The truth is that we all start out with no credit score at all. Credit scores are based on the information in our major credit reports, and such reports aren’t even created until we’ve had credit (e.g., a credit card or loan) in our names for at least six months. Without any credit history, reports and scores won’t magically burst into existence when we turn 18 — the age at which we first become eligible to apply for credit — contrary to common myth.
This connection between the contents of our credit reports and our eventual credit scores means that we all won’t start with the same number. Rest assured that your first score won’t be zero, though, as the most common credit-scoring models start at 300. It’s unlikely to be that low, either. Ratings at the lowest end of the credit-score range reflect the most serious credit-score damage, and it’s nearly impossible to get into that much trouble when you’re just starting out.
Rather, your first score could range anywhere from under 500 to “well into the 700s,” depending on your initial performance, according to credit expert John Ulzheimer, who has worked at both FICO and Equifax. “The only correlation between your first score and the scoring metrics would be the age of your credit file,” he said. “But that category is only worth about 15% of the points in your score, so even if you bombed that category and did well in the others you'd still score well above 640.”
Below, we’ll tell you a bit more about what information you can glean from your starting credit score as well as how you can improve it over time. After all, it’s not about where you start but rather where you’re going.
What Your First Credit Score Means
Simply having a credit score to begin with tells you a lot. For starters, it indicates that you have enough credit history to actually generate a score. Your first credit score will also clue you in to the following:
- The nature of your initial performance as a borrower, considering that mistakes are magnified in a thin file. So if you start with a “bad” score, it will be obvious that some measure of habit change is in order.
- The types of financial products you’re likely to garner approval for as well as which are best left alone. For instance, if your first credit score is 650, then you’ll have a good chance at getting a “limited-credit” credit card but not an offer that requires “good” or “excellent” credit for approval.
- The possibility of identity theft. If you’ve yet to intentionally kick off your credit career, the mere presence of a credit score could be an indication that someone applied for credit in your name. Don’t jump to any conclusions, though, as you could have built a bit of credit as an authorized user on a parent’s account, for instance.
You can sign up for WalletHub to get your free credit score and learn more about what it means. We update our scores on a daily basis, provide in-depth analysis of your credit standing and offer customized credit-improvement advice.
Starting Your Credit Career On The Right Foot
Figuring out whether you have a credit score and determining what it is are both great first steps, putting you ahead of the game compared to the 58% of Americans who don’t know their own scores, according to a survey by the American Bankers Association. But stopping there would be a mistake.
There are a few additional steps that you should take if you want to truly enable your starting credit score to blossom into excellence. Here’s a quick rundown:
- Begin With The Future In Mind: Considering that the age of your oldest credit account figures to impact your credit score, it would be great if your first credit card doesn’t charge an annual fee. That will enable you to keep it open for as long as possible, even after your credit standing has improved to the point that you’ve obtained a better card for everyday use.Similarly, try to apply strategically for a card that you are likely to get approved for, rather than haphazardly en masse. This will enable you to minimize the number of hard inquiries into your delicate credit report as well as avoid taking on more responsibility than you are prepared for at this point.
- Use Your Card Regularly & Responsibly: Charging a small amount to your credit card and paying the full balance each month will expedite the credit-building process. It indicates that you can actually use the credit extended to you in a responsible fashion and reflects modest credit utilization.However, the corresponding credit-score gains are not worth the risk if you doubt your ability to spend within your means. That’s because you can still build credit without spending a thing if you just keep your account in good standing. And locking your card in a drawer is certainly better for your score than racking up a huge, unsustainable balance. Just make sure the card doesn’t charge an annual fee or have a provision for the account to be closed after a certain period of inactivity.
- Always Pay On Time: Payment history accounts for roughly 35% of your credit score and is one of the most controllable components from your perspective. Perhaps the easiest way to avoid credit-score damage stemming from missed due dates is to establish automatic monthly payments from a bank account. You just need to make sure to have enough cash on hand.For additional pointers on avoiding missed payments, check out our 8 Tips For Always Paying On Time.
- Watch Your Credit Utilization: It can be hard to keep your credit utilization — the ratio between your available credit and the portion you use each month — below recommended levels when you’re just starting out, considering that your spending limit is likely to be quite low. But you should try to avoid maxing out any of your credit cards, as creditors perceive this to be risky behavior. You can find some tips for doing so in our credit utilization improvement guide.
- Build An Emergency Fund: A stout emergency fund is essential to long-term credit-score stability. After all, you’re far less likely to rack up serious debts or to miss payments if you have a sturdy safety net — even if you’re surprised by emergency expenses or job loss. We recommend striving to have roughly 12 months’ worth of take-home pay stashed away for such occurrences, but you’ll obviously want to build that gradually over time.
- Enroll In Credit Monitoring: Identity theft, fraud and credit-report errors are all threats to your credit score, but it can be difficult to stay on top of all such obstacles even with access to your full credit report, which WalletHub provides and updates on a daily basis. That’s where credit monitoring comes into play. WalletHub also offers this 24/7 service for free and will alert you of any important changes to your credit report. Not only will this provide some much needed peace of mind, but it will also give you more control over your financial life.
- Confirm The Contents Of Your Credit Report: Credit monitoring definitely saves you a lot of time, but you’ll also want to review the actual contents of your credit reports on a regular basis. Credit reports are the foundation for all credit scores, after all, so keeping tabs on their contents is integral to credit health.
Credit building can be a long and confusing process, but understanding why you’ll start from nothing — rather than zero — as well as how to lay the foundation for a solid rating early on will position you for resilience and make the path to credit excellence appear more obvious. And if you’ve yet to begin this journey, your clean slate represents an amazing opportunity. To learn more about the best credit cards with which to kick start your credit career, check out our editors’ picks.