Table Of Contents
- 1 WHAT CREDIT SCORE DO YOU START WITH?
- 2 THERE IS NO INFORMATION TO USE WHEN CALCULATING YOUR RATING IF YOU DON’T HAVE A CREDIT HISTORY.
- 3 HOW TO CALCULATE YOUR CREDIT SCORE
- 4 FICO CREDIT SCORE RANGES
- 5 CAN YOU HAVE A CREDIT RATING WITHOUT A CREDIT CARD?
- 6 HOW TO CHECK YOUR SCORE
- 7 WAYS TO ESTABLISH AND MAINTAIN A HIGH SCORE
WHAT CREDIT SCORE DO YOU START WITH?
You build both a credit score and a history when you begin borrowing money. However, what credit score do you start with?
Figuring out your score can help you know the line of credit available to you and strategize on how to improve it.
So, what does your score start at? People wonder whether they start with a credit rating of zero or the lowest possible FICO score of 300. You have no credit rating when you start using credit.
Starting with no credit standing doesn’t mean your score is zero. It means your rating doesn’t exist. You don’t have a score because agencies calculate your rating when a credit card issuer, lender, or relevant entity requests it to ascertain your creditworthiness.
THERE IS NO INFORMATION TO USE WHEN CALCULATING YOUR RATING IF YOU DON’T HAVE A CREDIT HISTORY.
Once you establish some credit history, you are unlikely to start with the lowest FICO score of 300. Your rating may be a bit higher if you have sound credit habits. However, it is doubtful that you’ll get the highest credit rating of 850 under FICO or VantageScore — the two commonly used models.
You don’t have sufficient credit history to earn this score. You may get it after some time if you use your line of credit well.
HOW TO CALCULATE YOUR CREDIT SCORE
Knowing how credit bureaus calculate your credit rating can help you build and maintain a high credit score. These five factors affect your FICO credit standing:
* PAYMENT HISTORY: This factor accounts for 35% of your credit rating. It comprises your record of on-time payments. Make your payments on time and don’t miss them to have an excellent payment history.
* CREDIT UTILIZATION: This factor accounts for 30% of your credit score. It is the proportion of your available credit you use. Bureaus determine your credit utilization by dividing the revolving credit you use by the total of your revolving limits.
Keep the utilization ratio below 30% (overall and on each account). Pay off the excess amount quickly to maintain a high score.
* LENGTH OF CREDIT HISTORY: This factor accounts for 15% of your credit rating. It is the duration you have used credit accounts. You’ll build a history with time if you are a new credit account owner.
Good credit habits over a long period translate to high credit scores, which can provide you with favorable credit terms.
* CREDIT MIX: This factor accounts for 10% of your credit rating. It comprises the various types of credit accounts you have. Your credit rating can improve if you have both installment debt (like mortgages and loans) and revolving debt (like credit cards) in your credit history. You may still attain good credit standing if you haven’t taken any loans.
* NEW CREDIT: This factor accounts for 10% of your credit standing. It entails how often you get new credit. Wait 3–6 months between your \card applications to avoid reducing your rating because of too many credit requests.
FICO CREDIT SCORE RANGES
FICO scores can be in these categories:
« Very poor: 300–579
« Fair: 580–669
« Good: 670–739
« Very good: 740–799
« Exceptional: 800–850
Aim for a FICO rating of over 670. You’ll access the best cards and get loans with ease if your score is above 670.
CAN YOU HAVE A CREDIT RATING WITHOUT A CREDIT CARD?
Yes, you can build credit if you don’t have a card. You’ll require at least one line of credit under your name. For example, a car or student loan can build your history and establish your score.
You may also have a history by being an authorized user on a relative’s credit card. Furthermore, you can develop a credit history if you use a payment service, such as Experian Boost, to add utility bills to your credit report.
Your financial patterns on these credit accounts will affect your credit score.
HOW TO CHECK YOUR SCORE
Many credit card issuers and banks provide free credit scores. Some finance apps, like Mint, can calculate your credit rating.
You may also hire credit monitoring agencies to get weekly credit standing updates and track possible threats to your credit accounts.
WAYS TO ESTABLISH AND MAINTAIN A HIGH SCORE
High credit scores can make it easier for lenders to approve your loan or credit requests. You’ll also get favorable rates and terms. Low credit ratings can deny you these benefits.
Follow these steps to build and maintain a high credit score:
1. PICK THE RIGHT CREDIT CARD
Apply for the right credit card to build and maintain high scores. For example, you may apply for a student credit card if you are a college student. These cards can have many benefits, such as rewards for good grades.
2. MAKE ON-TIME PAYMENTS
Make timely payments every time. This approach helps your credit standing, as your payment history accounts for 35% of your credit score.
You can use mobile alerts to get reminders when payment is due. Furthermore, you can set up an autopay to pay bills on time.
3. KEEP YOUR CREDIT BALANCES LOW
Keep your credit balances low. If you exceed the 30% credit utilization ratio, pay off the excess amount quickly.
These steps can help you keep your interest charges low and increase your rating.
4. TRACK YOUR CREDIT HISTORY
Track your history by checking your score regularly. You may use credit ratings from your bank, credit card issuer, or a personal finance app.
Request your credit reports from monitoring agencies and check them for errors or inaccuracies. Dispute any issues with your credit bureaus.
5. HAVE AN EMERGENCY FUND
Having an emergency fund can help with long-term credit stability. The safety net can help you avoid substantial credit debts that you struggle to repay. Therefore, you won’t lower your standing because of these debts.
Building and maintaining your credit standing is helpful when you get accounts. A high score can help you access loans with favorable terms easily.
Remember, do not overburden yourself with too many loans and card debt. This most likely will end up badly and then will lessen your scores in the long haul.
And that is the answer to – what credit score do you start with – Good Day!
Disclaimer: This article is meant for educational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice.
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