Key takeaways

  • If you're just beginning your financial life, you should know your credit score starting point.
  • There isn't a starting credit score, but there are minimum requirements for generating the initial score.
  • There are multiple ways to launch and improve your credit score, such as secured credit cards and credit-builder loans.
  • Building credit from a credit score starting point takes time, but it can be done.

Credit scores are important for financial success. They’re a must-have if you want to apply for a loan, rent an apartment or open a utility account.

But you might be just starting your financial life, putting you at the credit score starting point. What does that mean for your credit score? What credit score do you start with? Knowing how credit scores work can answer these questions about getting your credit score off to a good start.

What are credit scores?

Put simply, your credit score is a three-digit number that provides a picture of your financial health. It predicts your ability to pay back a loan or credit. Because of their importance, credit scores are used by lenders and credit card companies (among others) to determine if you’re responsible enough to pay back loans.

That three-digit credit score comes from the information that creditors and lenders report to the three credit bureaus (Equifax, Experian and Transunion). Based on that information, agencies like the Fair Isaac Corporation (FICO) and VantageScore provide models to give you a credit score, which could range from “Poor” to “Exceptional.” The higher your credit score, the more likely (in the eyes of creditors) you’ll be to pay back a loan or credit card promptly.

Many credit card companies and lenders use FICO as a “universal” score. However, the VantageScore (jointly developed by the three credit bureaus) is also growing in usage, especially by various installment and fintech lenders.

What credit score do you start with?

There’s no such thing as a starting credit score. However, there are minimum requirements for generating your very first credit score. According to FICO, the minimum requirements are:

  • You must have at least one credit account or loan open for a minimum of six months.
  • At least one account must be reported to one of the three credit bureaus within the past six months.

Meeting those criteria gets you on the credit scoreboard. Your first credit score will be based on that information.

Don’t assume your starting credit score is automatically at rock bottom. Multiple factors impact that beginning score.

What goes into your credit score?

Whether starting from scratch or repairing your credit, building your credit score requires time, patience and perseverance. Just as important is understanding the factors that impact it and using them to your benefit.

FICO and VantageScore models weigh various factors in generating a credit score.

On-time payment history

  • FICO: 35%
  • VantageScore 4.0: 41%

Paying your credit card balances and loans on time is heavily weighted in credit score calculations. Lenders and others examining your financial health want assurance you can pay your debt responsibly and on time.

Credit utilization

  • FICO: 30%
  • VantageScore 4.0: 20%

Credit utilization is how much credit you’re using relative to how much credit you have. Credit card companies want you to use as much of your balance as possible because that makes them money, but doing so can mean you’re overextending and struggling to pay what you owe. You’ll also look less responsible with your credit, making it harder to get new lines of credit in the future.

New credit/accounts

  • FICO: 10%
  • VantageScore 4.0: 11%

While opening new credit accounts isn’t as highly weighted as on-time payments and credit usage, it matters to your credit score.

New credit affects your credit score because you haven’t had time to show that you will make payments on time for that account yet. Having too many new accounts might also signal that you are relying on credit too much.

You’ll also have the effect of hard credit inquiries that are part of getting new credit.

Other factors impacting credit scores

Depending on the reporting bureau, other issues are in play when it comes to your credit score.

FICO

  • Length of credit history: 15%
  • Credit mix: 10%

VantageScore 4.0

  • Depth of credit: 20%
  • Balances: 6%
  • Available credit: 2%

How do you build your credit score?

Even when you are new to the world of credit with a low starting credit score, you can build a positive credit score immediately. When you prove your diligence through on-time payments and resist the temptation to run up credit card balances, this can help boost your overall credit score — even with only one or two accounts open and operational.

The more responsibility you demonstrate in handling those one or two accounts, the more lenders are likely to trust you and offer additional financial products. A reasonable selection of those products can help boost your credit score further.

Your next question might be where to start. Without credit (or a credit score), it can be difficult to obtain credit cards or loans. The good news is there are options available to help you build your credit from its starting score.

Secured credit cards

You might think there is no way you’ll qualify for a credit card without a credit history, but this isn’t true. Some credit cards don’t have strict credit score requirements, and secured credit cards are a good option to help build your credit.

To obtain a secured credit card, you deposit cash with a credit card company, which sends you a card. You use the card to purchase against that deposit and repay it by the due date.

The more you demonstrate that you can pay back what you use, the more information the credit card company has to send to the credit bureau. With enough time, the credit card company will return the balance on the secured card and switch you over to an unsecured card with a credit limit (and even more opportunities to improve your credit score).

Installment and credit-builder loans

If you don’t have a credit background, you could get your start with help from an installment loan. Many installment loans are unsecured (meaning no collateral is necessary) and provide a lump sum of cash for a specific purpose. You repay that cash in installments over a set period. Student loans and car loans are examples of installment loans.

Credit-builder loans are specifically to help you build your credit. These loans also provide a lump sum, but you don’t receive that money. Instead, the lender places it into a secured account. You pay the lender in installments, and when the entire loan amount is paid off, you can access the funds.

Credit score programs

Certain programs can help move your score from its starting point. These include Experian Boost and UltraFICO. Rather than analyzing your (possibly) non-existent credit, these programs examine other measures of financial success, like rent and utility payments or positive account balances.

Using someone else’s credit

You can also become an authorized user on someone else’s credit card account. As an authorized user, you have access to that individual’s credit balance with your own credit card.

When you use that card to buy goods or services, the primary cardholder is responsible for making on-time payments on the balance. This also reflects on you and your credit score.

Assuming the primary cardholder uses their credit responsibly, your credit score increases.

When going this route, be sure that the primary cardholder is a trusted individual (like a spouse, parent or relative) and that this person has a good history with their credit.

How long does it take to build credit?

Building up from that starting credit score doesn’t happen immediately. From-scratch efforts require time, patience and healthy financial habits to demonstrate your responsibilities regarding repaying credit balances and loans. It can take several months to get on the map and establish a credit score in the first place — and years to build that score into the “good” or above range.

Don’t let this prevent you from using all avenues to build your credit. Your credit score is an important financial tool. You need it to apply for credit cards and loans. It’s also necessary when renting an apartment (and eventually obtaining a mortgage), applying for a job, obtaining insurance or opening a utility account.

Next steps

The good news is that your credit score doesn’t automatically start at zero. A few months after you open that first account, the lender or creditor will report that information to one of the three credit bureaus, and you can work from there. Whether you’re a young adult just starting in the credit world or new to traditional credit accounts, you have control over the steps needed to build a favorable credit profile.

Building your credit score proves to lenders that you’re responsible for handling your finances. This, in turn, can help you develop and maintain a positive financial picture.