. This method carries a risk if the primary account holder mismanages the account, as negative activity could also be reported.
Regardless of the chosen method, responsible usage is important for building an initial credit score. This includes making all payments on time and keeping credit utilization low. Avoiding too many new accounts quickly also helps demonstrate stable credit management. Consistent use of these initial credit products will lead to the generation of a credit score and its improvement over time.